In commercial contracts, there are certain clauses that often appear straightforward at first glance but can create significant challenges later. One example is the “agreement to agree” clause.
These typically look like this:
“In the event market conditions change the parties shall discuss and agree any required changes to the current pricing”.
At first glance, this seems a practical and collaborative approach. During contract negotiations, relationships are usually positive, commercial objectives are aligned, and both parties are motivated to move forward efficiently. In that context, leaving certain issues to be resolved in the future can feel entirely reasonable.
The difficulty, however, is that contracts often outlast the circumstances in which they were negotiated.
Years later when it’s time to rely on the “agreement to agree”, the commercial environment may look very different. Key personnel may have moved on, priorities may have shifted, and the relationship between the parties may no longer be as cooperative as it once was. At that stage, reaching a future agreement on unresolved issues can become far more complicated than originally anticipated.
This is often why “agreements to agree” can be flagged by legal advisors during negotiations. Whist these clauses can sometimes be unavoidable, they can also introduce uncertainty into arrangements that otherwise appear settled.
The practical consequences can be significant.
For example, a contract may provide for an extension period but require the parties to agree revised pricing at a later date. If negotiations stall, the agreement itself may expire before terms can be finalised, potentially disrupting operations or commercial continuity.
Similarly, an unforeseen issue may arise during the life of the contract that requires cooperation between the parties. If one party is experiencing commercial disadvantage while discussions continue without resolution, delays can be costly and weaken the disadvantaged party’s negotiating power.
Even where dispute resolution mechanisms exist, relying on them is rarely ideal. Formal disputes can consume substantial time, management attention, and legal cost, often undermining the commercial relationship in the process.
As general principle, “agreements to agree” are best avoided in legally binding contracts.
That does not mean every future scenario can or should be anticipated. In many long-term or complex agreements, some flexibility is necessary. However, ideally there should be clear parameters around decision making and backstops if the parties cannot agree.
Ultimately, careful upfront negotiation may feel time-consuming in the moment, but it is often far easier — and far less expensive — than attempting to resolve unresolved issues years down the line.
If you have any questions about your business’ contracts please contact our team.
