Chapter 5

Question 1

The parties must intend to be legally bound before the court will recognise the existence of an enforceable contract. What was the leading case for this?

Answer 1

The leading case is RTS Flexible Systems Limited v Molkerei Alois
Müller GmbH & Co KG [2010] 1 WLR 753.

Question 2

How does the court determine the parties’ intention in a contract?

Answer 2

The court determines the parties’ intention based on the particular facts of each case, which are objectively assessed. It does not consider their subjective states of mind. The words used, conduct, circumstances, and the relationship between parties are all relevant considerations.

Question 3

Is the finalization of all terms a prerequisite for a legally binding agreement?

Answer 3

No, even if certain terms of economic or other significance have not been finalized, an objective appraisal of the parties’ words and conduct may lead to the conclusion that they intended to form a concluded and legally binding agreement.

Question 4

Who bears the burden of proving a lack of intention to create legal relations in a commercial context?

Answer 4

In a commercial context, the onus of demonstrating that there was a lack of intention to create legal relations lies on the party asserting it. This burden is considered heavy.

Question 5

How do the courts distinguish between domestic and commercial agreements?

Answer 5

The courts distinguish between domestic and commercial agreements based on the context in which they are made. Commercial agreements are generally held to have a stronger presumption of an intention to create legal relations, whereas domestic agreements may be presumed to lack such intention unless there is evidence to the contrary.

Question 6

Can agreements between spouses be enforced?

Answer 6

When spouses who are living together in harmony make an agreement, there is a presumption that the agreement is unenforceable in a court of law. In other words, it is assumed that the agreement between the spouses is not legally binding unless there is clear evidence within the agreement itself indicating otherwise.

Question 7

When spouses who are living together in harmony make an agreement, there is a presumption that the agreement is unenforceable in a court of law. What do they have to do if they want to enforce an agreement? Who carries the burden of proof?

Answer 7

If one of the spouses wants to enforce the agreement and seek legal remedies, they have the responsibility (the onus) to provide evidence and arguments to counter the presumption of unenforceability. They must demonstrate to the court that the agreement should be recognized as legally binding despite the initial presumption.

Essentially, the burden of proof lies with the claimant (the party seeking enforcement) to convince the court that the agreement should be upheld and enforced, even though there is a general presumption against enforceability in such agreements between spouses living together in harmony.

Question 8

Social agreements between spouses living together in harmony are presumed to be unenforceable, unless the agreement states to the contrary. Which case relating to this issue is famous?

Answer 8

In the case of Balfour v Balfour [1919] 2 KB 571, the husband and wife were living apart due to the husband’s posting in Sri Lanka and the wife’s health issues in England. During this separation, the husband made a promise to pay the wife £30 per month until she returned to Sri Lanka. However, the husband later expressed his belief that it would be better for them to remain apart.

When the wife sought to enforce her ex-husband’s promise after they obtained a divorce, her claim was rejected in the Court of Appeal. Despite the lack of consideration (something of value exchanged between parties in a contract), Atkin LJ, one of the judges, believed that domestic arrangements of this nature are generally not intended to be legally binding unless there are facts pleaded to rebut the presumption against enforceability.

The strength of the presumption against enforceability in domestic arrangements depends on the closeness of the relationship and other relevant circumstances. It is important to note that the presumption does not apply when spouses are already estranged or no longer living together at the time the agreement is made.

In summary, Balfour v Balfour established that domestic arrangements between spouses living together are generally not legally binding unless there is evidence to the contrary. The presumption against enforceability can be overcome by pleading specific facts that rebut the presumption. The strength of the presumption varies depending on the relationship dynamics and circumstances, and it does not apply when spouses are estranged or living apart.

Question 9

Balfour v Balfour [1919] 2 KB 571 concerned a case where a social agreement between spouses was not enforceable. What is a leading case in which such an agreement was enforceable? What were the circumstances?

Answer 9

In Merritt v Merritt [1970] 1 WLR 1211, the court considered an agreement between a separated husband and wife. The husband agreed in writing to transfer the matrimonial home solely into the wife’s name if she paid off the remaining mortgage debt. Once the wife fulfilled her part of the agreement and paid off the mortgage, the court held that the husband’s promise was legally enforceable.

Question 10

Merritt v Merritt [1970] 1 WLR 1211 concerned a case in which a social agreement between a separated husband and wife was enforceable. There is an exception to such agreements, which? Based on what case?

