Case Update: Court of Appeal upholds supply contract despite lack of agreement

2 April 2013

In the recent case of MRI Trading AG v Erdenet Mining Corporation LLC [2013] EWCA Civ 156 the Court of Appeal ruled that a contract for the supply of goods was enforceable, despite the fact that some terms had not been agreed.

The facts

An agreement existed between Erdenet Mining Corporation LLC (‘EMC’) and MRI Trading AG (‘MRI’), whereby EMC contracted to sell copper concentrates to MRI. A dispute arose between the parties in relation to the performance of the contract; however the dispute was referred to arbitration and eventually resolved through a settlement agreement. The agreement provided for three fresh supply contracts to be performed by the parties. Two of these contracts were performed without issue; however no concentrates were shipped by EMC under the third contract.

MRI asserted that EMC were in breach of contract, and consequently brought a claim for damages, interest and costs in excess of $10m. EMC argued that the contract was unenforceable due to the fact that important terms had not been agreed, namely in relation to dispatch, shipping and certain charges.

The dispute was referred back to arbitration, where it was decided that the contract could not be enforceable, as it left material terms to be agreed. In reaching this decision only the terms of the contract were considered, and no regard was given to the settlement agreement.

MRI appealed to the High Court under section 69 of the Arbitration Act 1996. Eder J overturned the decision of the tribunal, stating that no reasonable tribunal correctly applying the relevant principles could have reached such a conclusion.
EMC appealed to the Court of Appeal.

Held on appeal

The Court of Appeal dismissed the appeal, agreeing with Eder J that the contract could not be interpreted solely on the wording of the contract without regard to the settlement agreement. As a rule, the fact that provisions relating to price and performance were “to be agreed” would be fatal to the enforceability of any contract. However, the Court of Appeal held that this is not always the case where the contract clearly suggests that the parties intend the terms to be enforceable. Here, the language of both the contract and the settlement agreement showed beyond any doubt that the parties had not intended that, in the event that any terms failed to be agreed, there would be no obligations in respect of the contract. 

Another relevant factor considered by the Court of Appeal was that there had been part performance of the contract by both parties and that some benefit had been received. EMC had derived full benefit from entering the settlement agreement with MRI, as this had resulted in MRI abandoning their original claim against EMC.


This case provides useful guidance in relation to what the courts will consider when applying the complex rules on certainty within commercial contracts.
The Court of Appeal was right to consider the enforceability of the contract in light of the terms of the settlement agreement. Both parties had acted on the agreement and EMC had obtained a benefit as a result.

Katie Allard

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