Agreement to Agree South African Case Law

Agreement to Agree in South African Case Law: An Overview

In South African law, an agreement to agree is a preliminary agreement between parties that sets out the basic terms of a future agreement. It is generally non-binding and does not create an enforceable contract. However, there are instances where an agreement to agree may be enforceable, and this is where South African case law provides guidance.

The general principle is that there must be sufficient certainty in the agreement to make it enforceable. The South African courts have held that an agreement to agree is unenforceable where the parties have left a crucial aspect of the agreement open for determination at a later stage. This is because the courts require that all essential terms of the agreement must be agreed upon before it can be enforceable.

The case of Hills v Salt River Motors (Pty) Ltd is an example of this. In this case, the parties had entered into an agreement to negotiate the terms of a lease agreement for a property. However, the parties did not agree on the rental amount or the duration of the lease. The court held that the agreement to negotiate was not enforceable because the parties had left the rental amount and duration of the lease open for determination.

On the other hand, there are instances where an agreement to agree may be enforceable. In the case of Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa Ltd, the parties had entered into a preliminary agreement to negotiate the terms of a construction contract. The court held that the agreement was enforceable because the parties had agreed on the essential terms of the construction contract, such as the scope of the work and the estimated cost.

It is important to note that an agreement to agree can also be enforceable if it contains a mechanism for resolving the outstanding issues. For example, the parties may agree to submit the outstanding issues to an independent third party for determination. In the case of Post Office v Joe Slovo Residents Committee, the parties had entered into an agreement to negotiate the terms of a lease agreement for a post office building. The agreement provided that if the parties could not agree on the rental amount, they would submit the matter to a valuator for determination. The court held that the agreement was enforceable because the parties had agreed on a mechanism for resolving the outstanding issue.

In conclusion, an agreement to agree is generally non-binding and does not create an enforceable contract. However, there are instances where an agreement to agree may be enforceable, provided that the essential terms of the agreement are agreed upon and there is a mechanism for resolving outstanding issues. South African case law provides guidance on the circumstances in which an agreement to agree may be enforceable, and parties should be aware of these principles when entering into preliminary agreements. As a professional, I hope this overview has been informative and useful.

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