Answer 10

It is important to note that agreements between separated couples may still be unenforceable due to lack of certainty. In the case of Gould v Gould [1969] 3 All ER 728, the husband made an undertaking to his estranged wife, promising to pay her £15 per week “so long as I can manage it.” The court ruled that this undertaking was non-binding because it lacked the necessary certainty required for a legally enforceable agreement.

Question 11

Are social agreements between parents and children enforceable? What is the leading case?

Answer 11

Domestic agreements are presumed not to have legal effect with regard to parents and children.

In the case of Jones v Padavatton [1969] 2 All ER 616, a mother purchased a house in London for her daughter with the intention that the daughter would live there and generate income by renting out spare rooms. The daughter moved to London to pursue a law degree but became estranged from her mother after failing the Bar exam. The mother then claimed possession of the house, while the daughter argued that she had a contractual right to remain there.

The Court of Appeal held that agreements between parents and children, similar to agreements between spouses, are presumed not to have legal effect. In this case, the daughter failed to rebut the presumption against an intention to create legal relations. The court considered that the agreement was made when the parties were on good terms, and there was no evidence presented to demonstrate a contrary intention to create a legally binding arrangement.

Therefore, the court concluded that the daughter did not have a contractual right to remain in the house, and the mother’s claim for possession was upheld.

This case exemplifies the general presumption that domestic agreements between parents and children are not intended to create legal obligations. In order for such agreements to be legally enforceable, there must be evidence to rebut this presumption and establish a clear intention to create legally binding relations between the parties.

Question 12

Are social agreements between non-relatives enforceable? What are two of the leading cases (with opposing outcomes)?

Answer 12

In social situations, there is a presumption against an intention to create legal relations. This means that agreements made in informal or social contexts are generally not considered to be legally binding unless there is evidence to the contrary.

In the case of Lens v Devonshire Club [1914], the court held that there was no intention to create legal relations in a golf club competition where the conditions of the competition did not indicate any legal consequences. The court emphasized that the intentions of those involved in the competition did not support the existence of a legally enforceable agreement.

However, the presumption against an intention to create legal relations can be rebutted if the claimant can demonstrate that there was reliance placed on the agreement. This means that if the claimant can show that they had a reasonable expectation that the agreement would be legally binding and they relied on it, the court may consider the agreement to be enforceable.

In Simpkins v Pays [1955], a case involving a newspaper competition, the court found that there was a joint enterprise between a grandmother, her daughter, and their paying lodger. Although the application for the competition was in the name of the grandmother, they had an agreement to share the cost of entry, indicating an intention to share any prize. The court held that there was a shared acknowledgment of the intention to be legally bound, and therefore the arrangement was considered legally enforceable.

These cases illustrate that while there is a presumption against an intention to create legal relations in social situations, the court will consider the circumstances of each case and may recognize the agreement as legally binding if there is evidence of reliance and an intention to be legally bound.

Question 13

How does the presumption in commercial agreements differ from social agreements?

Answer 13

The presumption in commercial agreements differs from social agreements in terms of the default assumption regarding the intention to create legal relations. Here are the key differences:

Presumption: In commercial agreements, there is a presumption in favor of the intention to create legal relations. This means that when parties enter into a commercial agreement, it is generally presumed that they intended for the agreement to be legally binding and enforceable. The presumption operates in favor of enforceability.

Rebutting the Presumption: In commercial agreements, the presumption of intention to create legal relations can be rebutted by providing clear evidence to the contrary. If a party can demonstrate that they did not intend for the agreement to have legal consequences, the presumption can be overcome. However, the burden of proof is typically high, and very clear evidence must be presented to rebut the presumption.

Social Agreements: In contrast, in social agreements, there is a presumption against the intention to create legal relations. This means that in informal or social contexts, agreements are generally presumed not to be legally binding unless there is evidence to the contrary. The default assumption is that the parties did not intend for legal consequences to arise from their social arrangements.

Reversing the Presumption: In social agreements, the presumption against intention to create legal relations can be reversed if there is evidence to support an intention to be legally bound. This can occur when the parties demonstrate that they relied on the agreement or when there is a clear indication of a legal intent.

Overall, the key difference lies in the initial assumption regarding the intention to create legal relations. In commercial agreements, the presumption favors enforceability, while in social agreements, the presumption leans towards non-enforceability. However, both presumptions can be rebutted or reversed based on the specific circumstances and evidence presented in each case.

