Agreement to Agree Cases
Agreement to Agree Cases: What You Need to Know
When entering into a contract, it is common for parties to agree to agree on certain terms at a later date. These types of agreements, known as “agreement to agree” clauses, are quite common in business transactions. However, they can also lead to legal disputes when the parties fail to reach a final agreement.
In this article, we will explore what agreement to agree clauses are, their possible implications, and how businesses can avoid disputes arising from them.
What are Agreement to Agree Clauses?
An agreement to agree clause is a provision in a contract stating that the parties will negotiate and agree on specific terms at a later date. For example, a contract for the sale of a business might include an agreement to agree on the final purchase price following a due diligence review.
While an agreement to agree clause can be useful in setting out the framework for future negotiations, it can also create uncertainty and ambiguity. This is because the parties have not yet agreed on all the details of the contract, and there may be disagreements or differences in interpretation when it comes time to finalize the agreement.
Possible Implications of Agreement to Agree Clauses
When the parties to a contract have agreed to agree, there are several possible outcomes:
1. The parties reach agreement on all terms: In this scenario, the agreement to agree clause becomes irrelevant, and the final contract is binding.
2. The parties fail to reach agreement: In this scenario, the agreement to agree clause may be unenforceable, and the contract may be considered incomplete or invalid.
3. One party refuses to negotiate in good faith: In this scenario, the other party may pursue legal action for breach of contract.
4. The agreement to agree is too vague or uncertain: In this scenario, the courts may be unable to enforce the clause, and the contract may be considered incomplete or invalid.
Avoiding Disputes Arising from Agreement to Agree Clauses
To avoid disputes arising from agreement to agree clauses, businesses should consider the following:
1. Be specific: The agreement to agree clause should clearly specify the terms to be negotiated, the timeline for negotiations, and the consequences if agreement cannot be reached.
2. Negotiate in good faith: Both parties should approach negotiations in good faith, with the goal of reaching an agreement that is satisfactory to all.
3. Consider alternative dispute resolution: In the event that negotiations reach an impasse, businesses may consider alternative dispute resolution, such as mediation or arbitration, to avoid costly and time-consuming litigation.
Agreement to agree clauses can be a useful tool in setting out the framework for future negotiations. However, they can also create uncertainty and ambiguity, leading to potential legal disputes. By being specific in the terms to be negotiated, negotiating in good faith, and considering alternative dispute resolution, businesses can avoid disputes arising from these types of clauses.