Delaware Supreme Court answers Siga argument against LATS
SIGA argues it is inconsistent to hold that the LATS is not a binding license agreement and at the same time conclude that SIGA’s obligation to negotiate in good faith requires that SIGA only propose terms substantially similar to the LATS.41 We disagree.
We now turn to the question of what is the proper contractual remedy for
breach of an agreement to negotiate in good faith where the court finds as fact that
the parties, had they negotiated in good faith, would have reached an agreement.
Our decisions have not clearly answered this question. In Titan Investment Fund
II, LP v. Freedom Mortgage Corp., we reversed the Superior Court judge’s award
of a one-percent commitment fee for breach of an agreement to negotiate in good
faith.75 We noted that it was “fatally inconsistent” for the trial judge to conclude “that the contract would not have closed[, ]even absent Freedom’s breach,” and at
the same time award damages “that presupposed the opposite conclusion, namely,
that the deal would have closed.”76 We concluded that given the plaintiff’s
“inability to establish that the . . . [c]ontract would have closed but for [the
defendant’s] breach, [the plaintiff was] not entitled to damages measured on a
‘benefit-of-the-bargain’ basis. Rather, [the plaintiff] was entitled only to its
‘reliance’ damages, measured by its actually-incurred costs and expenses.”
Our decision in Titan Investments leaves open the question of whether expectation damages are available where the trial judge makes a factual finding that the parties would have reached agreement but for the defendant’s breach. In fashioning his remedy, the Vice Chancellor noted the lack of consensus.98 We now hold that where the parties have a Type II preliminary agreement to negotiate in good faith, and the trial judge makes a factual finding, supported by the record, that the parties would have reached an agreement but for the defendant’s bad faith negotiations, the plaintiff is entitled to recover contract expectation damages.