Question 14

In commercial agreements, there is a presumption in favor of the intention to create legal relations. This means that when parties enter into a commercial agreement, it is generally presumed that they intended for the agreement to be legally binding and enforceable. However, this presumption can be rebutted if there is clear evidence to the contrary. Which is the leading case for this?

Answer 14

In the case of Edwards v Skyways [1964] 1 WLR 349, an airline pilot was promised an ex gratia payment by his employers, commonly referred to as a “golden handshake.” When the employers failed to make the payment, the pilot sued for breach of contract. The employers argued that the offer of the ex gratia payment was not intended to be legally binding.

The court held that in a commercial context, the burden of proof lies on the party asserting that no legal effect was intended. In this case, the employers failed to provide sufficient evidence to rebut the presumption of enforceability. As a result, the court concluded that a legally binding agreement existed and the employers were obligated to make the promised payment to the pilot.

This case highlights the importance of clear evidence when attempting to rebut the presumption of enforceability in commercial agreements. Parties seeking to avoid contractual obligations must present strong and compelling evidence to demonstrate that they did not intend to create legal relations.

Question 15

In which cases may the presumption of enforceability may be rebutted? (4)

Answer 15

1) Express exclusion of intent
2) Promotional offers
3) Mere puffs
4) Collective agreements

Question 16

What kind of transactions are generally unenforceable?

Answer 16

Transactions made ‘subject to contract’, letters of intent, letters of comfort, and honors clauses.

Question 17

What is a letter of intent?

Answer 17

A letter of intent is a document in which one party indicates that he intends to contract with the other in future, but is not yet ready to create contractual obligations. This often occurs where further information is sought, for example, to price up a tender on the basis of that subcontractor’s involvement, but where the inquiring party does not wish to be bound by that price at the initial stage of negotiations.

Question 18

British Steel v Cleveland Bridge (1981) 24 BLR 94

Answer 18

*The parties were negotiating for the manufacture of steel work for a construction project.
*Claimant provided an estimated price based on incomplete information.
*Claimant informed defendant that a final rate needed to be agreed upon.
*Defendant sent a letter of intent, willing to contract based on the estimated price.
*Letter proposed that the contract be based on defendant’s standard terms.
*Claimant did not respond to the letter but started work.
*Parties discussed technical requirements and delivery specifications but did not reach a final agreement.
*Claimant sent a formal quotation, which defendant rejected and changed specificatios.
*Claimant continued manufacturing.
*Parties eventually agreed on the price but not on other terms.
*Claimant sued for payment in quantum meruit, arguing no contract had formed.
*Claimant claimed they would not have agreed to defendant’s standard terms.
Defendant counter-claimed for breach, alleging late delivery and incorrect order.

Justice Robert Goff identified two possible species of contracts that may arise following a letter of intent:

1) Ordinary executory contract: This is a typical contract where both parties agree to perform certain obligations.
2) “If” contract: This type of contract involves one party (A) requesting another party (B) to carry out a certain performance with the promise that if B does so, they will receive a certain performance in return.

In this case, Justice Goff concluded that there was no contract formed. Instead, there was an obligation on the part of Cleveland Bridge to pay a reasonable price for the work done and materials delivered. If there is nothing in the letter of intent to negate the intention to form a contract, the letter may be considered as forming a binding agreement, particularly if the parties have acted based on the document for a significant period or have incurred expenses in reliance on it.

Question 19

What is quantum meruit?

Answer 19

Quantum meruit is a legal principle that allows for the recovery of a reasonable sum of money for goods or services rendered, even in the absence of a formal contract or agreement. It is Latin for “as much as he has deserved” or “as much as is deserved.” Essentially, it is a remedy to ensure fairness when one party has provided goods or services and deserves to be compensated, even if there is no explicit contract governing the transaction.

In a quantum meruit claim, the court determines the reasonable value of the goods or services provided based on factors such as the market rate, the nature of the work performed, and any express or implied agreements between the parties. The goal is to prevent unjust enrichment and provide restitution to the party who has performed the work or provided the goods.

Quantum meruit is often invoked when there is a dispute over the existence or terms of a contract, or when a contract is found to be unenforceable. It allows for a fair assessment of the value of the work done or services rendered, ensuring that the party who performed the work is reasonably compensated.

Question 20

What is a comfort letter?

