Agreements to agree in supply contracts: squeezing a deal from thin air

Suppliers supply and distributors distribute – a regular blog, July 2025

Often supply agreements provide for various issues to be agreed. This is particularly so when what is to be agreed is for some point in the future. But the law dislikes uncertainty and, as a consequence, has regularly rejected the enforceability of agreements to agree.

Now a recent Court of Appeal judgment has called into question whether the law is changing.

Background

KSY is a supplier of orange juice pulp wash (known as water extracted orange solids or “Wesos”). It entered into a 3 year supply agreement with Citrosuco, the Austrian subsidiary of Citrosuco of Brazil for the supply of 1,200 metric tonnes (MT) of Wesos annually from 2019 to 2021.

The contract clearly fixed the price for 400 MT per year at €1,350 per MT, subject to a Brix-based adjustment (an industry-standard method to determine pricing based on sugar content). However, the remaining 800 MT per year were to be supplied at an “open price to be fixed at the latest by December of the previous year.” This clause was the focal point of the dispute.

Citrosuco accepted and paid for the initial 400 MT in 2019 but refused to accept further deliveries. KSY terminated the contract in 2020, citing a serious (repudiatory) breach, and claimed €4.8 million in damages. Citrosuco argued that the 800 MT portion of the contract was unenforceable as it constituted a mere “agreement to agree” on the price.

The dispute raised a fundamental legal question: when parties leave essential terms, such as price, to be agreed upon in the future, can the courts uphold such contracts, or are they rendered unenforceable?

The judgments

High Court decision:

The High Court decided in favour of Citrosuco. It concluded that the clause relating to the 800 MT per year was an unenforceable agreement to agree.

This was because there was no certainty regarding the price that was to be paid and no fallback mechanism. Furthermore, the court declined to imply a term for either a reasonable price or an obligation to use reasonable endeavours to agree a price, considering both too uncertain.

Court of Appeal decision:

The Court of Appeal (CoA) took a markedly different approach.,

It allowed KSY’s appeal and overturned the High Court’s decision. It ruled that the entire contract (including the disputed 800 MT portion) was enforceable. The absence of a fixed price did not negate the parties’ clear intent or the ability to determine price reasonably based on market norms.

In reaching its decision, the CoA emphasised that the parties had intended to form a binding agreement for the full 1,200 MT per year. This intent was evidenced by their commercial conduct and how comprehensive the contract was in other respects – delivery methods, quality, term, and payment terms were agreed for all product to be supplied under the contract.  

The CoA noted, in particular, the availability of a “readily available objective standard” for establishing a reasonable or market price.

While the parties had initially left the price of the 800 MT “to be fixed,” the CoA ruled that this did not preclude the implying of a term into the supply contract that the price, in the absence of agreement, would be a reasonable or market price. The CoA decided that Wesos traded at around 70% of the price of frozen concentrated orange juice, which had a transparent market rate. This made it possible to ascertain a reasonable price which could be implied into the contract.

The CoA also took into account that the Sale of Goods Act 1979 does not preclude the implying of a term as to reasonable or market price at common law.

The CoA ruled that this statutory provision which implies an obligation on the buyer to pay a reasonable applies when the price in a contract of sale is not:

• “fixed by the contract”,
• “fixed in a manner agreed by the contract”, or
• “determined by the course of dealing between the parties”,

had no application in this instance because the contract already provided for how the price was to be determined.

It did not matter that the method for determining price required applying terms implied at common law, which in this case involved applying the principles summarised in earlier court judgments.

Practical takeaways

1. The courts will strive to uphold commercial contracts where possible

One of the most important lessons from this judgment is the English courts’ willingness to uphold commercial bargains where parties have shown a clear intention to be bound. The commercial context, prior dealings, and the existence of other detailed terms may all serve to demonstrate such intent. Even when one essential term, such as price is not expressly fixed, the courts may imply a term to save the contract.

2. Beware of “agreements to agree”

Although the CoA held that the supply contract was enforceable, the judgment should act as a reminder that agreements to agree will remain unenforceable unless guardrails are in place. These may take the form of:

• a means for establishing an objective market standard;
• a fallback mechanism (e.g. a reference to market indices);
• a formula (e.g. cost plus margin); or
• a method for dispute resolution (for example, expert determination or arbitration).

3. Some degree of flexibility is to be expected in long-term contracts

In markets where price volatility is expected (which in the age of tariffs may be more markets than previously thought!) leaving some flexibility in pricing may make commercial sense. However, such flexibility should be backed up by objective standards or clear mechanisms. Courts are receptive to upholding these types of agreements, provided the agreement before the court is not so uncertain as to become unworkable.

Conclusion

The KSY v Citrosuco case serves as a reminder of the difficulties parties may face when negotiating long-term agreements that must accommodate market volatility. While agreements to agree are generally unenforceable, any term must be seen in the wider context which takes into account the contract, the parties’ intentions, and the broader commercial context.

It remains to be seen how far the courts will be prepared to push the principles developed in this case – not least as on 15 July 2025 Citrosuco lodged its application for permission to appeal with the Supreme Court!