At the Delaware Corporate and Commercial Litigation Blog, Francis Pileggi analyses SIGA Technologies, Inc. v. PharmAthene, Inc., in which the Supreme Court clarified the law surrounding the circumstances under which a preliminary agreement or letter of intent becomes binding. Pileggi writes:
Any lawyer interested in the latest iterations of contract law by the Delaware Supreme Court needs to read this opinion. More specifically, any lawyer who advises clients on the binding nature or enforceability of letters of intent, or preliminary agreements, for example, in connection with mergers, needs to read this opinion. The Delaware Supreme Court affirmed a decision from the Court of Chancery in which two types of preliminary agreements were upheld as enforceable. The first, known as a Type I agreement, involves an agreement where the parties have consented to the essential terms but may not have formalized their agreement in a fully executed document. The next type of enforceable preliminary agreement is known as a Type II. This category of preliminary agreement refers to an “agreement to negotiate in good faith,” when all essential terms have not been agreed to, and that was the type of preliminary agreement involved in this opinion in which the Supreme Court upheld expectation damages of $113 million.
The entire post is a must-read for anyone to whom the latest developments in Delaware contract law (which has profound implications for business entity governance) is of interest: "Delaware Supreme Court Pens Must-Read Contract Decision."