C. Agreements to Agree

AuthorJohn D. McCamus
ProfessionProfessor of Law. Osgoode Hall Law School, York University
Pages101-104

Page 101

In agreements suffering from some degree of incompleteness, it is not uncommon for parties to stipulate in the agreement that such matters are to be agreed upon by the parties in the future. Accordingly, the question has often arisen as to whether an "agreement to agree" gives rise to an enforceable obligation. The traditional position at common law is that no such obligation does, in fact, arise. In a well-known passage from the decision in Hillas, however, Lord Wright suggested that such an agreement might indeed be enforceable. He first noted that an agreement to agree in the future to a particular set of terms is simply an agreement to those terms.34It is one contract, not two. Even if the "second contract" is one that is not to take effect until a certain date, such an agreement is just a single agreement, the operation of which has been postponed to a future date. Lord Wright went on to observe, however, as follows:

If, however, what is meant is that the parties agree to negotiate in the hope of effecting a valid contract, the position is different. There is then no bargain except to negotiate and negotiations may be fruitless and end without any contract ensuing; yet even then, in strict theory, there is a contract (if there is good consideration) to negotiate, though in the event of repudiation by one party the damages may be nominal, unless a jury think that the opportunity to negotiate was of some appreciable value to the injured party.35Lord Wright’s tentative suggestion has not, however, been embraced in either the Canadian or English jurisprudence. In the Courtney and Fairbairn Ltd.36case, Lord Denning indicated that he did not consider Lord Wright’s view that a contract to negotiate could be enforceable was "well founded" and went on to explain as follows: "The reason is because it is too uncertain to have any binding force. No court would estimate the damages because no one can tell whether the negotiations

Page 102

would be successful or would fall through; or if successful, what the result would be. It seems to me that a contract to negotiate, like a contract to enter into a contract is not a contract known to the law."37Thus, where there remains a fundamental matter that is explicitly said to be subject to negotiation or agreement, the agreement fails for uncertainty. This proposition has been applied in a variety of contexts. Thus, it is well established that where there is an option to purchase land at a price to be agreed38or an option to lease land at a rent to be agreed,39the agreement is unenforceable. Indeed, an agreement for the sale of land at a fixed price with a down payment and the "balance to be arranged" has been held void on the basis, presumably, that the terms of the mortgage or some similar arrangement are essential terms of a real estate transaction.40In other contexts, however, "balance to be arranged" terms have been upheld on the ground that such terms pertain only to mode of...

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