Agreement to Agree in Future: Understanding the Legal Concept
When two parties enter into a business agreement, they expect the terms to be defined clearly and unambiguously. However, sometimes the parties may not be able to agree on certain terms, or some terms may need further clarification or negotiation. In such cases, the parties may include a provision for “agreement to agree in future.” But what does this concept mean and how does it work?
Agreement to agree in future refers to an agreement between two parties to enter into a future agreement on specific terms or conditions that are not yet fully defined. In simpler terms, it is an agreement to agree on something later. This type of agreement allows the parties to proceed with the present business transaction with the understanding that certain terms will be agreed upon in the future.
For instance, a company may have an agreement with a supplier for the purchase of raw materials. However, the parties have not yet agreed on the price of the raw materials for the next year. They may include a clause in the current agreement stating that they will agree on the price at a later date, usually by a certain deadline.
While agreement to agree in future may seem like a simple solution to address unresolved issues between parties, it can be legally tricky. This type of agreement is not enforceable in many jurisdictions, especially if the agreement is too vague or uncertain. Courts may view such agreements as lacking the necessary specificity and legal obligation required to be enforceable.
To avoid any legal issues, parties must clearly define the terms and conditions that they intend to agree upon in the future. The agreement to agree in future should specify the details that are to be negotiated, such as the date, time, location, and the parties involved in any future negotiation. This helps to ensure that the agreement can be enforced in the future.
Another way to ensure enforceability is to include a mechanism for resolving disputes if the parties fail to agree on the terms in the future. For example, parties may include a provision for arbitration or mediation in case of a disagreement, instead of resorting to litigation.
In conclusion, agreement to agree in future can be a useful tool for parties who cannot agree on certain terms at the time of entering into an agreement. However, parties must ensure that the agreement is clear, specific, and enforceable. By doing so, they can avoid any legal disputes that may arise in the future and maintain a positive business relationship.
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