456. Courtney and Fairbairn Ltd v Tolaini Brothers [1975] 1 WLR 297

Agreement to agree not binding

The Facts

A building contractor who was also in a position to arrange finance, wrote to a prospective employer, property owner, in the following terms:

“Accordingly, I would be very happy to know that, if my discussions and arrangements with interested parties lead to an introductory meeting, which in turn leads to a financial arrangement acceptable to both parties you will be prepared to instruct your quantity surveyor to negotiate fair and reasonable contract sums in respect of each of the three projects as they arise.”

In response, the property owner wrote:

“In reply to your letter …, I agree to the terms specified therein, and I look forward to meeting the interested party regarding finance.”

Findings

Shaw J found that a binding contract had come about.

Lord Denning MR (sitting with Diplock and Lawton LJJ) disagreed.

Lord Denning MR pointed out that there could be no agreement because an essential term, the price, had not been agreed upon.

Both Lord Denning MR and Diplock LJ disagreed expressly with the obiter dictum of Lord Wright in Hillas v Arcos that an agreement to agree was binding provided there was sufficient consideration.

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