Agreement to Agree in Contracts: Why It’s Legally Unenforceable in Ontario
The concept of an agreement to agree may sound practical in everyday language, but in contract law, it’s a red flag. Especially in Ontario, courts have consistently ruled that agreements requiring parties to “agree later” on essential terms—like price or rent—are not enforceable. If you rely on a vague renewal clause in your lease or business contract, you could end up with no rights at all. This article explains what an agreement to agree means, why it’s unenforceable, and how to draft better contracts to avoid legal uncertainty.
What Is an Agreement to Agree?
An agreement to agree refers to a contract term that defers a critical detail—usually price, time, or scope—for future agreement. These types of clauses are often found in renewal or extension provisions.
Examples of Agreement to Agree Clauses
- “Parties will negotiate the new rate at the time of renewal.”
- “Future services will be provided on terms to be agreed.”
- “Rent to be determined between landlord and tenant.”
While such clauses may feel flexible, they are problematic from a legal standpoint because there is no certainty about what is actually agreed upon.
Why Courts Reject Agreements to Agree
Courts in Ontario—and across Canada—require contracts to include all essential terms for them to be legally binding. If a key term is missing or left vague, the agreement may be considered void.
The Legal Standard for Enforceability
- There must be certainty of terms.
- The agreement must be complete and not contingent upon future agreement on essential items.
- The court will not write the contract for the parties or impose terms that were never agreed upon.
Gallant v. Johnson: A Case Study
The 2024 Ontario Superior Court decision in Gallant v. Johnson, 2024 ONSC 5777, illustrates the dangers of an agreement to agree in a lease renewal clause.
Key Facts
- The lease contained a renewal clause allowing the tenant to renew the lease “on the same terms” with rent “to be agreed upon.”
- The tenant exercised the option to renew, but the parties couldn’t agree on a new rental rate.
- The tenant sued to enforce the renewal.
The Court’s Ruling
The court found the renewal clause unenforceable because it amounted to an agreement to agree. The clause failed to define the rent or even provide a method for determining it. As a result, the court refused to enforce the lease renewal, siding with the landlord.
How to Avoid Agreements to Agree
To ensure your contract stands up in court, avoid vague or open-ended language when dealing with key terms like price, time periods, or deliverables.
Drafting Enforceable Contracts
- Include fallback mechanisms: Specify a formula, market rate reference, or arbitration process if parties can’t agree.
- Be precise: Avoid phrases like “to be agreed” without supporting language.
- Consult a lawyer: Legal advice during contract drafting can prevent costly disputes later.
Comparison Table: Enforceable vs. Unenforceable Clauses
| Clause Type | Example | Enforceable? | Why? |
|---|---|---|---|
| Agreement to Agree | “Rent to be agreed upon at renewal.” | No | Lacks certainty of key term (rent). |
| Defined Renewal | “Renewal rent will be 110% of current rent.” | Yes | Specifies method to calculate rent. |
| Market-Based Clause | “Rent to be adjusted to fair market value, as determined by an appraiser.” | Yes | Includes method to resolve ambiguity. |
Frequently Asked Questions (FAQs)
1. What makes an agreement to agree unenforceable?
It fails to include essential terms or a mechanism to determine them, leaving the agreement incomplete and vague.
2. Can a court enforce a vague contract clause?
No, courts generally avoid filling in the blanks unless a clear fallback mechanism or past practice can be referenced.
3. How can I fix an agreement to agree in an existing contract?
Consider amending the contract with specific terms or methods for determining them, such as appraisal or arbitration.
4. Are all renewal clauses risky?
Not necessarily. Only those that leave key terms undecided or vague may be legally unenforceable.
5. What should be included in a lease renewal clause?
Include rental rate, duration, and any changes in terms—or provide a method to determine these elements clearly.
Conclusion
The use of an agreement to agree may seem like a flexible way to defer decisions, but in contract law, it’s a recipe for unenforceability. Whether you’re dealing with lease renewals or commercial agreements, you must ensure that all essential terms are either fixed or determinable through an agreed-upon mechanism. Courts will not write your agreement for you—and they won’t enforce one that lacks the required certainty. Always draft with clarity, or risk losing everything you thought you had agreed to.
