Agreements to Agree: New York Law Explained
In the world of business, it is common to encounter agreements to agree. An agreement to agree is an agreement that is made between two parties to negotiate and eventually reach a final agreement. These types of agreements are common in many industries, including real estate, finance, and technology. However, it is important to understand the legal implications of such agreements, particularly in the context of New York law.
In New York, agreements to agree are generally considered unenforceable. In other words, if the parties to an agreement fail to reach a final agreement, a court cannot enforce the agreement to agree. This is because New York law requires that contracts be sufficiently definite and certain in their terms. Agreements to agree often fail to meet this standard because they lack the specificity required by New York law.
To illustrate this point, consider the following example: Company A agrees to purchase goods from Company B at a future date. The parties agree to negotiate the price and other terms of the agreement later. However, if the parties are unable to reach a final agreement on the price or other terms, a court would not enforce the original agreement to purchase the goods. This is because the original agreement lacked the necessary specificity to be enforceable under New York law.
Despite the general rule against agreements to agree, there are some exceptions. For example, an agreement to agree may be enforceable if the parties have established a specific method for reaching a final agreement. Additionally, an agreement to agree may be enforceable if the parties have already agreed to all of the material terms of the final agreement, leaving only minor details to be worked out.
In practice, parties can avoid the pitfalls of agreements to agree by creating more definitive agreements from the outset. This means ensuring that the material terms of the agreement, such as the price, quantity, and delivery date, are clearly defined and agreed upon in writing. Parties should also establish a method for resolving any disputes that may arise during the negotiation process.
In conclusion, agreements to agree are generally unenforceable in New York. While there are some exceptions, parties can avoid the risks associated with agreements to agree by establishing more definitive agreements from the outset. By taking the necessary steps to ensure that their agreements are sufficiently definite and certain, parties can avoid unnecessary legal disputes and build stronger business relationships.