Agreement to Agree Language: Understanding Its Importance in Legal Contracts
In legal contracts, it is common to come across a certain type of language known as “agreement to agree” language. This language is used to express the intent of the parties to reach an agreement on certain terms in the future. However, while this language may seem harmless at first glance, it can have serious implications on the enforceability of the contract. Therefore, it is important to understand the implications of using agreement to agree language in your legal contracts.
What is Agreement to Agree Language?
Agreement to agree language refers to a provision in a contract that sets out an agreement to negotiate or agree on specific terms in the future. Typically, this language is used in situations where the parties are unable to agree on certain terms, but still want to proceed with the contract and leave those terms for future negotiation. For example, a contract for the sale of a business may include a provision that states the parties will negotiate in good faith and agree on a purchase price within a certain timeframe.
The Issue of Enforceability
The use of agreement to agree language in legal contracts can create uncertainty and lead to disputes between the parties. This is because such language can be vague and leave important terms open to interpretation. Furthermore, the courts have generally been reluctant to enforce an agreement to agree provision. This is because there is no clear indication of what the parties actually agreed upon, and it can be difficult to prove that the parties intended to create a binding obligation.
Best Practices for Drafting Contracts
To ensure that your contracts are enforceable and avoid any confusion or disputes in the future, it is best to avoid using agreement to agree language altogether. Instead, it is recommended that you include clear and detailed provisions that set out all the terms of the agreement. This should include any contingencies or conditions that the parties need to meet before the agreement can be executed.
In situations where there is a possibility that certain terms may need to be negotiated in the future, it is best to include a clear mechanism for doing so. For example, you could include a provision that provides for the dispute resolution process or the appointment of a mediator or arbitrator to help resolve any disputes.
Agreement to agree language is a common feature in legal contracts, but its use can create uncertainty and lead to disputes between the parties. The courts have been reluctant to enforce such provisions, and it is therefore important to ensure that your contracts set out clear and detailed terms that are enforceable. By following best practices for drafting contracts and avoiding agreement to agree language, you can ensure that your contracts are enforceable and protect your interests.