When deciding whether a document is a binding contract or merely an agreement to agree, the guiding principle is whether the terms are sufficiently clear and certain to be enforceable in practice. In an instructive High Court case, that test was met by a handwritten note made by a mediator in the context of a farming dispute.
The case concerned a son’s acrimonious departure from a farming partnership with his parents and his replacement by his brother. A dispute over how the partnership assets were to be distributed between them was submitted to a mediator. Following a full day of anxious negotiations, heads of terms were agreed. They were put in writing by the mediator and signed by each side’s solicitors.
Some years after the event, the parents and the brother launched proceedings with a view to enforcing those terms. The son, however, argued that the mediator’s note did not constitute an enforceable contract. It did not deal comprehensively with matters in issue and was intended merely to record some points that had been agreed in principle as part of the process of reaching a full and effective compromise.
The Court accepted that the note had been handwritten by the mediator somewhat hurriedly, the draft typed version of the terms having been lost. On any view, it was intended that further documentation would be created in due course. However, in rejecting the son’s arguments, the Court observed that there was nothing on the face of the note to indicate that a further formal agreement was contemplated.
Subsequent correspondence was consistent with attempts to agree the way the heads of terms would be implemented and did not indicate that no concluded agreement had been reached. The mediator’s note reflected the essentials of what had been agreed and the heads of terms were sufficiently certain to be binding. The parents and brother were granted a declaration to that effect.
