B. Certainty of Terms

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 141-143

Page 141

The leading decisions of the English courts on the possible existence of a duty to negotiate in good faith have arisen in the context of attempted agreements that may fail because of incompleteness or uncertainty of terms.¹³Thus, the possible existence of an enforceable duty to negotiate was first suggested in a well-known dictum of Lord Wright in the leading case of Hillas and Co. Ltd. v. Arcos.¹⁴The plaintiffs sought to enforce an agreement for an option to purchase by instalments a quantity of timber over the 1930 lumber season from a Russian supplier. The agreement left a number of details at large such as the arrangements to be made for particular instalments. The prices were to be settled by the supplier’s price list when available. The description of the goods was arguably vague. The parties had, however, worked successfully with a similar agreement in the previous season, finding themselves able to agree to appropriate details as the need to do so arose. In these circumstances, Lord Wright was obliged to consider whether an "agreement to agree" might be binding. In his view, if the agreement was to agree to the prescribed terms of what amounted to a binding contract, the agreement to agree would simply be that binding contract. He went on to consider, however, what the significance might be of an agreement to attempt to reach a binding agreement in the following fashion:

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.¹⁵It was unnecessary for Lord Wright to consider this point further, however, as it was his view that the agreement was enforceable as the parties had implicitly agreed to "reasonable" arrangements with respect to each of these matters. If the parties were unable to agree as to a reasonable arrangement with respect to a particular point, "the machinery (of the law) is always available to give the necessary certainty."¹⁶

Page 142

The suggestion made by Lord Wright that an agreement to negotiate could be enforceable has not...