Imagine you’re closing a real estate deal and one key detail - say the final price or rental rate - is left blank with a promise to settle it later. It might feel like a minor concession to get the deal signed, but this kind of “agreement to agree” can be a ticking time bomb. These clauses, where parties agree to negotiate an essential term in the future, often have no legal teeth. In practice, they lead to ambiguity, disputes, and even lost deals.
Real estate professionals, attorneys, and investors need to understand why agreements to agree are usually unenforceable and how to avoid them. In this article, we’ll demystify what agreements to agree are, explain the legal reasons courts reject them, illustrate the real-world fallout from relying on them, and share clear strategies to keep your contracts solid and enforceable. By the end, you’ll know how to spot these red flags and protect your transactions - and your professional reputation - from the uncertainty they create.
What Is an “Agreement to Agree”? (Definition & Examples)
An “agreement to agree” is essentially a contract clause or preliminary document that says, “We’ll work out this important term later.” In other words, the parties have not finalized all essential terms but still express an intention to do a deal. Legally, this is viewed as an incomplete negotiation rather than a binding contract.
Examples of an “Agreement to Agree”
Common examples in real estate include:
- a letter of intent to purchase property that leaves the purchase price “to be determined”,
- a memorandum of understanding between a landlord and tenant that the rent for a renewal term will be set later,
- a joint venture agreement where the parties say they’ll formalize details in a future contract.
For instance, consider a lease renewal clause that states the tenant can renew the lease “on the same terms as before, with a rental rate to be agreed upon by the tenant and landlord.”
At first glance it sounds reasonable, but in reality “a rental rate to be agreed” is an agreement to agree - and courts consider it no agreement at all. In a recent Ontario case, a tenant tried to enforce such a renewal clause; when the parties couldn’t later agree on the new rent, the court threw out the clause as unenforceable.
Typical “agreements to agree” often show up in pre-contract documents. A classic scenario is the letter of intent (LOI) in a property sale. Parties sign an LOI to outline main terms but plan to sign a formal Agreement of Purchase and Sale later.
Generally, an LOI is considered “an agreement to agree, which is not a binding agreement under Canadian common law.” Unless the LOI itself specifies all essential terms and an intention to be bound, it’s usually just a roadmap for a future contract, not an enforceable deal.
The same goes for memoranda of understanding and even email exchanges expressing that “we have a deal, details to come.” If those details include anything essential (like the financing terms, closing date, or what exactly is being sold), the courts will view the arrangement as incomplete. Simply put, an agreement to make an agreement isn’t a final contract - it’s more like an IOU for a contract that may never materialize.
Why Are ‘Agreements to Agree’ Unenforceable? (Legal Requirements)
To understand why these clauses fail, we need to recall what makes a contract legally binding. In contract law, a valid contract requires a “meeting of the minds” on all essential terms - typically offer, acceptance, consideration (value exchange), intention to create legal relations, and certainty of terms. That last part, certainty of terms, is usually the downfall of an agreement to agree. The terms of a contract must be clear and complete enough that a court can understand the parties’ obligations. If an important term is left vague or open, there is no true meeting of minds.
Canadian courts have consistently held that they will not enforce a contract where essential provisions are undefined. In the words of the Ontario Court of Appeal, if a would-be contract is “incomplete because essential provisions… have not been settled or agreed upon,” then that “‘contract to make a contract’ is not a contract at all.” The law does not allow a court to step in and write the missing terms for you. For example, the Supreme Court of Canada long ago refused to enforce an agreement for sale of land that stated a price with “the balance to be arranged,” finding it too indefinite to be binding. Likewise, in a lease context, a clause that left rent and term to future agreement meant there was “at most an ‘agreement to agree’” and no enforceable lease.
Why such a hard line?
Because courts value certainty and fairness. If a contract says “we’ll agree on X later,” how can a judge tell what a fair or intended outcome for X would be? One party might think X should be one thing, the other party another - that’s exactly the disagreement you failed to resolve in the contract. The courts won’t guess at what you might have agreed on. They also won’t force someone to negotiate endlessly or adhere to some unknown future term. In fact, courts will not make a new agreement for the parties when all they have is an agreement to negotiate. At best, they might say “no contract was ever concluded,” and at worst, they’ll throw the whole deal out for uncertainty.
