These types of agreements are called pre-contractual and generally refer to a future contract whose objectives and characteristics are described, expressly referring and conditionalizing the possible subscription to the reaching of an agreement on further details or to the approval from the management. In fact, these contracts often contain all the obligations that make a contract complete.
It will therefore be necessary to carefully assess the scope of any “letters of intent” when, following their signature, one of the two contractors has to rely on the commitments set out therein, as there is a risk that a valid contract will not be drawn up.
While some letters of intent contain binding provisions on the conduct of negotiations (e.g. confidentiality agreements, obligations not to conduct parallel negotiations), in most cases they provide that, where a contract is not concluded, there is no liability for the parties.This does not mean that the obligation of good faith in the initial negotiation is waived.
In the Italian system, the obligation of good faith entails a duty to conduct the negotiation seriously and is considered violated if a party refuses to sign the contract without reason, after agreement has been reached on the contractual elements under discussion.
We think for example to the case in which the committente, waiting for to formalizzare a purchase, authorizes the supplier to proceed with the fabrication and these, for fear of losing the affair, begins therefore the workings in absence of a contract. Should the order not then be finalized, the minutes, the minutes of the meeting will be taken into account in any judgment, the correspondence between the parties and the court will assess compliance with the obligation of good faith in the negotiation.
However, finding an infringement would normally only give rise to a pre-contractual liability, limiting the compensation to only the emerging damage, that is to say the costs incurred in conducting the negotiation, without considering the loss of income. However, if, beyond the letters of intent, the correspondence between the parties gave rise to the entrustment of the supplier because of its content, it cannot be ruled out that a contractual obligation involving more compensation in the event of default is recognised
It would therefore be necessary for authorisations to proceed to provide for the reimbursement of costs incurred and for the parties to include clauses such as “letter of intent only” or“Non binding letter of intent” and the like governing the negotiation which the parties are about to commence in relation to some assumed contractual relationship, without any commitment or responsibility in the event that the negotiations fail.
Word of the gentleman
Gentlemen’s agreements deserve a separate speech, and usually do not consist of a written document, but they consist of verbal guarantees entailing a commitment on the word, and the sanction, if any, consists only in the loss of the credibility of the person who had committed himself. These promises are therefore not binding and are generally used in confined environments where failure to keep a word is easily known to members of a small community (see stock exchanges for certain raw materials).
However, if those agreements are made in writing, it will be difficult to support their non-compulsory nature by invoking that they are gentlmen agreements. On the other hand, it cannot be excluded that, in extreme cases, a verbal agreement evidenced by testimony and other elements supporting it will still give rise to the test of a contract, although the hypothesis should be considered remote, in view of the scant importance accorded by the right to testify in matters of commercial obligations.