Prior to this month’s decision of the Court of Appeal in MRI Trading AG –v- The Erdenet Mining Corporation LLC (2013) it had been generally safe to assume that ‘agreements to agree’ written into contracts in relation to fundamental provisions of the contract (such as pricing) would most likely be unenforceable for lack of certainty. In this case an ‘agreement to agree’ in respect of a treatment charge, shipping charge and shipping schedule in a contract for the sale of copper concentrates was upheld and a term was implied that the charges and shipping schedule were to be reasonable or referred to arbitration in the event of dispute.
Erdenet and MRI had contracted for Erdenet to supply copper concentrates to MRI. A dispute arose and, as part of a settlement agreement, three future contracts for the supply of the concentrate were entered into. Erdenet complied with the first two contracts but refused to deliver under the third contract which contained the ‘agreement to agree’. An arbitral tribunal found that the contract was unenforceable as it contained an ‘agreement to agree’ on an important aspect of price. The High Court allowed MRI’s appeal, and Erdenet appealed to the Court of Appeal. The Court of Appeal upheld the High Court decision and found in favour of MRI. The Court’s reasoning was that it would be perverse to attribute to parties an intention not to be bound in circumstances where every other aspect of the contract, including quality, specification and price, had been agreed. The Court also placed emphasis on the parties agreement to arbitrate disputes. The Court read the disputed contract with the other two contracts and the settlement agreement, seeing them as parts of a whole, and therefore finding that there had already been part performance. The case demonstrates the Court’s willingness to imply terms where there is uncertainty over a reasonably fundamental provision of the contract. If you would like further information, please contact Toby Stroh, head of Druces LLP’s Corporate & Commercial team or Tim O’Callaghan, Partner.This note does not constitute legal advice but is intended as general guidance only. It is based on the law in force in May 2013.