Charles Shaker v Vistajet Group Holding SA [2012] EWHC 1329 (Comm)

This case concerned an application for summary judgment on a claim for the return of a deposit of $3.55m paid by Shaker to Vistajet pursuant to the terms of a Letter of Intent in respect of a potential transaction concerning the purchase, operation and repurchase of an aircraft. Under the terms of the LOI, Shaker agreed to “proceed in good faith and to use reasonable endeavours to agree, execute and deliver” certain documents by a cut off date. Vistajet was to refund the deposit within fi ve days of the cut off date where the “seller and buyer, despite the exercise of their good faith and reasonable endeavours, failed to reach agreement…” Vistajet argued that since Shaker had not proceeded in good faith or used reasonable endeavours to agree the relevant transaction documents, he was not entitled to the return of the deposit.  

Teare J referred to the recent decision in Barbudev v Eurocom [2012] EWCA Civ 548 as authority for the principle that agreements to use reasonable endeavours to agree or to negotiate in good faith are unenforceable.

He stated that the “reason for such unenforceability is that there are no objective criteria by which the court can decide whether a party has acted unreasonably and that a duty to negotiate in good faith is unworkable because it is inherently inconsistent with the position of a negotiating party”. The Judge expressed some doubt as to whether under the terms of the LOI, the exercise of good faith and reasonable endeavours was a condition precedent to the return of Shaker’s deposit. He concluded that such a condition precedent would nevertheless be unenforceable for the same reasons and ordered the return of the deposit.