BetterLawNotes-5 (2)


An agreement may not be enforceable as a contract because it is too vague or uncertain. Sometimes, and particularly where the proposed contract is to be performed over a lengthy period, the parties may wish to reserve some flexibility in the terms of their deal. For example, a seller who is undertaking to make deliveries of a certain item over a period of several years may be reluctant to commit himself at the outset to the price at which those deliveries are to be made. In such a case the parties may defer the fixing of the price to a later date. But doing so throws up the risk that the court will deem the agreement to be too uncertain to be enforced and therefore lacking contractual force altogether.

May and Butcher Ltd v R (1929) [1934] 2 KB 17n

The claimants agreed with the defendant, a government department, to purchase such tentage as might become available in the UK in the period up to 31st March 1923. The agreement provided for the parties to agree prices from time to time. The agreement also contained provision for any disputes to be referred to arbitration. The parties failed to agree prices and the defendant claimed that it was no longer bound by the agreement. The House of Lords held that there was no contract between the parties.

‘It has long been a well recognized principle of contract law that an agreement between two parties to enter into an agreement in which some critical part of the contract is matter is left undetermined is no contract at all. It is of course perfectly possible for two people to contract that they will sign a document which contains all the relevant terms, but it is not open to them to agree that they will in the future agree upon a matter which is vital to the arrangement between them and has not yet been determined.’ (Lord Buckmaster LC at 20).

Sale of Goods Act 1979, s 8

(1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed in a manner agreed by the contract, or may be determined by the course of dealing between the parties.

(2) Where the price is not determined as mentioned in subsection (1) above the buyer must pay a reasonable price.

(3) What is a reasonable price is a question of fact dependent on the circumstances of each particular case.

The general principle, exemplified by the May case, is that it is not possible to make an enforceable agreement to agree, a contract to make a contract. But there are, of course, ways around this principle. One way is to incorporate into the contract a mechanism, such as an arbitration clause, for resolving any failure by the parties to reach agreement.

Foley v Classique Coaches Ltd [1934] 2 KB 1

P bought land from V for use as a coach station. The sale was made subject to P agreeing to buy all the petrol it required for its business from V ‘at a price to be agreed by the parties in writing and from time to time’. The land was transferred to P and for three years P bought all its petrol from V as agreed. A dispute then arose, and V successfully obtained a declaration that the petrol agreement was binding.

‘[t]he parties obviously believed they had a contract and they acted for three years as if they had; they had an arbitration clause which relates to the subject-matter of the agreement as to the supply of petrol, and it seems to me that this arbitration clause applies to any failure to agree as to the price.’ (Scrutton LJ at 10).

Compare the approach to the arbitration clause in May and Butcher Ltd v R (1929) [1934] 2 KB 17n:

‘The next question is about the arbitration clause . . . The clause refers ‘disputes with reference to or arising out of this agreement’ to arbitration, but until the price has been fixed, the agreement is not there. The arbitration clause relates to the settlement of whatever may happen when the agreement has been completed and the parties are regularly bound. There is nothing in the arbitration clause to enable a contract to be made which in fact the original bargain has left quite open.’ (Lord Buckmaster LC at 20-21)

‘The general arbitration clause is one in very common form as to disputes arising out of the arrangements. In no proper meaning of the word can this be described as a dispute arising between the parties; it is a failure to agree, which is a very different thing from a dispute.’ (Viscount Dunedin at 22).

Finally, bear in mind the distinction drawn in the next case between an agreement to an agree and a clause which is ‘meaningless’.

Nicolene Ltd v Simmonds [1953] 1 QB 543

C and D entered into a contract for the sale to C of 3,000 tons of steel bars. D failed to perform the contract and when sued by C argued the contract was void for uncertainty. The Court of Appeal held that the contract was valid.

‘In my opinion a distinction must be drawn between a clause which is meaningless and a clause which is yet to be agreed. A clause which is meaningless can often be ignored, whilst still leaving the contract good; whereas a clause which has yet to be agreed may mean that there is no contract at all, because the parties have not yet agreed on all the essential terms . . .’ (Denning LJ at 551).

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