Agreements to agree can seem like a sensible way to keep your options open, especially when you're under pressure to get a deal moving.
It’s not uncommon: a founder might verbally agree on “competitive” pricing with a manufacturer to secure exclusivity while still refining product costs. Or a growing SaaS business might shake hands on a revenue share with a distributor, with “exact terms to be worked out later”. But if those details never get nailed down in writing, you're left relying on a promise the law may not recognise.
This kind of flexible arrangement can feel like progress, especially in early-stage ventures or fast-paced industries, but if your agreement is missing key terms, it may not be enforceable at all. Courts generally don’t uphold contracts that are too vague, even if both parties acted in good faith. That’s why legal clarity from the outset is so important.
Our commercial law solicitors can help you avoid the costly risks of uncertainty. Whether you're drafting early-stage agreements or navigating a potential dispute, we work closely with your team to ensure your contracts are watertight, enforceable, and support your commercial goals.
Contents:
Why might you leave contract terms open?
Your business might want to leave some future contractual terms undecided to move quickly, keep your options open and flexible, or finalise the details as a business relationship develops. This approach may seem practical, but now, it can cause problems. Under English and Welsh law, ‘agreements to agree’ are generally unenforceable, so if your contract is too uncertain, you might be unable to enforce it.
Another ‘agreement to agree’ scenario is to imagine you agree with a supplier under your current contract that you will receive a discount on a future services contract. Still, the actual details of that discount will be decided later. Pricing is a key term here, so if there’s no clear method for determining it, your contract may not be legally binding. If the supplier later refuses to honour their discount, you could be left without much recourse, even if you really need that discount and the services are business-critical.
Sometimes, businesses decide to enter into preliminary-style documents. Heads of terms and term sheets are examples of documents where businesses outline the structure of a deal but postpone the finer details for later negotiation. These, too, can be uncertain and come with risk if they’re unclear, so they are important to get right.
Sometimes, businesses decide to enter into preliminary-style documents to outline the structure of a deal while deferring finer details for later negotiation. Heads of terms, also known as letters of intent, are documents that set out the key commercial principles of an agreement before a formal contract is drafted. Term sheets serve a similar purpose, commonly used in investment and financing deals, to summarise the main terms before finalising binding agreements. While these documents can clarify early negotiations, they can also create legal uncertainty if not carefully drafted, making it essential to define their terms clearly.
What are the risks of agreements to agree and leaving contract terms open?
Problems can typically arise when a dispute occurs, for example, when one party claims that a contract is unenforceable because it was merely an agreement to agree.
Courts have historically ruled that agreements to agree are generally invalid. This is because contracts must be sufficiently certain to be binding, meaning that key details should be clearly defined.
However, context does matter. If you and the other party have already started performing the contract, or if an industry standard clearly indicates missing terms, a court may still decide that the agreement is valid.
While in some cases, the courts have taken a practical approach around agreements to agree, it’s better to be safe than sorry and not put yourself in circumstances where a dispute over your contract’s enforceability could arise. For the safest approach, ensure your key terms are defined clearly upfront to avoid uncertainty and the risk of being left without an enforceable agreement.
Remember to be cautious about relying on agreements to agree, as they’ll generally carry little legal weight. You may want to see them as simply expressions of intent rather than binding commitments you’ll be able to enforce.
How can you reduce risk in preliminary agreements?
Preliminary agreements, such as heads of terms, are standard in business relationships. These are documents where you agree on important terms for a project, but reserve other terms for later inclusion in a more comprehensive contract. Typically, these documents will set out your intentions to negotiate on the terms of a future contract.
If you’re using heads of terms, you must draft them carefully to avoid legal risks.
For example, ensure your document clearly states whether it is legally binding. For instance, you can expressly set out which of the terms in your document are legally binding to avoid doubt. By clearly separating binding and non-binding terms, you should be able to reduce the risk of arguments which could escalate into disputes.
Say so explicitly if you don’t want a contract legally binding until a formal agreement is signed.
Should I take legal advice before signing preliminary documents?
Poorly drafted preliminary agreements (such as heads of terms and term sheets) can create legal uncertainty and trigger disputes. Legal advice can help you ensure that your contracts are drafted properly, with precise wording reflecting your intentions and minimising risk, particularly where the legal structure of your business may influence your obligations. A commercial solicitor can guide you through defining which terms are binding and which are not. For instance, legal advice is especially important when drafting heads of terms or entering into early negotiations to ensure key terms are clearly defined. Consulting a solicitor early can help prevent misunderstandings and disputes, giving you peace of mind throughout the agreement process.
What’s the best way to avoid disputes over vague agreements?
It’s tempting to think you can fill in the blanks later, particularly when you’re focused on momentum. But courts expect clarity, and if your contracts don’t include all essential terms, you may be left without legal protection when it matters most, even if you’ve already started work or built a relationship around informal agreements, which won’t always be enough to make your terms stick.
The safest way to mitigate legal risk is to define your key terms early and clearly. If you’re entering negotiations, drafting heads of terms, or revisiting a deal that may lack enforceability, our commercial law solicitors are here to help. We can ensure your agreements reflect your intentions, protect your business, and keep you one step ahead of potential disputes.
If your old contracts or negotiations have landed you in hot water and a conflict has arisen, our dispute resolution solicitors are here to help.
