Reference no: EM131627334

Abraham Coach entered into negotiations with Bondo Corporation to purchase Bondo's ABC Division. The two parties drew up a letter of intent stating, "[n]o further obligation will arise until a definitive agreement is reduced to writ­ing" and that it was the parties' intention "to proceed in good faith in the negotiation of such binding definitive agreement." At another place in the letter of intent were the words, "Of course, this letter is not intended to create, nor do you or we presently have any binding legal obligation whatever in any way relating to such sale and purchase." Bondo eventually sold the ABC Division to another party. Coach sued Bondo, alleging, among other things, that Bondo had breached an agreement to negotiate in good faith the proposed contract with Coach. Given these facts, con­sider the following questions.

1. Did the letter of intent create a legally binding obligation, or was the letter merely an "agreement to agree" in the future?

2. The UCC requires that all parties to commercial contracts exercise good faith and commercial reasonableness in their dealings with one another. In your opin­ion, did 3. Bondo breach this duty when it sold its ABC Division to a third party?

3. Regardless of its legal duties under the UCC, did Bondo have an ethi­cal duty to proceed in negotiating a contract with Coach? Discuss.