Overlord Firebaugh or Wanda could not possibly know that this will end badly. Haffaton's deal is total BS. Goodminton has taken three cities and won every battle. Why should they fear Haffaton? Goodminton is advancing, Haffaton is on the retreat. They are in no position to make demands. Even if they where, you don't give your best military asset to the enemy.
Sure, a strait up peace treaty would be fine. Or trade Delphie instead!