Answer 20

A comfort letter is usually written by a holding company to a lender about to lend money to a subsidiary of the holding company in order to reassure the lender of the financial viability of the subsidiary. These letters are not guarantees as the holding company is not willing to enter into a legally binding financial commitment.

Question 21

Kleinwort Benson Ltd. v Malaysia Mining Corp. Bhd [1989] 1 All ER 785

Answer 21

In Kleinwort Benson Ltd. v Malaysia Mining Corp. Bhd [1989] 1 All ER 785, the case revolved around letters of comfort provided by the defendant to the claimant bank in relation to a loan facility provided to the defendant’s subsidiary. . As part of the arrangement, the defendant provided two ‘letters of comfort’, each stating that “it is our policy to ensure that the (subsidiary’s) business is at all times in a position to meet its liabilities to you”. The subsidiary went into liquidation and the bank claimed from its holding company,

The Court of Appeal reached the following conclusions:

Nature of Letters of Comfort: The court determined that the letters of comfort issued by the defendant were statements of present fact rather than contractual promises regarding future conduct. They were intended to provide reassurance and establish a moral responsibility, rather than create legally binding obligations.

No Intention to Create Legal Relations: The court held that the letters of comfort did not demonstrate an intention to create legal relations between the parties. They were seen as a moral commitment to ensure the subsidiary’s ability to meet its financial obligations, but not a legally enforceable promise.

Absence of Implied Promise: The court emphasized that no promise could be implied from the letters of comfort when it was not expressly stated. The defendant’s moral responsibility did not give rise to an enforceable legal obligation to repay the subsidiary’s debt.

Question 22

Rose and Frank Co. v Crompton Bros Ltd. [1925] AC 445 - on honor clauses

Answer 22

In Rose and Frank Co. v Crompton Bros Ltd. [1925] AC 445, an “honour clause” was included in a commercial agreement to rebut the presumption of contractual intention. The clause stated that the arrangement was not a formal or legal agreement and would not be subject to legal jurisdiction in the Law Courts. Instead, it was described as a record of the parties’ purpose and intention, to which they each honourably pledged themselves based on past business.

The court held that the inclusion of the honour clause indicated a clear intention by the parties not to be legally bound by the agreement. As a result, the claimant’s action for breach of contract and non-delivery of goods failed because there was no binding agreement between the parties.

This case exemplifies how the inclusion of an honour clause can effectively rebut the presumption of contractual intention in a commercial contract. It demonstrates that parties can expressly state their intention not to be legally bound, thus preventing the formation of a legally enforceable contract.

Question 23

Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117 is a leading case for “promotional offers”, i.e one of the cases where the presumption of enforceability may be rebutted in commercial agreements. Summarize the case.

Answer 23

Case: Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117

Facts:

*Esso, a petrol company, ran a sales promotion where customers would receive one free “World Cup” coin for every four gallons of petrol purchased.
*The coins were manufactured coins with the image of a 1970 World Cup English footballer on one side and the word “Esso” on the other.
*Customs and Excise Commissioners claimed that the coins should be subject to purchase tax as goods “produced in quantity for general sale” under the Purchase Tax Act 1963.
*Esso argued that the coins were given as free gifts and did not involve a sale or create legal relations.

Issues:
*The main issue was whether the distribution of the coins constituted goods “for general sale” and whether Esso had a legal obligation to supply the coins under a contractual relationship with customers.

Decision/Outcome:
The Court held:

1) Legal intent: There was an intention by Esso to create a legal obligation to supply the coins. The transaction took place in a business setting and was not merely promotional “puffery.” Esso derived commercial advantages from the offer, and customers accepted the offer, indicating the existence of legal intent.
2) Transfer of goods: For a contract of sale to exist, there must be a transfer of goods for monetary consideration. In this case, despite the intention to create a legal obligation, there was no consideration for the transfer of the coins. The coins were given to customers as a part of a separate contract for the sale of petrol, and no monetary payment was involved.
3) Contract of goods: As a result, the Court concluded that there was no contract of sale between Esso and the customers. Instead, there was a contract to produce the coins as goods “for general sale.” The coins were virtually worthless in themselves, and their distribution was considered part of a unilateral contract or a general offer in parallel with the main contract of petrol sale.

In summary, the majority of the House of Lords held that there was no sale of the coins, and Esso was not liable for sales tax. The distribution of promotional coins was deemed an integral part of a unilateral contract alongside the petrol sale contract, demonstrating legal intent despite the coins’ minimal intrinsic value.

