Pricing Flexibility and Long-Term Contracts: Pricing Clause Survives the “Agreement to Agree” Test

A recent Court of Appeal decision will be of interest to those negotiating pricing clauses in longer-term supply contracts, especially where trying to create flexibility to guard against future market volatility.

At issue was a clause that left the price for most of the contract volume to be fixed (in the words of the contract), “at open price to be fixed latest by December of the previous year”. The High Court had held this was too uncertain to be enforceable (i.e. it was not a binding contract term). The Court of Appeal disagreed; it found that the parties intended to be bound and that a term could be (and was) implied in the contract so that, in the absence of agreement, the price was a reasonable or market price.

The judgment offers the following key takeaways:

[1] Where possible, the Courts will strive to uphold commercial agreements to which both parties intended to be bound.

It appears the most determinative factor was that so many of the other core terms of this contract all pointed to an intention to create a long-term contract on agreed terms and “This case is, therefore, firmly in the territory of those contracts which a court will strive to uphold” (emphasis added).  This is consistent with the current state of contract law, where the Courts will seek to hold the parties to their bargain, which may include implying terms (where legally possible) in order to make the contract workable.

Agreed terms for the three year contract included: the price for the first third of the annual supply of goods; a total aggregate price across the three years supply of the goods; minimum quantity of goods per year; duration of agreement; matters concerning delivery methods; quality of goods; timing of delivery; and payment. It was only the pricing clause for the remaining two thirds of the goods per year that was argued to make the whole contract invalid. As the court said: “The contract does not contemplate any renegotiation of any other part of the agreement. It does not, for example, contemplate either party renegotiating the overall volume to be supplied/purchased on the basis of that party's changing requirements. This case is, therefore, firmly in the territory of those contracts which a court will strive to uphold.”

[2] The Court’s ability to uphold the contract does have limits

Key factors in this case were:

• The clause within the context of the wider contract: it was detailed, commercially structured, and largely fixed subject to this pricing clause. A warning therefore not to treat this particular judgment as a precedent that all such clauses would be valid; the wider context of the contract is important; 
• The intent of the parties was apparent: they were trying to create a long term contract with some pricing flexibility: “It is common ground that the market was generally volatile, which provides an obvious incentive for the parties to leave some flexibility as to pricing in a long-term contract. The parties had at least some track record, pursuant to the second contract agreed in 2017, of dealing successfully with such flexibility by reaching agreement on price where that was left open in their agreement”
• There was a readily ascertainable “market price” for the goods: this was crucial because if there was “no readily available objective standard by which the price could be ascertained, then … a court would be ill-equipped to identify a "reasonable" price””. Here, the goods (orange pulp) consistently tracked at circa 70% of the transparent market price for frozen concentrated orange juice (FCOJ) and so the market value could be calculated. 

So this outcome turned on a specific and well-evidenced commercial context. The courts will not always be able to rescue an uncertain pricing clause, even if drafted in similar terms to the disputed clause here. 

[3] Avoid ‘agreements to agree’ in favour of adjustment mechanisms

Courts will not enforce ‘agreements to agree’. Per the well-known (at least in legal circles) quote from Chitty on Contracts: “the most natural inference to be drawn from the fact that the parties left such an important matter as to the price to be settled by further agreement was that they did not intend to be bound until they had agreed on price". Therefore, if a price cannot be agreed the parties are not bound.

Where price flexibility is needed (e.g. to guard against the contract becoming a windfall for one party and/or a commercial albatross for the other), parties should consider:

• Indexation clauses tied to published rates.
• Formulae based on costs or margins.
• Fallbacks, such as expert determination if no agreement is reached.

However, it is also worth noting the court’s comments about reference to arbitration clauses. A clause which leaves the price to be agreed by the parties may be saved where it contains a reference to arbitration in case of dispute. It is then not a mere agreement to agree because there is an objective path to determine the price where it is not agreed.  This judgment confirms that “The presence or absence of such a clause is not determinative… Its presence may assist the court to find sufficient certainty, but that is not to say that the court will not itself provide the dispute resolution machinery in the absence of such a clause”.

Further details of the case

In KSY Juice Blends UK Ltd v Citrosuco GMBH [2025] EWCA Civ 730, KSY agreed to supply 1,200 metric tonnes of orange juice pulp wash (“Wesos”) per year for three years. The contract divided this into 400MT at a fixed price and 800MT at an “open price to be fixed” each year by December.

The invoicing price was nominally set at €1,600/MT, but the real commercial price for the fixed 400MT was €1,350/MT. This was reflected by KSY supplying additional free products (the so-called “free trucks” mechanism) to adjust for the difference. The remaining 800MT was left to be priced annually, but no agreement was ever reached.

Citrosuco took delivery of the 400MT in 2019 but then refused further performance. KSY supplied a small volume in 2020 and ultimately treated Citrosuco’s conduct as a repudiatory breach of contract, therefore bringing the contract to an end. It brought a claim for damages for the profits it would have made had the contract been performed. Citrosuco’s defence was that the price adjustment clause was too uncertain and therefore unenforceable, so that it was not bound to pay for goods that would have been provided at this uncertain future price. 

The High Court held that the “open price to be fixed” clause was unenforceable. There was no certainty on the price and no fallback mechanism. But the Court of Appeal reversed that decision. It held that the contract could be saved by implying a term that the 800MT would be priced at a reasonable or market rate.

Final thoughts 

The decision may give some commercial comfort to those operating in volatile markets. In today’s climate of rising tariffs and unpredictable input costs, clauses like this may well become the subject of dispute where one party seeks to escape (what has become) a bad bargain for them. But the judgment confirms that contracts will not fail merely because pricing is not entirely precise, so long as there is a reliable basis for working it out. 

However, as has become ritual to say in every article about contract interpretation: it all depends on the precise wording of the clause within the wider terms of the contract, and the (admissible) wider matrix of fact between the parties. The Court of Appeal preserved this bargain, but that will not always be the case. Ensuring that price adjustment clauses are carefully drafted – treading the line between permissible flexibility and impermissible uncertainty – is the first line of defence.

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This article was written by Lloyd Nail and Amy Khodabandehloo with assistance from Nathan Gevao. Our dispute resolution team is dedicated to achieving successful outcomes for our clients, focusing on resolving your disputes swiftly and effectively. We prioritise outcomes, not just the process, working alongside you to ensure the right solution is found, minimising the impact on your business while maximising success.