Duty to Negotiate Created by NC Business Court

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Duty to Negotiate Created by NC Business Court

On June 9, 2015, the NC Business Court created a new cause of action (basis for a lawsuit).  Judge Gregory McGuire determined that there can exist a Duty to Negotiate. In RREF BB Acquisitions, LLC v. MAS Properties L.L.C.,  Mark Saunders, a real estate developer, (and his company) sued BB&T Bank and RREF BB Acquisitions (which had purchased the loan for BB&T) for a number of reasons, most relevantly, breach of duty to negotiate in good faith.  Mark Saunders had a number of loans with BB&T over a number of years.  Each year, BB&T modified, extended or renewed those loans.  However, when Mr. Saunders got involved in some litigation against Bank of America, BB&T decided not to renew the loans as it always had done.  Mr. Saunders and BB&T brought together their lawyers in attempt to negotiate terms of a new loan and appeared to be getting close.  However, when Mr. Saunders attempted to revise a deal after having received a “term sheet,” BB&T backed out, claiming that the term sheet represented the “last, best and final terms that BB&T would accept.”

Judge McGuire stated that “…North Carolina already implies in every contract a duty of faith and fair dealing.  The Court sees no reason that an agreement to continue negotiating in good faith would not be enforceable, provided that it met all of the requirements for contract formation in North Carolina Law.”  Mr. Saunders’ attorneys, Graebe, Hanna & Sullivan, believe that this “new” cause of action is the natural extension of N.C.G.S. Chapter 75, which forbids unfair business practices.

This post is based, in part, on the July 6, 2015, article in Lawyers Weekly entitled, “Business Court recognizes duty to negotiate in good faith.”