Introduction
An “agreement to agree” is a preliminary commitment where parties express an intention to finalize contract terms at a later date. These agreements often face enforceability challenges due to their inherent vagueness and lack of certainty, which courts typically require for binding contracts. However, some jurisdictions recognize limited enforceability when mechanisms such as good faith negotiation duties or objective deadlock resolution clauses are included.
What Is an Agreement to Agree?
- Definition: A preliminary commitment where parties express intent to finalize contract terms later.
- Problem: Courts often reject them as too vague or uncertain, since enforceability requires clear, definite, and complete material terms.
- Use Case: Common in complex deals (e.g., technology licensing, joint ventures, construction) where parties want flexibility before finalizing details.
Comparative Jurisdictional Overview
| Jurisdiction | General Position | Key Cases / Principles | Notes |
| South Africa | Generally unenforceable unless certainty exists. Courts may uphold if a deadlock mechanism or objective criteria are included. | Letaba Sawmills v Majovi emphasized good faith negotiation but rejected vague agreements. | Courts stress certainty of terms; “agreements in principle” often fail unless structured. |
| United Kingdom | Strong presumption against enforceability. Agreements to agree are void for uncertainty. | Walford v Miles (1992): No enforceable duty to negotiate in good faith. | UK courts reject “good faith” negotiation obligations as inherently uncertain. |
| United States | Mixed approach. Some states (e.g., New York) reject them outright; others (e.g., California) may enforce if good faith negotiation or objective standards exist. | Texaco v Pennzoil (1987): Preliminary agreements can bind if intent is clear. | US law distinguishes between Type I preliminary agreements (binding) and Type II (binding only to negotiate in good faith). |
| European Union (Civil Law) | More flexible. Courts may enforce if parties show intent and objective criteria exist. | French law: Code civil allows enforcement if essential terms are determinable. German law: § 154 BGB presumes no contract unless expressly intended. | Civil law systems emphasize intent and determinability rather than strict certainty. |
| Switzerland | Similar to Germany. Agreements to agree are unenforceable unless essential terms are determinable. | Swiss Code of Obligations requires clarity on material terms. | Courts may enforce if price or scope can be objectively determined. |
Key Comparative Insights
- Common Law (UK, South Africa, US): Skeptical of enforceability; certainty is paramount.
- Civil Law (EU, Switzerland): More pragmatic; enforceability possible if objective criteria exist.
- South Africa: Aligns with UK but shows some openness if a mechanism for resolving deadlock is included.
- US: Unique in recognizing “preliminary agreements” with enforceable duties to negotiate in good faith.
Practical Risks & Considerations
- Risk of unenforceability: Parties may invest time/resources only to find no binding contract.
- Best practice: Include objective mechanisms (e.g., arbitration, expert determination, formula-based pricing).
- Drafting tip: Avoid vague “to be agreed later” clauses; instead, specify fallback procedures.
Bottom Line: If you are drafting cross-border contracts, treat “agreements to agree” with caution. In South Africa and the UK, they are usually unenforceable unless backed by certainty mechanisms. In the US and civil law jurisdictions, enforceability depends on intent and determinability.
Conclusion
Agreements to agree present significant enforceability challenges due to their inherent uncertainty. While common law jurisdictions generally reject them unless supported by clear mechanisms, civil law systems offer more flexibility based on intent and determinability. Careful drafting with objective fallback provisions is essential to mitigate risks and ensure enforceability across jurisdictions.
References and Further Information
- https://www.cliffedekkerhofmeyr.com/news/publications/2023/Practice/Dispute/dispute-resolution-alert-10-october-agreement-in-principle-unpacking-the-enforceability-of-agreements-to-agree
- https://hbgschindlers.com/wp-content/uploads/2025/08/Agreements-to-Agree-Clarifying-the-Obligation-to-Negotiate-in-Good-Faith-b.pdf
Disclaimer
This practice note is for informational purposes only and does not constitute legal advice. Readers should consult qualified legal professionals for advice tailored to their specific circumstances.