Expert Witness Journal Issue 63 October 2025 - Flipbook - Page 73
The price is right
Or is it? Drafting lessons from
the Court of Appeal
Flexibility is often essential in commercial contracts, but so is certainty. The recent Court of
Appeal decision in KSY Juice Blends UK Ltd v Citrosuco GMBH [2025] EWCA Civ 730
offers a timely reminder of how courts interpret flexible pricing clauses.
What happened
The contract in question included a clause stating that
part of the price was flexible and was to be fixed between the parties by a certain time, namely December
of each year. The High Court initially ruled this clause
unenforceable, as a result of its open-ended nature
and the absence of defined parameters to determine
how this was to be interpreted by the parties. However, the Court of Appeal reversed that decision, holding the clause enforceable and instead, that in the
absence of an agreed price, a reasonable market rate
could be implied.
Zacaroli LJ (with whom Baker LJ and Popplewell LJ
agreed) placed considerable emphasis on the availability of objective pricing benchmarks - specifically,
market data for frozen orange juice - which offered a
credible foundation for assessing price. Although such
benchmarks are unlikely to be available in all cases.
Other relevant factors included the contract’s provisions on delivery schedules, minimum purchase volumes, and an initial fixed price. Taken together, these
elements led the Court to imply a term that in the
absence of reaching agreement the price would be a
reasonable or market price.
KSY Juice Blends Ltd had entered into a three-year
supply contract with Citrosuco GMBH for 1,200 metric tonnes of orange juice pulp wash per year. The
contract split the annual volume into two parts: 400
metric tonnes at a fixed price, and a further 800 metric tonnes at an open price to be fixed. No agreement
was ever reached on the open price portion of the
contract. Citrosuco refused to accept delivery of a
cargo of pulp from KSY, prompting KSY to claim repudiatory breach, terminate the contract, and seek
damages for lost profits. The court had to consider
whether the open pricing clause was enforceable.
However, the Court also acknowledged that with
different wording or without reference points, the
outcome may have differed. Particular care needs to
be taken when leaving a matter to be agreed at a later
date.
What now
Given how context-dependent the enforceability of
open pricing clauses is, clear drafting is essential. The
more certain the original drafting is, the less likely it is
that a dispute about enforceability will arise. If
flexibility is needed particular care should be taken
and the parties could consider quantifiable mechanisms - such as indexation clauses tied to published
benchmarks or formula-based pricing that adjusts
automatically.
What matters
There is a tension between the Court’s desire to
uphold the parties’ contractual bargain and the uncertainty of clauses that leave matters to be agreed
upon at a later date.
It is often sensible to build in dispute resolution
mechanisms, such as expert determination or arbitration. When doing so, it is wise to consider carefully
the question the decision-maker is expected to resolve,
the criteria to be applied, and the scope of their authority. KSY indicates that a solid resolution process
(while not necessary) can go a long way in giving the
court comfort about the certainty of the agreement to
maintain enforceability.
It is not unusual for parties to leave some aspects of a
contract open to be agreed at a later date. However,
this carries the risk that the clause (or the contract) will
be an unenforceable ‘agreement to agree’.
KSY reinforces that the Court will strive to enforce the
parties’ agreement where the drafting and surrounding circumstances allow.
EXPERT WITNESS JOURNAL
71
OCTOBER/NOVEMBER 2025
