Agreements to agree
Agreements to agree

The following Commercial guidance note provides comprehensive and up to date legal information covering:

  • Agreements to agree
  • Principle
  • Agreement
  • Uncertainty
  • Fair and reasonable price
  • Contractual machinery to resolve uncertainty
  • Implication of terms

This Practice Note considers agreements to agree, and why an agreement to agree certain contractual terms at a future date has traditionally been held to be unenforceable. It also looks at the circumstances in which courts have upheld contracts as enforceable despite the apparent lack of certainty as to their fundamental terms.

Principle

Traditionally, contracts which contain an agreement to agree certain contractual terms in the future have been held unenforceable as being too uncertain.

The existence of a binding contract is determined by an objective test, which is whether:

  1. on the basis of the evidence, the reasonable man would say that the parties were in agreement and had intended to create legal relations (the test disregards the parties’ own views), and

  2. the contract is sufficiently certain so as to be enforceable

Agreement

For a contract to be binding its terms must be sufficiently definite to enable the court to give them a practical meaning and, in particular, the terms must be enforceable without further agreement by the parties.

The indicators that the parties are in agreement are as follows:

  1. a concluded bargain

  2. everything is settled that is necessary and leaves nothing to be settled by agreement between the parties, and

  3. something has been left to be determined but that determination must not depend on the agreement of the parties

The case