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Certainty and ‘Agreements to Agree’

Introduction

Agreements/contracts should seek to provide certainty and clarity for those relying upon them. It is a principle of English law that an ‘agreement to agree’ between parties is void and unenforceable for uncertainty. An agreement to agree, in simple terms, is an agreement to enter into an agreement at a future date. This might occur where, for example, the parties have agreed most of the terms but they wish to agree specific contractual terms at a later date, perhaps to allow flexibility.

Certainty

If the terms of the contract are uncertain or incomplete, the parties cannot have reached an agreement in the eyes of the law. Failure to agree on key issues may cause the entire contract to fail.

However, a court will attempt to give effect to commercial contracts where possible, by construing a reasonable construction of the contract. In MRI Trading AG v Erdenet Mining Corporation LLC, the Court of Appeal upheld the terms of a contract as enforceable despite the fact that certain terms were ‘to be agreed’. The Court decided that where the wording of a contract clearly indicates that the parties intended the contract to be enforceable and there had been part performance (as in this case) the courts should intervene. In such a situation, it was open to the court to imply obligations in order for the contract to be performed.

Nonetheless, it is probably unwise to rely on the courts to imply the necessary terms to resolve any disagreements. The above case was decided upon its facts so, faced with another contract, a court may decide it is unenforceable or, even if it implies terms, they may not be to the liking of one or more of the parties.

Conclusion

Contracts should be drafted clearly and unambiguously to avoid challenge on the basis of uncertainty. If provision is to be made for agreement at a future date then this should be set out clearly and with an objective mechanism to allow the parties to resolve any disputes.

This should not be relied upon for legal advice. If you would like any further information or advice please email richard@clariclegal.co.uk.

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