Agreement to Agree Australian Contract Law

Agreement to Agree in Australian Contract Law: What You Need to Know

In contract law, an agreement to agree is a common provision that is often included in contracts. Essentially, it is a clause that outlines how the parties will negotiate and finalize the terms of the agreement at a later date.

In Australia, an agreement to agree is generally considered to be an enforceable contract, as long as certain criteria are met. Here`s what you need to know.

Criteria for an Enforceable Agreement to Agree

For an agreement to agree to be enforceable under Australian contract law, it must meet the following criteria:

1. Certainty of Terms: The agreement must provide a clear indication of what the parties intended to agree upon. For example, if the parties agree to negotiate the price of a product, the agreement must specify the range of prices that will be considered.

2. Intention to Create Legal Relations: The parties must have intended to create a legally binding agreement. This means that the agreement must not be a mere expression of intent or a preliminary agreement.

3. Capacity to Contract: The parties must have the legal capacity to enter into the agreement. This means that they must be of legal age, of sound mind, and not under duress.

4. Consideration: The parties must exchange something of value in order to create a valid agreement. Consideration can take the form of money, goods, or services.

When an Agreement to Agree is Unenforceable

An agreement to agree may be unenforceable if it fails to meet the above criteria or if it is too vague. For example, if the parties agree to "negotiate in good faith," but do not specify how the negotiations will take place, the agreement may be deemed unenforceable.

Additionally, an agreement to agree may be unenforceable if it is found to be unconscionable. This occurs when one party takes advantage of the other party`s vulnerability or lack of bargaining power.

Tips for Drafting an Agreement to Agree

To ensure that your agreement to agree is enforceable under Australian contract law, consider the following tips:

1. Be Specific: The more specific your agreement is, the more likely it will be enforced. Use clear and concise language to outline the terms of the agreement.

2. Define Key Terms: Define any key terms or concepts that may be open to interpretation. For example, if you are negotiating the price of a product, define what is meant by "price" (e.g. inclusive of taxes, delivery fees, etc.).

3. Consider Alternatives: An agreement to agree may not always be the best option. Consider whether a binding contract with specific terms may be more appropriate for your situation.

In conclusion, an agreement to agree is a common provision in Australian contract law that can be enforceable if it meets certain criteria. By being specific and defining key terms, you can draft an agreement to agree that is more likely to be enforceable.