How Enforceable is an Agreement to Agree?
The High Court recently found that an agreement was unenforceable as it lacked sufficient certainty; it was in essence merely an “agreement to agree”.
This case concerned an agreement between a shipping company (“T”) and a shipbuilder (“S”) for several oil tankers. An option agreement was also entered into for T to order extra ships, providing that the delivery dates for the ships would be mutually agreed between the parties and that S would use its best efforts to deliver the ships.
S refused to build the extra ships. T terminated the agreement and claimed loss of bargain damages of $178 million. The Court agreed with S’ argument that the agreement was unenforceable for uncertainty; the agreement was merely an “agreement to agree”. Whilst the surrounding agreements showed an intention for the agreement to be binding, there was no term to agree the delivery dates if the parties were unable to reach mutual agreement.
Teekay Tankers Ltd v STX Offshore & Shipbuilding Co Ltd  EWHC 253 (Comm)
Matthew Howat, Commercial & Dispute Partner, comments: This case provides a useful reminder of the law on agreements to agree and highlights that where the parties have entered into a contract, the court will strive to uphold it. However, a court will not imply a term to rescue a contract from uncertainty, particularly if the implied term contradicts the express language of the contract.
To discuss any commercial or legal matter on a no obligation basis, please contact Matthew Howat, Company and Disputes Partner, on 020 7884 9700 or email Matthew at Matthew.Howat@hasolicitors.co.uk. Alternatively, visit our website at www.howatavraamsolicitors.co.uk.
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