Agreements to agree & lock-out agreements (exclusivity agreements): Case law, principles, and practical guidance
Pre contractual arrangements or clauses included in certain agreements frequently arise in commercial and property negotiations in relation to lock out agreements and agreements to agree, which carry important legal distinctions and risks. Understanding how courts treat each mechanism is essential for clients seeking certainty in complex transactions.
This article summarises the leading case law, outlines the practical implications and provides Freeths’ view on how parties can reduce risk when negotiating preliminary arrangements.
Key case law and facts
The House of Lords confirmed that agreements to negotiate in good faith are unenforceable due to inherent uncertainty. Parties cannot be compelled to negotiate in good faith because such an obligation lacks objective criteria and is “inherently inconsistent with the adversarial position of the parties.”
Agreements to agree or negotiate, without more, will not bind the parties in English law.
In contrast to Walford, the Court upheld a lock out agreement where:
- The exclusivity period was fixed, and
- The agreement was supported by consideration (or would have been enforceable as a deed)
Properly drafted lock out agreements are enforceable.
The Court of Appeal acknowledged that objective mechanisms may sometimes be implied to uphold commercial arrangements. However, the Court reaffirmed the long standing principle that agreements to agree generally remain unenforceable unless certainty can be achieved through objective criteria.
Courts may be willing to save a commercial arrangement, but only where the parties provide clear machinery for resolving missing terms.
Combined, these reforms require councils to rethink the entire waste system architecture. Lower residual tonnage due to improved segregation and mandatory food waste collection may allow re balanced fleet deployment, altered round design, and future down sizing of residual waste treatment capacity. Conversely, higher food waste capture will increase demand for anaerobic digestion outlets and may change disposal contract economics.
Authorities should now be modelling scenarios to understand:
- Future material flows and peak tonnage forecasts
- Whether existing fleet assets remain fit for purpose
- How contractual risk/benefit allocations should change under EPR funded systems
- Long term implications for treatment capacity, from MRF upgrades to AD procurement
Legal principles
Enforceable where a clear and fixed exclusivity period is stated and consideration is provided or the agreement is executed as a deed.
Avoid open ended or indefinite exclusivity periods and obligations “to negotiate in good faith,” which remain void for uncertainty.
To improve enforceability, parties should state a precise exclusivity period (e.g., 14 days), include nominal consideration or execute as a deed, and avoid vague “best endeavours” or “good faith” language.
Generally unenforceable unless clear objective mechanisms exist to determine missing terms (e.g., market based formula, expert determination) and a fallback process such as arbitration is provided.
Courts will not enforce vague obligations and damages for breach of a lock out agreement tend to be limited to wasted costs, not lost profit.
To reduce uncertainty, parties can use objective mechanisms, include dispute resolution mechanisms, clarify which parts are binding, avoid vague commitments and add time limits
Our opinion
At Freeths, we see an increasing number of disputes arising from poorly drafted pre contractual arrangements or agreement to agree clauses included in contracts, particularly where commercial teams verbally agree principles but fail to define the machinery for resolving the missing terms.
Exclusivity agreements can be a valuable tool if the commercial intent is to secure genuine exclusivity for a short, defined period. However, they must include clear timings and consideration to avoid being struck down if they cannot be avoided.
The case law remains reluctant to enforce them agreements to agree and these should be avoided. If parties must leave a term open (e.g., price or performance metrics), they should include an objective determination method, binding fallback mechanisms and clear time periods for decision making.
Courts strive to uphold commercial bargains but will not fill in the blanks without objective criteria. The more drafting relies on vague aspirational language, the less likely the arrangement will survive judicial scrutiny.
While the principles remain largely stable, the 2025 KSY Juice Blends decision suggests a subtle judicial willingness to preserve commercial bargains where objective machinery exists, even if that machinery must be implied.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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