It’s worth noting that even an explicit promise to negotiate in good faith - often a component of agreements to agree - is usually unenforceable on its own. Under common law, an agreement to negotiate is considered too uncertain, because there’s no objective standard for what “good faith negotiation” would achieve or how long one must try (there are limited exceptions where courts have enforced a duty to negotiate in specific contexts, but those are rare and fact-specific.)
As a general rule, agreements to agree are unenforceable, and while a court might imply a reasonable term in some cases, that only happens if the rest of the contract is otherwise complete and the missing term is minor. If the missing term is a big one - like price, property description, or payment terms - the whole deal falls apart.
Real-World Consequences of Unenforceable Agreements
Leaving an essential term unresolved isn’t just a legal technicality - it has real and painful consequences in the real estate world. First and foremost, your “deal” can evaporate when you need it most. Take the example of the tenant who thought they had secured a lease renewal: they exercised their option to renew, expecting to stay on, but because the rent was left “to be agreed,” the landlord was able to walk away when negotiations broke down.
The tenant ended up in a lawsuit trying to save the deal, only to have the court confirm that the clause was void and “nothing more than an agreement to agree”. The result? The renewal was lost, and the tenant likely had to vacate or renegotiate from scratch - now with zero leverage. They also presumably spent significant money on legal fees, only to be told the contract was not on their side.
For buyers and sellers, a similar nightmare can occur. Imagine you’re a buyer who signs an Agreement of Purchase and Sale (APS) for a property but with the financing terms or a development approval left open for later agreement. You might think you’ve “locked in” the deal, but if the seller gets a better offer or loses interest, they can exploit that open term to back out.
You, meanwhile, could have paid for inspections, appraisals, condo reviews, and tied up your deposit for weeks or months - all for a contract that isn’t worth the paper it’s written on when challenged. Unenforceable agreements mean unenforceable rights. You can’t force the other side to honor the deal, no matter how much time or money you spent in reliance on it. In many cases, the party walking away faces no legal liability because there was never a binding obligation on that key point.
There’s also a domino effect of delays and costs. If a contract term is ambiguous or left to future negotiation, it often triggers last-minute disputes before closing. The parties may find themselves scrambling to reach a secondary agreement on that term to avoid derailment of the whole deal. This can delay closings or even cause the transaction to miss a critical deadline (imagine a financing rate-lock expiring because the closing got postponed over an unresolved term). In worst-case scenarios, the deal collapses entirely, which can mean lost deposits or opportunity costs.
For example, a seller who thought they sold their property might have declined other buyers and now has to relist, or a buyer might have given notice to their landlord or sold their previous home and now find themselves in a tough spot. In commercial real estate, an unenforceable preliminary agreement can mean losing a valuable opportunity to another bidder or missing a market window.
Beyond the deal at hand, professional reputations are at stake. If you’re a real estate agent or broker who allowed an offer or contract with an “agreement to agree” clause, your client will not be happy when they learn the deal fell apart due to a drafting issue. You could even face litigation or professional discipline if the client believes you were negligent in protecting their interests. Attorneys, too, have a duty to ensure a contract is enforceable.
A lawyer who drafts (or fails to warn about) an unenforceable clause might face a malpractice claim or, at the very least, damage to their reputation. Even investors or developers doing deals on a handshake or vague term can suffer financial and credibility loss - partners and lenders may become wary of working with someone who doesn’t tie down the details. In short, an agreement to agree can implode a transaction and reverberate far beyond it, causing financial loss, legal headaches, and lasting distrust among the parties involved.
Ambiguity: The Hidden Deal-Killer in Contracts
Ambiguity in contract language is a silent killer of real estate deals. Vague or unclear terms don’t just cause mild confusion - they create legal uncertainty that can nullify the whole agreement. In fact, even a small ambiguity can open the door for one party to argue “we never truly agreed.” For example, an incorrect or vague detail in an Agreement of Purchase and Sale can delay or halt a transaction, potentially costing the buyer significant money. Ambiguity essentially means the parties might have had different understandings of the deal, which undercuts the meeting of minds required for a binding contract.
