Binding Agreement-part
The facts relating to the Gabriel Heinze dispute between Liverpool and Manchester United were set out in last Friday's article. One issue which arose was the suggestion that the letter given to the agent did not show an intention to enter legal relations, another that the letter purely represented an "agreement to agree", and so for both reasons was not binding.
The basic elements of a contract (which are easy to state but sometimes not quite so easy to identify) consist of offer, acceptance, consideration and intention to create legal relations. In broad terms one side has to say what the offer to enter into a contract is, and the other side has to accept that. There has to be "consideration". That is that each side has to provide something as part of the bargain. That can consist of promises on each side, each of which are regarded as "in consideration" of the other. If you agree to buy a motorcar for £10,000 one side provides consideration in the promise to provide the car, the other side consideration in providing the £10,000. The same would apply if the agreement was to buy the car for £1. The court merely assesses whether there is "consideration", not how valuable it is. If however someone merely offered to give someone else a vehicle, then unless the promise was made in a deed (a document under seal), in general terms it is most unlikely to be capable of being enforced. (Very rarely a promise can be enforced under a doctrine known as "estoppel" but that will be considered in a future article). There also however has to be an intention to create legal relations.
What that means is, looking at the circumstances, did the parties intend this to be a legally binding agreement? If you agree with a friend to go to the pub for a pint on a Friday night, and the friend does not turn up then you would be most unlikely to have a legally enforceable agreement that you could sue them for having breached. (It all depends on the circumstances: if you turned down a member of your quiz team on their promise to turn up and allow you to pursue a £1000 prize a different view might be taken). Sometimes even in a contractual situation the parties plainly are doing things which they do not expect to be bound by. Giving a letter saying at what price you would sell a player could be designed to allow the player to be marketed, with everyone intending that if the marketing was successful the precise terms of the deal would then have to be agreed. That would be a strong indication that it was not intended to create legal relations.
Likewise parties have to have an agreement, not "an agreement to agree". The courts will always seek to help by implying machinery or terms into an agreement to make it work. However the courts will not agree something for the parties. A deal may be able to proceed if for example a price is not fixed because the court can imply that there will be a reasonable price, which can be a question of fact. If however the deal specifies that the parties are to agree something, which is a fundamental part of the deal, then what is envisaged is not that the parties will be stuck with what some third-party would regard as reasonable, but that they are to agree something. If properly construed all that there is is an agreement to agree, then likewise that will not be binding. Whilst the court will fix a reasonable price if no prices specified, if parties are to agree something in general it will not tell them what they should have agreed.