Is An Oral Agreement With a Bank Binding ?
In Richter v. Bank of America National Trust and Savings Association, 939 F.2d 1176 (5th Cir. 1991), the court, applying Texas law, considered whether an alleged oral agreement with a bank to negotiate in good faith toward a reasonable restructure of the plaintiff's debt was an enforceable agreement. Id. at 1196.
The plaintiffs did not argue that the bank had agreed to a specific outcome of the negotiations; instead, they argued that the bank agreed to negotiate in good faith, regardless of the outcome. Id.
They argued that the subject matter of the oral good faith agreement was the method of the negotiation, not the result of the negotiation. Id.
The court held that the agreement to negotiate in good faith was too indefinite to enforce because it did not discuss the relevant terms of the agreement such as the duration, the parties' obligations, or what a "reasonable" restructure of the loan would be. Id.
We believe that the "good faith" provision in this case is similarly vague.
It requires the parties to do "all acts and things as the other party . . . may reasonably require."
There is no discussion of what sort of "acts and things" to which such clause refers.
"If an alleged agreement is so indefinite as to make it impossible for a court to fix the legal obligations and liabilities of the parties, it cannot constitute an enforceable contract." University Nat'l Bank v. Ernst & Whinney, 773 S.W.2d 707, 710 (Tex. App.--San Antonio 1989, no writ); see also Moore v. Dilworth, 142 Tex. 538, 179 S.W.2d 940, 942 (Tex. 1944).