Case Law Database

Case Study: Reservation Contract Dispute Regarding Violation of Good Faith Negotiation

This case analyzes a reservation contract dispute involving an equity acquisition. Plaintiff Liu signed an "Intent Agreement" with an Industrial Company to buy shares and paid a deposit. However, the Company later refused to sign the formal agreement unless Liu paid the full amount upfront—a condition not originally agreed upon. The court ruled that the Company violated the obligation of good faith negotiation inherent in a reservation contract. Consequently, the Company was ordered to double-return the deposit. However, the court rejected Liu's claim for damages related to a penalty paid to a third-party lender, deeming it an unforeseeable loss.