Introduction
The concept of an ‘agreement to negotiate reasonably’ sits at a contentious juncture in contract law, raising fundamental questions about certainty, enforceability, and the boundaries of legal obligation. In English law, for a contract to be binding, it must exhibit certainty of terms, mutual intention to create legal relations, and consideration. However, agreements to negotiate—particularly those qualified by terms such as ‘reasonably’—often lack the precision required for enforceability, rendering them vulnerable to the critique of being ‘too uncertain’. This essay explores the validity of this statement by examining judicial approaches to such agreements, focusing on key case law, the principle of certainty, and the practical implications for contractual parties. It argues that while agreements to negotiate reasonably are often deemed unenforceable due to their inherent vagueness, there are limited contexts where courts have attempted to uphold related obligations, thus demonstrating a nuanced judicial stance. The discussion will proceed by analysing the legal principles underpinning certainty, evaluating landmark cases, and considering the broader implications for commercial practice.
The Principle of Certainty in Contract Law
Certainty of terms is a cornerstone of English contract law, ensuring that agreements are sufficiently clear to be enforceable. As Lord Wright articulated in Scammell and Nephew Ltd v Ouston (1941), an agreement must be “sufficiently definite to enable the court to give it a practical meaning” (Wright, 1941). Without precise terms, courts struggle to determine the intentions of the parties or to provide remedies in the event of a breach. An agreement to negotiate reasonably inherently introduces ambiguity, as the term ‘reasonably’ is subjective and context-dependent, lacking objective criteria for measurement. For instance, what constitutes reasonable behaviour in negotiations may vary significantly between parties or industries, rendering such agreements difficult to enforce. This fundamental issue underpins the critique that these agreements are too uncertain, as they fail to meet the threshold of clarity required for a binding contract.
Moreover, the courts have consistently upheld the principle that they will not ‘make a contract for the parties’ by filling in gaps left by vague terms (Hill, 2001). This judicial reluctance further complicates the enforceability of agreements to negotiate, as they often leave critical details unresolved. While parties may intend to create a framework for future discussions, the lack of specificity often results in such agreements being classified as mere ‘agreements to agree’, which are generally unenforceable under English law.
Judicial Approaches to Agreements to Negotiate
The judiciary’s stance on agreements to negotiate reasonably is perhaps most clearly illustrated in the landmark case of Walford v Miles (1992). In this case, the House of Lords held that an agreement to negotiate in good faith was unenforceable due to its lack of certainty. Lord Ackner reasoned that such an obligation was “unworkable in practice” as it provided no objective standard by which the court could assess compliance (Ackner, 1992). The decision underscored the view that without clear, defined parameters, an agreement to negotiate reasonably cannot constitute a binding contract. This ruling remains a bedrock authority in English law, frequently cited to affirm the judiciary’s aversion to enforcing vague pre-contractual agreements.
However, the courts have occasionally demonstrated a willingness to enforce related obligations in specific circumstances, particularly where a broader contractual framework provides context. For example, in Petromec Inc v Petroleo Brasileiro SA (2005), the Court of Appeal upheld a term requiring parties to negotiate in good faith over certain costs within an existing contract. This suggests that while standalone agreements to negotiate reasonably may be too uncertain, they can be enforceable when tethered to specific, measurable obligations within a larger agreement. Nevertheless, such cases remain exceptions rather than the norm, and the general principle articulated in Walford v Miles continues to dominate judicial reasoning.
Comparative Perspectives and Exceptions
It is worth noting that the English approach to agreements to negotiate reasonably stands in contrast to other jurisdictions where such obligations may be more readily enforced. For instance, in some civil law systems, the principle of good faith is a foundational concept, and courts are more inclined to impose duties to negotiate reasonably (Beale, 2010). This comparative perspective highlights the distinctiveness of the English common law tradition, which prioritises certainty and freedom of contract over implied duties of cooperation. Indeed, the English judiciary’s reluctance to enforce vague terms arguably reflects a broader policy of preserving parties’ autonomy to walk away from negotiations without legal consequence.
That said, there are limited contexts within English law where courts have inferred obligations akin to reasonable negotiation. For example, in cases involving lock-out agreements—where a party agrees not to negotiate with others for a specified period—courts have occasionally upheld such terms, provided they are sufficiently clear and time-bound (Furmston, 2017). However, even in these scenarios, the term ‘reasonably’ introduces an element of subjectivity that risks rendering the agreement unenforceable. Thus, while exceptions exist, they are typically narrowly construed and depend heavily on the specific wording and context of the agreement.
Practical Implications for Commercial Practice
The uncertainty surrounding agreements to negotiate reasonably has significant implications for commercial practice. Businesses often enter into preliminary agreements with the intention of fostering trust and collaboration, yet the unenforceability of such terms under English law can expose them to risks. For instance, a party relying on an agreement to negotiate reasonably may invest time and resources into discussions, only to find that the other party can walk away without legal repercussion. This reality underscores the importance of drafting clear, detailed contracts that avoid vague language wherever possible.
Furthermore, the judicial stance on this issue may deter parties from including negotiation clauses in their agreements, potentially stifling early-stage collaboration. As Hill (2001) notes, while certainty is crucial for enforceability, an overly rigid approach may fail to accommodate the fluid, dynamic nature of commercial dealings. This tension between legal principle and practical reality remains a key challenge for contract law, prompting calls for reform or greater judicial flexibility in exceptional cases.
Conclusion
In conclusion, the statement that ‘an agreement to negotiate reasonably is too uncertain’ holds substantial merit within the framework of English contract law. The principle of certainty, as upheld in cases such as Walford v Miles (1992), underscores the judiciary’s reluctance to enforce vague terms that lack objective standards for compliance. While limited exceptions exist—particularly where negotiation obligations are embedded within a broader contractual context—the general position remains one of unenforceability. This approach, though grounded in the need for clarity, arguably overlooks the practical realities of commercial negotiations, where parties often rely on flexible, preliminary agreements. Moving forward, there may be scope for the courts to adopt a more nuanced stance, balancing the need for certainty with the evolving demands of modern business practice. Ultimately, however, the current legal landscape suggests that parties must exercise caution when relying on agreements to negotiate reasonably, prioritising precision in their contractual terms to avoid the pitfalls of uncertainty.
References
- Ackner, L. (1992) Judgment in Walford v Miles [1992] 2 AC 128. House of Lords.
- Beale, H. (2010) Contract Law: Principles and Policy. Hart Publishing.
- Furmston, M. (2017) Cheshire, Fifoot & Furmston’s Law of Contract. 17th edn. Oxford University Press.
- Hill, J. (2001) ‘Agreements to Agree and the Limits of Contractual Obligation’, Modern Law Review, 64(4), pp. 589-605.
- Wright, L. (1941) Judgment in Scammell and Nephew Ltd v Ouston [1941] AC 251. House of Lords.
