Legal Case Summary
Hillas and Co v Arcos Ltd (1932) 147 LT 503
Interpretation of Terms – Agreement to Negotiate – Enforceability
Facts
Hillas bought some timber from the timer merchants Arcos Ltd. They purchased 22,000 units of timber, and the agreement also contained an option that they would be able to buy up to 100,000 units the next year at a discounted rate of 5%. The next year, Arcos refused to sell them the timber at this rate and Hillas sued for breach of contract. Arcos claimed that the agreement could not be valid because it required further agreement in the future.
Issues
Whether or not the agreement to enter into another agreement was an enforceable term of the first agreement. Whether or not the contract to enter into a future contract was valid.
Decision / Outcome
There was a valid and enforceable agreement that allowed Hillas to purchase 100,000 staves of wood for at a reduced rate. This was more than a mere ‘agreement to agree’ because the only thing necessary for the agreement to be brought into existence was for the buyers to decide to exercise their option to purchase the wood. Whilst the price had yet to be agreed, this was only because it naturally fluctuated as a commodity depending on market conditions. Where the issue was in the balance, as here, it was held that the court should try to interpret the words of the agreement in such a way as to preserve the subject matter of the agreement rather than destroying it, and contracts made between merchants in this way should be upheld where the court can interpret the terms in order to do so.
Updated 19 March 2026
This case summary accurately reflects the decision in Hillas and Co Ltd v Arcos Ltd (1932) 147 LT 503, a House of Lords authority that remains good law. The principles described — that courts will strive to give effect to commercial agreements rather than strike them down for uncertainty, and that an option to purchase at an agreed discount is not a mere unenforceable agreement to agree — continue to be applied in English contract law. The case is regularly cited in modern decisions on contractual certainty and interpretation.
Readers should note that the broader area of agreements to agree and contractual uncertainty has been further developed by subsequent case law, including Walford v Miles [1992] 2 AC 128 (which confirmed that a bare agreement to negotiate in good faith is generally unenforceable) and MRI Trading AG v Erdenet Mining Corporation LLC [2013] EWCA Civ 156. The summary does not address these later developments, but they do not alter the correctness of what is stated about the Hillas decision itself. No statutory changes affect the core common law principles discussed.
