‘Agreement to Agree’ was Enforceable Clause as to Pricing
How is pricing for a product or service provided for in your commercial contracts? While all contractual terms should be carefully agreed and drafted, pricing and other costs are fundamental to the contract - going to the very heart of the business relationship.
In a recent case involving an ‘agreement to agree a price’, the dispute ended up in the Court of Appeal, leading to helpful guidance for the business community. Where an end price cannot be agreed, an agreement to agree is not automatically unenforceable.
What’s the background?
In KSY Juice Blends UK Limited v Citrosuco GMBH [2025] EWCA Civ 760 the claimant entered into a contract in May 2018 for the sale of pulp wash (a by-product of the orange juice extraction process) over a 3-year period.
The pricing provisions included a clause stating: “800mt [metric tonnes] at open price to be fixed latest by December of the previous year”.
Later in 2018, the parties tried but failed to agree the ‘open price’ for the following year 2019. A year on, the parties again failed to reach an agreement for 2020.
The claimant issued invoices in January 2020 and May 2020 in respect of 800mt of pulp wash for 2019 for €1,600/mt. The defendant had in fact refused delivery and did not pay the invoices on the basis that the open price provision was an unenforceable ‘agreement to agree’. KSY brought a claim for damages.
The Court of Appeal disagreed with the High Court’s decision. It ruled that in this case, there was an implied term “… to the effect that the price… was to be fixed, in the absence of agreement, as a reasonable or market price”.
Zacaroli LJ found that the contract “implicitly envisages that – at least in the first instance – the parties would seek to fix the price by agreement”, also noting that they had agreed, or at least provided a mechanism for deciding, most elements of their long-term agreement. Furthermore, the contract did not contemplate renegotiation of any other part of the agreement, therefore it was “firmly in the territory of those contracts which a court will strive to uphold”.
There was also a generally accepted method for identifying the price (by reference to the frozen concentrated orange juice market). The claimant was entitled to compensation.
What does this mean?
The court’s conclusions provide important guidance for similar types of contractual clauses:
· Although s8(2) of the Sale of Good Act states that where no price has been agreed in the contract, the seller can claim a “reasonable price”, this did not apply to this contract. That provision only applies where the contract is ‘silent’ as to price. The contract between the parties was not silent – the parties were to agree the price
· An ‘agreement to agree’ is not automatically unenforceable as a ‘mere agreement to agree’. It depends on the facts of the case and a true construction of the words used in the particular agreement
The ruling is particularly relevant to longer term contracts where a level of flexibility around costs may be appropriate. Drafting open price provisions need to be carefully considered to avoid arguments further ahead. Don’t be tempted to treat such a clause as a potential ‘get out’ clause.
1KSY Juice Blends UK Limited v Citrosuco GMBH
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you