Question 24

What are advertising puffs?
In which cases do they attract contractual liability?

Answer 24

They are vague or exaggerated claims in advertising. Generally, they are statements of opinion and do not attract contractual liability.
However, if a pledge is specific, such as the form of a money-back guarantee, it is more likely to be binding. See: Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1

Question 25

Are collective agreements legally enforceable?

Answer 25

Collective agreements between employers and trade unions are generally presumed not to create legal relations. Therefore, they are usually unenforceable in court, unless there are clear and explicit provisions stating that they are legally binding (Ford Motor Co Ltd v AUEFW [1969] 2 QB 303).

Subsequently, legislation has intervened to specify cases where no contractual intention exists. Section 179 of the Trade Union and Labour Relations (Consolidation) Act 1992 states that agreements between trade unions and employers concerning rates of pay and working conditions are not intended to be legally enforceable, unless they are in writing and expressly affirm their binding nature.

Question 26

What is an agreement to agree?

Answer 26

An agreement to agree refers to a situation where the parties enter into a preliminary or incomplete agreement that contemplates the negotiation and execution of a future agreement. It means that the parties agree to negotiate and reach a final agreement on certain terms and conditions at a later stage.

In an agreement to agree, the parties typically express their intention to enter into a binding agreement in the future, but the specific terms and details of that future agreement are not fully defined or settled. The purpose of such an agreement is to outline the framework or principles for future negotiations and provide a basis for the parties to move forward.

However, because the terms are not sufficiently certain or definite, an agreement to agree is generally considered unenforceable in English law. The parties must reach a final agreement and fulfill the requirements of a legally binding contract before their rights and obligations can be enforced by the courts. Such agreements are considered “incomplete” and not legally binding until the final agreement is executed (Walford v Miles [1992] 2 AC 128).

Question 27

Leading case that agreements to agree are not enforceable

Answer 27

Walford v Miles [1992] 2 AC 128

In the case of Walford v Miles [1992] 2 AC 128, the House of Lords (now the Supreme Court) addressed the issue of enforceability of agreements to agree. The case involved an agreement for the sale of a business, where the parties entered into a preliminary agreement that stated they would negotiate the terms of a formal agreement in good faith. However, the final agreement was never reached, and one party attempted to terminate the negotiations.

The House of Lords held that an agreement to negotiate in good faith towards a final agreement is not legally binding. They emphasized the principle that an agreement to agree is incomplete and lacks the necessary certainty to be enforceable. The court ruled that until a formal and complete agreement is reached, either party is free to withdraw from the negotiations.

The decision in Walford v Miles reaffirmed the general rule that agreements to agree are unenforceable in English law due to uncertainty. It clarified that parties are not obligated to continue negotiations in good faith or reach a final agreement unless they have already entered into a legally binding contract.

Question 28

Under which circumstances are agreements to agree enforceable?

Answer 28

In certain circumstances, an agreement to agree can be fully enforceable if it meets certain requirements. While the general principle is that an agreement to agree is unenforceable due to uncertainty, there are exceptions where the agreement may be deemed enforceable.

For an agreement to agree to be enforceable, it must contain sufficiently definite terms that allow the court to determine the essential elements of the agreement. This means that the key terms, such as price, subject matter, and performance obligations, must be clearly defined. Additionally, there must be adequate consideration provided by both parties to support the enforceability of the agreement.

However, even if an agreement to agree meets these criteria, there may still be uncertainty regarding its enforceability. This uncertainty arises from the fact that certain details or specific terms may be left to be negotiated later by the parties. In such cases, the enforceability of the agreement may depend on the willingness of the parties to negotiate in good faith and reach a final agreement.

It is important to note that the enforceability of agreements to agree can be complex and may vary depending on the specific circumstances and jurisdiction. Legal advice should be sought to determine the enforceability of a particular agreement.

Question 29

The Court of Appeal, in a recent decision, held that an agreement between two parties to negotiate in good faith the terms of later agreements, which are uncertain in their terms, will not be enforceable in law. What case was that?

Answer 29

In the case of Georgi Barbudev v Eurocom Cable Management Bulgaria Eood & Ors [2012] EWCA Civ 548, the Court of Appeal in England and Wales considered an agreement to agree and its enforceability.

