Agricultural Profiles Ltd v Performance & Deck Roofing Ltd

A compromise is binding only when all material terms have been agreed. A proposal remains capable of acceptance or rejection where the correspondence shows continuing negotiations, an important term remains unresolved, or the proposed wording is too vague to enforce. An agreement to agree has no binding effect. Whether an oral compromise was concluded is determined from the parties’ communications and evidence. A term concerning the timing and priority of payment under a voluntary arrangement may be essential where it would give one creditor treatment different from other unsecured creditors.

The claimant, Agricultural Profiles Ltd, alleged that its dispute with Performance & Deck Roofing Ltd had been compromised by oral agreements reached in telephone conversations on 25 November and 24 December 2004. The defendant denied that either conversation produced a binding agreement.

The parties had exchanged proposals concerning payment of the claimant’s debt, including the treatment of the debt under the defendant’s creditors’ voluntary arrangement. Most terms had been narrowed or agreed, but the claimant sought to retain a clause fixing or influencing the date on which the balance would be paid. The defendant objected to that clause as giving the claimant separate treatment from other unsecured creditors. The issue was whether either alleged compromise was binding.

1. No compromise concluded. The claim was not compromised. Neither the 25 November conversation nor the 24 December conversation produced a binding agreement.
2. The governing principles were that all material terms must be agreed; an unresolved material element ordinarily prevents formation of a contract; wording that is too vague to enforce is insufficient; and an agreement to agree is not binding. The court considered those principles in Foley v Classique Coaches [1934] 2 KB 1, Yorwerth v Sonnyplaster (1973) C.A.T. 255, Wilson & Whitworth Limited v Express and Independent Newspapers Limited [1969] 1 WLR 197, and Walford v Miles [1992] A.C. 128.
3. The letter of 25 November was, objectively and on the evidence, a counter-proposal rather than a record of an agreement already reached. It invited signature after consideration, contained matters not discussed in the telephone conversation, and left unresolved the proposed payment date in clause 6. The defendant’s response confirmed that negotiations were continuing.
4. The defendant’s revised proposal of 7 December was not accepted. The claimant accepted deletion of one recital but expressly refused to delete clause 6. The dispute about that clause therefore remained unresolved.
5. The amended wording proposed after the 24 December conversation was also too vague and was not agreed. The court found that the defendant had consistently objected to clause 6 and had not accepted the amended version.
6. Clause 6 was an essential term. It potentially gave the claimant a fixed payment date and preferential treatment within the creditors’ voluntary arrangement. The court considered, but rejected on the facts, the possibility that the term was inessential under G Percy Trentham v Archital Luxfer [1993] 1 Lloyd’s Rep. 25. Judgment was therefore given on the compromise issue for the conclusion that no binding agreement had been demonstrated.