Parties to a contract should always look to ensure that a contract is certain. If a contract is incomplete then it may well be found to be unenforceable. A mere agreement to agree is not binding.
However, where the parties clearly intend to have created a binding agreement, the courts will be reluctant to find that the contract is unenforceable due to lack of certainty. The recent Court of Appeal decision in MRI Trading AG v Erdenet Mining Corporation (2013) shows the approach that is likely to be taken.
The parties (“MRI” and “EMC”) had agreed to settle a dispute in relation to supply of copper concentrate. As part of the settlement, they agreed three further supply contracts. The two 2009 contracts were performed. However, EMC failed to supply pursuant to the 2010 agreement. MRI therefore alleged breach of contract.
EMC’s defence was that the contract was uncertain and therefore could not be enforced. The key provisions in relation to time-scales and price stated:
- “Shipping schedule shall be agreed during the negotiations of terms for 2010.”
- “Treatment Charge shall be agreed between [MRI] and [EMC] during the negotiation of terms for 2010.”
- “Refining charge shall be agreed between [MRI] and [EMC] during the negotiation of terms for 2010.”
The arbitration panel which initially decided the claim found that delivery and price were both terms which were expressly stated still to be agreed. It therefore concluded that there could be no binding contract. The key provisions were uncertain.
The dispute was appealed to the High Court and subsequently to the Court of Appeal. Both courts disagreed with the arbitration panel’s findings and concluded that there was a binding contract. The Court of Appeal found that the 2010 agreement should be read as part of a wider contract reached between the parties through the settlement. The Court of Appeal concluded that the wording of the 2010 agreement also strongly indicated that the parties had intended it to be binding.
In the circumstances, the Court of Appeal concluded that terms could be implied into the contract that the charges should be reasonable and that any dispute in relation to either the charges or the delivery schedule could be resolved by the parties through arbitration.
The Court of Appeal considered the whole relationship between the parties in the round. It looked at the parties’ objective intentions and concluded that they had intended to be bound. It was therefore not prepared to allow EMC to avoid its agreed responsibilities on the grounds of uncertainty.