The case involved a dispute between Mr. Georgi Barbudev, the claimant, and Eurocom Cable Management Bulgaria Eood and other defendants. The parties had entered into a preliminary agreement for the sale of shares in a company, but certain essential terms were left to be agreed upon in the future.

The Court of Appeal held that the agreement between the parties was not a binding contract because it was an agreement to agree on essential terms. The agreement lacked certainty as it did not provide sufficient details regarding the price, the shares to be sold, and the timetable for completion. Therefore, it did not meet the requirements for a legally enforceable contract.

The court emphasized the general rule that an agreement to agree is unenforceable due to uncertainty. It stated that the parties must reach a final and definite agreement on all essential terms for a contract to exist. Mere agreement on some terms while leaving others open for future negotiation does not create a binding contract.

This case reaffirms the principle that an agreement to agree is generally unenforceable in English law unless it contains sufficiently definite terms and shows a clear intention to be legally bound. It highlights the importance of ensuring that all essential terms are agreed upon to avoid uncertainty and potential disputes regarding the enforceability of the agreement.

Question 30

Regarding an agreement to agree, in MRI Trading AG v Erdenet Mining Corporation LLC [2013] EWCA Civ 156, the Court of Appeal distinguished between two situations. Which?

Answer 30

In the case of MRI Trading AG v Erdenet Mining Corporation LLC [2013] EWCA Civ 156, the Court of Appeal made a distinction regarding the enforceability of agreements to agree based on the intention of the parties and the presence of objective criteria for determining essential matters.

The court stated that if the parties, based on the true construction of their words and the circumstances, intended to leave an essential matter (such as price or rent) to be agreed upon in the future, without any obligation to agree, then there is no enforceable contract. However, if the court determines that the matter to be agreed upon in the future can be determined by objective criteria of fairness or reasonableness, even in the absence of specific machinery for such determination, then the contract is enforceable. The court can provide its own machinery for determining the outstanding matter, including ordering an inquiry if necessary.

In the MRI Trading AG case, the court found that the agreement was enforceable despite certain provisions that were still to be agreed upon. The court considered the fact that the parties had already agreed on every other aspect of the contract, including quality, specification, and price. Additionally, the parties had stipulated for arbitration by a market tribunal to resolve any disputes. In light of these factors and the context of the broader transaction, the court concluded that it would be unreasonable to interpret the agreement as not intending to create a binding contract.

The Court of Appeal emphasized that the principles discussed in the case were not intended to provide an exhaustive list, and each case should be decided based on its own facts and the construction of the specific agreement involved.

Question 31

Sudbrook Trading Estate v Eggleton [1983] 1 AC 444 is a leading case mentioned for agreements to agree, why is it important?

Answer 31

In the case of Sudbrook Trading Estate v Eggleton [1983] 1 AC 444, four leases were made for adjacent industrial premises, each containing an option for the lessees to purchase the premises upon the expiry of the leases. When the lessees exercised the options, the lessors refused to appoint a valuer as required by the terms. The Court of Appeal held that the options were unenforceable, considering them as agreements to agree. However, the House of Lords allowed the appeal, ruling that a valid contract for the sale of the premises had been constituted between the parties since a price could be ascertained. The court stated that the mechanism for determining the purchase price was subsidiary and non-essential, and if it broke down, the court could substitute its own valuation by ordering an inquiry into the fair value of the property. Therefore, the options were considered validly exercised, and the contracts for sale should be performed.

The lessee is the tenant or occupant who rents a property, and the lessor is the landlord or owner who grants the right of possession and use to the lessee.

Question 32

Why was MRI Trading AG v Erdenet Mining Corporation LLC [2013] EWCA Civ 156 a leading case for agreements to agree?

Answer 32

The case of MRI Trading AG highlighted the principle that an agreement can still be enforceable even if certain provisions are yet to be agreed upon. The court emphasized that when parties have reached an agreement on essential aspects such as quality, specification, and price, and have included provisions for dispute resolution, it would be unreasonable to assume that they did not intend to enter into a binding agreement. This is especially true when the agreement is part of a larger transaction aimed at resolving an earlier dispute.

The Court of Appeal clarified that the principles discussed in the judgment were not meant to be exhaustive and that each case should be decided based on its specific facts and the interpretation of its own agreement. In other words, the enforceability of an agreement that leaves certain details to be determined in the future depends on the intentions of the parties as expressed in their agreement and the overall context of the transaction.