The court always leans against a conclusion which will leave parties who clearly intended to contract without a legally binding contract, and that this is the more so where they have acted as though they were bound. The court strains to supply mechanisms which will make agreements work in circumstances where the parties’ own attempts to provide them have broken down, and also where it is obvious the parties must have intended to provide a mechanism in order to make their agreements work but have neglected to do so in their agreements.
Rix LJ discussed the approach where a party said that an agreement was not binding: ‘In my judgment the following principles relevant to the present case can be deduced from these authorities, but this is intended to be in no way an exhaustive list:
i) Each case must be decided on its own facts and on the construction of its own agreement. Subject to that,
ii) Where no contract exists, the use of an expression such as ‘to be agreed’ in relation to an essential term is likely to prevent any contract coming into existence, on the ground of uncertainty. This may be summed up by the principle that ‘you cannot agree to agree’.
iii) Similarly, where no contract exists, the absence of agreement on essential terms of the agreement may prevent any contract coming into existence, again on the ground of uncertainty.
iv) However, particularly in commercial dealings between parties who are familiar with the trade in question, and particularly where the parties have acted in the belief that they had a binding contract, the courts are willing to imply terms, where that is possible, to enable the contract to be carried out.
v) Where a contract has once come into existence, even the expression ‘to be agreed’ in relation to future executory obligations is not necessarily fatal to its continued existence.
vi) Particularly in the case of contracts for future performance over a period, where the parties may desire or need to leave matters to be adjusted in the working out of their contract, the courts will assist the parties to do so, so as to preserve rather than destroy bargains, on the basis that what can be made certain is itself certain. Certum est quod certum reddi potest.
vii) This is particularly the case where one party has either already had the advantage of some performance which reflects the parties’ agreement on a long term relationship, or has had to make an investment premised on that agreement.
viii) For these purposes, an express stipulation for a reasonable or fair measure or price will be a sufficient criterion for the courts to act on. But even in the absence of express language, the courts are prepared to imply an obligation in terms of what is reasonable.
ix) Such implications are reflected but not exhausted by the statutory provision for the implication of a reasonable price now to be found in section 8(2) of the Sale of Goods Act 1979 (and, in the case of services, in section 15(1) of the Supply of Goods and Services Act 1982 ).
x) The presence of an arbitration clause may assist the courts to hold a contract to be sufficiently certain or to be capable of being rendered so, presumably as indicating a commercial and contractual mechanism, which can be operated with the assistance of experts in the field, by which the parties, in the absence of agreement, may resolve their dispute.’
Judges:
Rix LJ, Schiemann LJ, Sir Ronald Waterhouse
Citations:
[2001] EWCA Civ 406, [2001] 2 Lloyd’s Rep 76, [2001] 2 All ER (Comm) 193
Links:
Bailii
Jurisdiction:
England and Wales
Cited by:
Cited – Oldham and others v Georgina Kyrris and Another CA 4-Nov-2003
The claimant sought to bring a claim against the administrators of a partnership alleging a duty of care to creditors.
Held: Such an administrator owed no greater duty to creditors than would a director. That duty was no different whether the . .
Cited – Scammell and others v Dicker CA 14-Apr-2005
The parties had settled a boundary dispute in 1994 with a consent order, but the terms of the order had been difficult to implement. The respondent appealed an order declaring the consent order void for uncertainty.
Held: The appeal succeeded. . .
Cited – Leeds Rugby Ltd v Harris and Bradford Bulls Holdings Limited QBD 20-Jul-2005
The claimant sought damages from the defendants saying that the second defendant had induced a breach of contract by the first when he left to play rugby for the second defendant.
Held: The contract could not be said to be void as an agreement . .
Cited – Donington Park Leisure Ltd v Wheatcroft and Son Ltd ChD 7-Apr-2006
Leave to apply was pursued under the provisions of a Tomlin order. The parties had disputed the extent to which parts of the order should be exhibited to the court.
Held: The Tomlin order should be amended to add terms necessary to give effect . .
Cited – MRI Trading Ag v Erdenet Mining Corporation Llc CA 8-Mar-2013
The Commercial Court had found the result of an arbitration award ‘obviously wrong’, and ineed bizarre.
Held: The appeal failed. The award was flawed, in failing to take account of the trading context between the parties: ‘The overall . .
Lists of cited by and citing cases may be incomplete.
Contract
Updated: 31 May 2022; Ref: scu.147482
