Stuart Farr, partner in our commercial dispute resolution and avoidance team, looks at how contractual uncertainty escalates disputes and what this means for businesses.
By their very nature, some legal services are seen as distress purchases. Take, for example, commercial disputes, the deterioration in the relationship between two business entities.
They can start with the smallest thing. An inadvertent “poor” email communication, an external unforeseen event, or just a misunderstanding over what was agreed at the outset.
Understanding contracts is key to resolution
Understanding contracts and how they function in practice is essential to being able to unlock a resolution. Many of the commercial contracts we see have not received any legal scrutiny. They expose anomalies, inaccuracies and uncertainties.
Sometimes these become the “blockage” to a successful commercial relationship. Indeed, it is not uncommon for a contracting party to rely on contractual uncertainties to gain commercial leverage.
The risks of an agreement to agree
A contract clause which comprises little more than an “agreement to agree” is a classic example. Within the context of pricing, it can be particularly damaging to a commercial relationship because they are generally unenforceable.
It sometimes manifests as a pricing structure which is subject to agreement between the parties at set points during the year. It can be perceived by the parties as a useful mechanism, especially where market fluctuations on the cost of raw materials are prevalent.
However, efforts to introduce pricing flexibility within a contractual setting, can easily backfire if not done correctly. When costs and overheads begin to escalate rapidly this can cause the issue to manifest into a full-blown dispute.
Courts’ past reluctance to intervene
Historically, in such cases, the courts have been reluctant to intervene. Recently, however, the Court of Appeal has stepped in to help.
The recent case of KSY Juice Blends UK Ltd -v- Citrosuco GMBH [2025] involved a contract split on price for the supply of orange juice pulp over a three-year contract. A third of the supply was based on an agreed fixed price.
The remainder was supplied at an open price to be fixed. Citrosuco ultimately refused to accept delivery of a consignment, which led to a claim for repudiatory breach. The loss of profit claim, which followed, caused the Court of Appeal to consider the enforceability of the open pricing mechanism.
In the above case, the availability of other external pricing benchmarks for the product enabled the Court to imply a term into the contract that, in the absence of agreement on the price, the price would be a reasonable or market price.
However, it cautioned that different circumstances could give rise to different results. Nevertheless, The Court’s guidance illustrates the dichotomy of interests between upholding a contractual bargain and the uncertainty which can prevail for the benefit of one party or another.
Conclusion
Whichever side of the dispute fence you may sit, the secret is to avoid generating contractual uncertainty in the first place.
Harrison Drury’s commercial lawyers regularly work closely with their colleagues in the commercial disputes team to identify, on behalf of clients, where contractual risks lie and to iron them out.
Not only does this help to de-stress a situation which has already arisen but it can positively assist to prevent the problem from ever arising.
To speak to our commercial dispute resolution and avoidance team about managing contractual risks or resolving a commercial dispute, call us on 01539 312497.