Apr 15, 2025
Negotiation Agreements and Alternative Forms of Agreement Conclusion in Norwegian Law
The model of the Contract Act with offer and acceptance is not sufficient to describe all forms of contract formation in modern business. This article provides an overview of how commercial negotiation agreements come into being, as well as other key alternative contract conclusion forms such as mass agreements, public procurement, and standard terms. Knowledge of these alternative contract conclusion forms is crucial to understanding when and how binding agreements arise in situations where the model of the Contract Act falls short.
Negotiation Agreements: From Negotiations to a Binding Agreement
When the Contract Act's Model Becomes Impractical
Commercial agreements are often the result of negotiations that extend over time. These agreements obtain their content as negotiations progress (successive agreements). It is impractical to view such negotiations as a series of offers and counteroffers as assumed by the Contract Act.
Typical complications with negotiation agreements include:
Conditional promises tied to progress in other areas
Non-binding proposals that require further review
Focus on main issues first, with details deferred
This raises questions about when binding occurs: Can a party retract a statement in a sub-question if overall agreement is not achieved? Or does successive binding occur as negotiations progress?
The Parties' Ability to Define the Binding Time
The parties can mutually agree on which disposition criteria should be dispositive:
Signing Condition: The parties can agree that no one shall be bound until both have signed a written agreement. This excludes gradual binding during negotiations.
Order Confirmation: The seller may reserve the right to remain unbound until he has confirmed the buyer's order, for instance, to check the buyer's creditworthiness.
Stepwise Binding: The parties can formalize and sign "sub-agreements" that clarify the extent to which binding exists.
Due Diligence Process: The parties may agree that the agreement does not bind the buyer until an investigation of the company is conducted.
Board Condition: A director may sign subject to board approval.
Stepwise Binding: When Does the Contractual Obligation Arise?
When the parties have not agreed on the binding time, the question arises as to when binding occurs. The Supreme Court has in several rulings held that it is sufficient for binding that the parties agree on the main points of the contractual relationship.
In the Vinagentur Case (Rt 1998 p 946), the Supreme Court stated that "there is no legal basis to generally require written expression in more complex contractual relationships" and that "as the results of the negotiations show and agreement is reached, each party, based on a general assumption of mutual loyalty, may have grounds to believe that the parties are bound even if the final agreement is not signed."
In the Mæle Case (Rt 2006 p 1585), the Supreme Court held that an agreement on the distribution of forest properties was bindingly entered into, even though many matters had not been agreed upon.
Also in Optimogården (Rt 2011 p 410) and Strömstad Marina (Rt 2014 p 100), the Supreme Court confirmed that contractual binding can occur when agreement is reached on main points, even if details are not resolved and the agreement is not signed.
In simpler contractual relationships, it is often sufficient that agreement on the main points is achieved, while more complex, long-term contractual relationships may require stricter agreement requirements.
Letter of Intent: Legally Binding or Merely Morally Obligatory?
Purpose of the Letter of Intent
Letters of intent are declarations that in a sketch form indicate a goal and some main points of a contract that the parties wish to bring into being. They are often used when:
The intended agreement is extensive and complicated
The parties are under time pressure
It is necessary to conduct extensive investigations before a binding agreement can be made
Are Letters of Intent Legally Binding?
The presumption is that letters of intent do not obligate the parties to enter into the intended agreement. The Supreme Court stated in Rt 1995 p 543 that "[t]he presumption with agreements of this type is that the parties are not obligated to enter into the intended agreement".
This presumption can be justified by:
The need to be able to express an intention to negotiate without being legally bound
Letters of intent are often signed by individuals without formal authority
It could become a "trap" for the parties if letters of intent presumptively carried promise effects
Even if the letter of intent is not considered to obligate the parties to enter into the intended agreement, it might still be that a party who withdraws from the cooperation without reasonable cause is required to compensate the other party's expenses (negative contractual interest).
Mass Agreements: When the Contract Act's Model Does Not Fit
Mass agreements are contracts entered into in large quantities in daily life and are constantly repeated. Typical examples are:
Purchases in a supermarket
Transactions with an automatic machine
Ticket purchases for public transportation
Parking a car in a parking space
In these agreements, it is impossible to identify anything akin to an offer and acceptance in the sense of the Contract Act. It is the simple actions related to the agreement that constitute relevant disposition criteria—monies put in a machine, a parking space being used, goods paid for in a supermarket.
A Swedish Supreme Court ruling (NJA 1981 p 323) held that binding in a parking situation occurs through "a person's actual actions," i.e., parking the car in the parking space.
Public Procurement: Tender Competition as a Contract Conclusion Form
Special Rules for Public Contracts
In public procurement, the public body is not free in terms of choosing the counterparty, contract terms, or the method of contract conclusion. The Public Procurement Act and related regulations set the boundaries for how contract formation should occur.
The process follows a formalized procedure in the form of a tender competition, where fundamental principles are competition, equality of treatment, predictability, verifiability, and proportionality.
The "Course" of a Tender Case
Announcement: The awarding authority issues an announcement that the contract will be awarded through a tender competition.
Tender Document: The awarding authority prepares a tender document with information about what is to be procured and the terms.
Offer: The suppliers prepare and submit offers within the submission deadline.
Binding: The offer is legally binding from the moment it is submitted.
Standstill Period: The period the offers are binding (normally 30 days unless otherwise specified).
Award: The awarding authority selects one of the offers based on predetermined award criteria.
Contract Conclusion: The parties sign a mutual document.
Binding and Legal Effects
In tender competitions, the offer is binding from submission and cannot be withdrawn or altered. The supplier's obligation also means that he cannot lower the price, even if he discovers that others have undercut him.
If a supplier believes the awarding process has occurred in violation of the rules, the case can be brought before the Public Procurement Complaints Board (KOFA) or the courts.
Standard Terms: When Are They Binding?
The Requirement of Adoption
For standard terms to become part of the agreement, they must be agreed upon by both parties. The decisive factor is whether the standard terms have been brought to the other party's attention—written or oral—before the contract conclusion.
Standard terms are not normally considered agreed if:
They are presented in a way that the counterparty did not have a reasonable opportunity to understand that they were intended as part of the agreement
The counterparty did not have a reasonable opportunity to understand what they contain
This can be summarized as "surprising standard terms," cf. Rt 1968 p 1188 (Pakkseddel Case) and Rt 2004 p 675 (Agurkpinne Case).
The requirement of adoption is tightened where the terms indicate it, especially for disclaimers or terms that place the party in a significantly worse position than the declaratory background law.
Competing Standard Conditions ("Battle of Forms")
A particular problem arises when both parties have their standard terms that they want to apply to the agreement. There is no certain solution as to which party's standard terms shall apply in Norwegian law, but several alternatives can be considered:
"The man who gets the blow in first": The one who first sends his standard terms wins.
"The man who fires the last shot": The one who last sends his terms wins.
Both parties lose, and declaratory law applies.
The terms that most align with declaratory law shall take precedence.
A harmonization of the two sets of standard terms.
"Knock-out doctrine": The contract is concluded on the terms the parties agree on, supplemented by provisions common to both parties' standard terms.
Conclusion
Contract formation often occurs in practice according to rules and principles other than the model of the Contract Act. Negotiation agreements, letters of intent, mass agreements, tender competitions, and standard terms each represent important alternatives to the traditional offer/acceptance model.
Norwegian case law shows that courts place decisive emphasis on the expectancy principle: The central question is whether justified expectations about the existence of an agreement and, if so, on what terms it is established. This principle applies regardless of the form of contract conclusion used.
For parties seeking predictability, it is important to be explicit about when they consider themselves bound and on what terms. Especially with negotiation agreements, the use of signing conditions or stepwise formalization can be useful to avoid doubt about the binding time.
