No price tag, no problem: Court of Appeal implies reasonable price term in recent case

Statutory mechanisms for price

Section 8(1) SGA sets out that the price is:

• Fixed by the contract.
• Left to be fixed in a manner agreed by the contract.
• Determined by the course of dealing between the parties.

These mechanisms typically suffice to establish the contract price.  But what happens when they fail?

Section 8(2) SGA provides a safety net.  Where the price cannot be determined using the methods in section 8(1), section 8(2) provides that “the buyer must pay a reasonable price” the determination of a “reasonable price” is a question of fact, taking into account the particular circumstances, market conditions, and any previous dealings between the parties.

If a ‘reasonable price’ cannot be determined, the contract may fail for uncertainty, rendering it unenforceable.  The statutory safety net under section 8(2) allows courts to imply a ‘reasonable price’ where explicit pricing mechanisms are absent or have failed.

However, this flexibility has limits.  For instance, if objective market data is unavailable or the product or service is novel, with no factual basis for identifying what a ‘reasonable price’ should be, it may be impossible to determine such a price.  In these circumstances, the statutory provision in section 8(2) cannot salvage the contract, and the agreement may be void for uncertainty regarding a fundamental term (the price).

Case analysis: KSY Juice Blends

This statutory safety net was recently considered by the Court of Appeal in KSY Juice Blends.

The principal issue was whether the contract, under which the price was to be determined by future agreement, was enforceable.  This arrangement amounted to an ‘agreement to agree’, which is generally unenforceable.  The High Court agreed.

The Court of Appeal held that a term could be implied into the contract such that, in the absence of agreement, the price would default to a reasonable or market price.  Importantly, the Court of Appeal stated that this implication was not prevented by either the parties’ expressed intention to agree a price at a later date or section 8(1) of the SGA.  Key factors influencing the Court’s decision included:

• a clear intention by both parties to be legally bound;
• a history of prior dealings with similar pricing structures;
• the existence of objective market data; and
• the commercial context and the need to uphold business bargains.

The Court of Appeal concluded that section 8(2) could apply even where the contract envisaged future agreement on price, provided the parties intended to be bound and the price could be objectively determined, for example, by reference to market data.

Implications for commercial drafting

This decision reinforces the willingness of English courts to uphold commercial contracts, even where certain terms (including the price) are left open.  It also clarifies that section 8(2) of the SGA operates as a safety net or catch-all provision, enabling the courts to imply a reasonable price term where the contract would otherwise fail for uncertainty, provided objective criteria for the price exist.

However, this flexibility is not without limits.  Where objective market data are unavailable or the goods are wholly novel, it may not be possible to determine a reasonable price.  In these circumstances, the contract may fail for uncertainty.

Drafting considerations:

• Avoid reliance on “agreements to agree” without fallback mechanisms.  Be aware that agreements to agree on a price in the future may be unenforceable.
• Include objective pricing references, such as industry benchmarks or third-party valuation clauses.
• Document prior dealings and market norms to support implied terms if needed.
• Address how the contract will manage price adjustments over time, taking into account factors such as inflation, changes in market conditions, and other relevant variables.
• Consider how the contract will address currency fluctuations, especially in international transactions, to ensure that the price remains fair and enforceable.
• Include a dispute resolution mechanism to address any disagreements over the price, ensuring that the contract remains enforceable even in the event of a dispute.
• Ensure compliance with any legal or regulatory requirements that may affect the price, such as those outlined in the SGA.
• Clearly specify how taxes, duties, or additional costs will be handled to avoid any ambiguity or disputes.
• Consider whether the contract should include provisions for periodic review or renegotiation of the price to account for changes in circumstances or market conditions.

Conclusion

The Court of Appeal’s decision represents a reaffirmation of the courts’ willingness to imply terms to preserve commercial agreements.  The case highlights the importance of clarity in pricing provisions, but equally reassures that English law (via section 8 of the SGA) will, in appropriate cases, provide a mechanism to uphold contracts where the parties have demonstrated genuine intent to be bound and there are objective criteria available for fixing the price.

Comment

Our Corporate & Commercial team advise on all aspects of commercial contracts. We act for both organisations procuring goods and services and suppliers, which allows us to “see it from both sides” – an invaluable position when trying to reach fair compromises on commercial contract terms.  Contact our team today if you need assistance with commercial contracts.

^[1] Sale of Goods Act 1979 (SGA)

^[2] KSY Juice Blends UK Limited v Citrosuco GMBH [2025] EWCA Civ 760