A deal is not always a deal: how does an agreement come about?

As an entrepreneur, you regularly enter into agreements. But did you know that an agreement is not automatically concluded as soon as someone says ‘yes’? Without agreement on the most important terms – the so-called essential elements – there is no legally binding deal. And that can have major consequences.

What are the essential elements of an agreement?

What constitutes an essential element varies from situation to situation. In any case, it concerns the core agreements on which the deal is based. Think of things such as price, product or service, delivery term or payment conditions. If these are not clear, no legally valid agreement will be concluded.

For example, in a share transaction, the purchase price is almost always an essential element. If there is no agreement on this, there is no agreement—even if the rest has already been discussed.

A practical example from case law

In a recent case before the Rotterdam District Court (ECLI:NL:RBROT:2025:7289), two parties negotiated the acquisition of a real estate company. The price of €5,000,000 was agreed, and the seller confirmed this with the words: “We have a deal.”

Nevertheless, the negotiations broke down. Why? Because no agreement had been reached on other essential terms, including tax arrangements and security provisions. The buyer believed that a binding agreement had already been concluded, but the court took a different view.

No contract and no right to compensation

The court ruled that no agreement had been reached. The buyer could not invoke ‘legitimate expectations’ either, as he was aware that the deal was subject to internal approval, for example, and that this had not yet been granted.

The result? The seller was entitled to terminate the negotiations without being liable for damages. A clear lesson: a few handshakes or an enthusiastic email are not enough if the key terms are still open.

Internal approval: obstacle or formality?

Internal approval played a role in this case. But beware: the absence of such approval does not automatically mean that there is no deal. Whether such approval is a strict condition or merely a formality depends on what the parties have agreed – or could reasonably assume.

For example, does one party behave as if the approval is a formality, thereby creating trust in the other party? If so, there may still be a binding agreement. In short: it’s all about intention, clarity, and communication.

What can you learn from this as an entrepreneur?

In business negotiations, it is crucial that you:

• Clearly and fully record essential conditions
• Explicitly state reservations (such as approvals or financing)
• Pay attention to the expectations you create in the other party

This will prevent you from unintentionally becoming bound by agreements – or ending up empty-handed after intensive negotiations.

 Get sound advice

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