“So we have a deal, right?”
The answer to this question is not always as easy as it appears. Parties can, and often do, have different understandings (as evidenced by numerous court cases) of whether negotiations have culminated in a binding contract. This can have significant consequences if one party decides to walk away from the negotiating table but has unknowingly already entered into a binding agreement and may be liable for damages if the agreement is breached.
Canadian courts typically employ an objective, two-stage analysis to determine whether the parties have reached a binding agreement during the negotiations even if a formal contract has not been executed. In particular, courts assess whether: