Willis Management (Isle of Man) Ltd v Cable & Wireless Plc
Court of Appeal
Citations: [2005] EWCA Civ 806; [2005] 2 Lloyd’s Rep 597; [2006] CLY 760.
Facts
The parties were negotiating a settlement for various torts and breaches committed by Willis’ employee. Willis agreed to accept legal responsibility for the employee’s conduct, in exchange for Cable agreeing not to join Willis as a party to legal proceedings which were ongoing against the employee. However, they stated that the parties needed to agree on a mechanism for quantifying how much Willis would have to pay – what their ‘fair share’ of the damages was. Cable emailed Willis a draft agreement setting out what Willis agreed to. Willis responded with a signed copy of the agreement. The cover email provided that Willis was:
‘signing and returning the letter as you’ve drafted it, but with the understanding that our acceptance of legal responsibility is not intended to be an undertaking of full responsibility for the damages suffered by [Cable], but in effect for a share in them which we are agreeing to discuss pursuant to the kind of standstill agreement that will give both of us appropriate cover as long as such discussions are proceeding in good faith and haven’t broken down.
The parties then had a phone call. Cable confirmed that signing the letter did not mean that Willis accepted liability for the full losses. They reaffirmed that the parties would discuss creating a method for determining the damages owed by Willis.
Willis later argued that there was no binding contract between the parties because the agreement was too uncertain. In particular, a core term of the agreement was that the parties agreed to agree on something. This kind of agreement was deemed too uncertain in Walford v Miles [1992] 2 AC 128.
Issue(s)
- Was the contract unenforceable for uncertainty?
Decision
The Court held in favour of Willis. At its heart, the agreement was an agreement to agree. The parties had yet to agree on a key term of the contract: the amount for which Willis was liable. The agreement was therefore uncertain and incomplete.
This Case is Authority For…
An agreement to agree on core terms of the contract is fundamentally uncertain. Such an agreement cannot be enforced.
Other
Rix LJ noted that an agreement to pay a ‘fair’ or ‘reasonable’ share could be sufficiently certain, as there are objective principles allowing the court to work out what such a share is. However, an agreement to agree on principles for working out a fair share is not sufficiently certain. He acknowledged that the distinction might be a narrow one.
