Pagnan SpA v Feed Products Ltd

Pagnan SpA v Feed Products [1987] 2 Lloyd’s Rep. 601

Contract – Uncertainty – Agreement to Agree

Facts

Pagnan SpA were an Italian company seeking to buy corn pellets to feed chickens with from Feed Products, an American company. The contract was governed by English law. The parties had reached agreement on the main points of the contract, such as the price, the product, the quantity and the period of shipment. However, they had not yet reached agreement on several other important parts of the contract, such as the loading port, the rate of loading and several other charges which may have become payable if certain events came to pass. The parties in any event began performance, when difficulties arose from the fact that they had not arranged all the central matters of the agreement.

Issues

Whether or not the contract was enforceable. Whether or not the contract could be considered void for uncertainty as important matters were yet to be agreed.

Decision/Outcome

The agreement did have contractual force and could be enforced. Parties may be bound by an agreement even where there are further terms to agree. If agreement on these terms is not reached then the existing agreement does not become void unless it renders the entire contract ‘unworkable’. Whether a contract has been concluded or not depends on the court looking at the whole course of correspondence. In this case, the agreement was not stated to be ‘subject to contract’ and the parties had begun to carry out performance. What will be an ‘essential’ term of any agreement and which must therefore be agreed for the sake of certainty depends on the facts, and whether or not it renders an agreement unworkable.