Parties to long-term contracts sometimes leave the price of products for at least some of a contract period unspecified and to be determined at a later stage.

They may do this where the market price for products is volatile, so as to allow a price for later deliveries to be fixed by reference to market conditions at that later stage.

Sometimes parties do this in the hope that a price can be agreed later, sometimes they have in mind that some objective criteria may ultimately be used to determine a price, or sometimes they may have agreed a review mechanism for determining the price that then ‘breaks down’ for some reason.

In all these cases, this can give rise to disputes if the parties do not agree upon a price for later sales or a mechanism for determining a price – or if one party argues that no valid agreement at all has been reached for later deliveries.

The Court of Appeal has recently given helpful guidance that is relevant in these circumstances in KSY Juice Blends UK Limited v Citrosuco GMBH.[1]

Specifically, the Court considered and confirmed the English-law principles applicable to assess whether (1) parties have agreed on a price (or other terms) for deliveries or (2) have merely reached an ‘agreement to agree’, which is unenforceable under English law.

1. Key applicable principles under English law

In considering whether parties have reached an agreement on a price (or other terms), the English courts have emphasised that each case is to be decided on its own facts and on the construction of the terms of the particular agreement.[2]

Based on the construction of the terms of a particular contract, the following principles apply:

  • If parties intended to leave an essential matter (such as the price) to be agreed in future, on the basis that either party will remain free to agree or disagree, there is no agreement that a court or tribunal can enforce.[3] The parties have no obligation to negotiate in good faith about the matter that is not agreed.[4]
  • If a court or tribunal finds that the parties intended to reach a binding agreement, it will strive to give effect to that intention by construing the contract terms so as to allow the price or other matter to be fixed in the future to be determined.[5] This is particularly appropriate with regard to commercial dealings between parties who are familiar with the trade at issue, who have acted in the belief that they had a binding contract.[6]In this second scenario, where the parties intended their bargain to be enforceable, a court or tribunal may imply a term into the contract that the price should be a ‘fair’ price or a ‘market’ price or a ‘reasonable’ price, provided that this is not inconsistent with what the parties have actually agreed.[7]  Similarly, if the parties intended the price or another matter to be determined by objective criteria of fairness or reasonableness but have not provided a mechanism for doing so, a court or tribunal may provide its own machinery for that determination.[8]

2. The Court of Appeal’s recent decision

The Court of Appeal recently considered and applied these principles in a dispute over whether a contract for delivery of orange juice pulp wash (“pulp”) for a three-year period included an agreement on a price for certain quantities of pulp for the later years of the contract.

While it was common ground that the parties in that case had agreed a price for some quantities of pulp, there was a dispute over whether an agreement had been reached on price for the remaining quantities.

The contract stipulated, among other provisions, that the remaining quantities were to be sold at an “open price to be fixed latest by December of the previous year”.  No further agreement was then reached as to the price for the remaining quantities.

After a year or so, the buyer Citrosuco considered that the contract had become a bad bargain for it and refused to take further deliveries.  It argued that it was under no obligation to pay for the remaining quantities, as there was no agreement on an essential term: the price.  The seller then terminated the contract, alleging that Citrosuco was in repudiatory breach of the contract, and sued Citrosuco for damages.

The High Court accepted Citrosuco’s case that the provision regarding the price for the remaining quantities of pulp was an unenforceable agreement to agree.

However, the Court of Appeal overturned this decision, finding that an agreement could be implied that a reasonable or a market price was to be paid for the remaining quantities.

Considering and applying the principles summarised above, the Court of Appeal’s reasoning was as follows:

  • While the contract stated that the price for the remaining quantities was “open”, it did not say how the price was to be fixed – and did not make this dependent on any future agreement (which would have made this an unenforceable ‘agreement to agree’).
  • Instead, the contract contained a number of indications that the parties intended their contract to be a binding agreement governing deliveries of the full quantity of pulp stipulated in the contract (including the remaining quantities). Notably, the parties had stipulated (1) a fixed term for the contract of over three years; (2) a fixed amount of pulp to be supplied, which included the remaining quantities; and (3) a term regarding the full amount to be paid, subject to limited adjustments.  The contract did not contemplate either party renegotiating the volumes to be supplied.
  • Moreover, the contract was part of a commercial dealing between parties familiar with the trade at issue, who had agreed or provided a mechanism for deciding most elements of their long-term agreement. The parties had left the price for the remaining quantities open only to allow for flexibility in view of the volatility of the market for pulp.
  • For those reasons, the Court of Appeal found that the contract fell firmly into the category of bargains that a court or tribunal should strive to uphold. It duly did so and implied into the contract a price for the pulp by reference to industry expert evidence as to the appropriate price.

3. Comments

The Court of Appeal’s decision confirms that, while an agreement to agree is not enforceable, English law offers a supportive framework for upholding parties’ bargains, including by implying pricing or other terms into the contract where that is necessary to achieve this.

However, for parties entering into long-term contracts governed by English law, it is advisable to agree wherever possible upon a contract price or a mechanism whereby a contract price can be determined.  One such mechanism is a price review mechanism that allows for the contract price to be reviewed and revised periodically where that is justified by specific market changes (as is common, for example, in long-term energy contracts).

Parties negotiating such contracts governed by English law should be aware that agreements to agree are not enforceable – and that a negotiating ‘fudge’ of this kind is likely to give rise to real practical difficulties.

If you have any questions about this decision, disputes about pricing, arbitration or expert determination, please contact:

Tom Cameron, Partner, International Arbitration

 

[1]    [2025] EWCA Civ 760.

[2]     See, e.g., BJ Aviation Ltd v Pool Aviation Ltd [2002] EWCA Civ 163 at [20] (per Chadwick LJ).

[3]     BJ Aviation Ltd v Pool Aviation Ltd [2002] EWCA Civ 163 at [21] (per Chadwick LJ).

[4]     Walford v Miles [1992] A.C. 128 at 138G.

[5]     BJ Aviation Ltd v Pool Aviation Ltd [2002] EWCA Civ 163 at [23] (per Chadwick LJ).

[6]     Mamidoil-Jetoil Greek Petroleum Company SA v OKTA Crude Oil Refinery AD [2001] EWCA Civ 406 at [69] (per Rix LJ).

[7]     BJ Aviation Ltd v Pool Aviation Ltd [2002] EWCA Civ 163 at [23] (per Chadwick LJ).

[8]     BJ Aviation Ltd v Pool Aviation Ltd [2002] EWCA Civ 163 at [24] (per Chadwick LJ).

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