Agreement to Agree Singapore Law: What You Need to Know
When entering into a commercial agreement, it is common for parties to include an “agreement to agree” clause. This clause states that the parties will agree to certain terms at a later date, usually after further negotiations or due diligence.
However, when including an agreement to agree clause, it is important to consider the governing law of the contract. In Singapore, it is not uncommon for parties to include a clause specifying that the agreement to agree will be governed by Singapore law.
So, what does this mean for parties in a contract?
Firstly, it means that any disputes that arise regarding the agreement to agree clause will be subject to Singapore law. This includes any questions regarding the enforceability or interpretation of the clause.
Secondly, it is important to note that Singapore law does not recognize an “agreement to agree” as a binding contract. This means that if the parties cannot come to an agreement on the outstanding terms, there is no obligation to continue negotiations or enter into a contract.
However, if the parties have already agreed on some terms of the contract, these terms will remain binding and enforceable. For example, if the parties have agreed on price and delivery terms, but not on the product specifications, the agreed-upon terms will still be binding.
It is also important to ensure that any agreement to agree clause is clear and specific. Vague or ambiguous language can lead to misunderstandings and disputes. The clause should clearly define the scope of the agreement to agree and the timeline for finalizing the outstanding terms.
In addition, parties should consider including a mechanism for resolving any disputes that arise during the agreement to agree process. This can include mediation or arbitration clauses, which provide a structured process for resolving disputes without resorting to court litigation.
In conclusion, including an agreement to agree clause in a commercial contract can be a useful tool for parties to allow for further negotiations and due diligence. However, it is important to carefully consider the governing law of the contract and ensure that the clause is clear and specific. By doing so, parties can minimize the risk of disputes and ensure that their contract is enforceable under Singapore law.