Consider a clause that says, “Seller may provide a vendor take-back mortgage; terms to be negotiated.” To the buyer, that might have meant the seller was willing to finance at a reasonable rate if needed. To the seller, it might just mean they’d consider it only at a very high interest rate or short term. Both sign the contract, thinking they have a deal, but in reality they haven’t agreed on the financing term at all. This unresolved ambiguity can lead to a blow-up later: the buyer claims the seller must give financing, the seller claims they’re not obligated to unless terms are satisfactory to them. Who is right? Possibly neither - a court might say the clause is void for uncertainty, as it’s essentially an agreement to agree on financing. The whole contract could fail if that mortgage was an essential part of the deal.
Ambiguity also breeds disputes and delays. When a contract term isn’t crystal clear, each side may interpret it in their own favor. This often comes to a head when it’s time to perform that part of the contract. Then the parties either renegotiate on the fly, argue (perhaps through lawyers) over what the term means, or end up in court asking a judge to interpret - or declare void - that provision. All of these outcomes mean extra time and cost, and they can poison the well of the overall deal. A deal in conflict is a deal at risk. Even if the rest of the agreement is fine, one ambiguous clause can hold the entire closing hostage until it’s resolved. And if it can’t be resolved, you’re back to the scenario of a failed transaction.
The key point is that ambiguity is the enemy of enforceability. The clearer and more specific a contract is, the less room there is for misinterpretation or “change of heart” later. Ambiguity often arises from poorly drafted clauses, missing specifics, or intentional vagueness when parties couldn’t agree on something upfront. As a real estate professional or attorney, spotting these vague spots is critical. Does a clause use fuzzy language like “reasonable efforts” or “to be determined later”? Is any blank space unfilled on a form contract? Those are glaring red flags. One industry proverb holds that “an ounce of prevention is worth a pound of cure” - in contract terms, ironing out ambiguities now is far easier (and cheaper) than fighting over them after the fact. In the next section, we’ll look at how you can avoid these pitfalls by drafting contracts the right way from the start.
Warning Signs of an Unenforceable Clause
How can you tell if a contract term might be an unenforceable agreement to agree? Here are some red flags and phrases to watch out for in any real estate contract or negotiation document:
- “To be agreed upon” or “to be determined later” - If you see these words next to an important term (price, closing date, rent, financing, etc.), the contract is flagging that there is no agreement yet on a key point. That’s a classic agreement-to-agree indicator. For example, “additional deposit amount to be determined by the parties at a later date” spells trouble - what if they never determine it?
- “Subject to a formal contract” - Sometimes letters of intent or offers say the deal is subject to signing a formal agreement. This usually means the parties do not intend to be bound until that next contract is signed. If the formal contract never materializes, the “agreement” evaporates. This phrase is basically an escape hatch that makes the initial document non-binding.
- Blanks or placeholder text - Any blank spaces on a signed contract (for instance, a blank for the interest rate, or “TBD” written in) are a major warning sign. An essential blank filled in with TBD (“to be determined”) is effectively an agreement to agree later. Always ensure all blanks are filled with definite terms or “N/A” if not applicable.
- “Negotiated in good faith” without further detail - A clause that the parties will negotiate something in good faith or will use “best efforts to agree on X” is well-intentioned, but it provides no guarantee. One party might later claim the other didn’t negotiate in good faith; yet it’s nearly impossible to prove or enforce such an obligation. It’s a sign that the real work of agreeing on X hasn’t been done yet.
- Overly general terms - Watch for language that’s too general to pin down. For example, “Seller will make repairs as mutually agreed” is problematic if those repairs (what exactly, by when, to what standard) aren’t specified. Similarly, “Buyer to assume some existing leases; details to be arranged” is too open-ended. These need specifics; otherwise, they’re open to dispute or nullification.
If you encounter any of these signs, pause and address them before proceeding. It’s far better to clarify or firm up the term now than to gamble on “figuring it out later.” In many cases, the fix might be straightforward - plug in a number, choose an objective standard, or explicitly state what happens if no agreement is reached by a certain date. And if a counterparty insists on leaving a term vague or open, recognize the risk: you may not truly have a deal at all.
Our Tip:If you see contract language like “to be agreed later” or blanks in critical clauses, treat it as a giant red flag. Don’t assume the other side will work it out with you later - by then, you may have no leverage or no deal. It’s far safer to either resolve the term now or insert a clear mechanism for determining it. In over 25 years of practice, I’ve never had a client say, “I wish our contract was less clear on this point.” Clarity protects you; vagueness can sink you.
Best Practices to Ensure Contracts Are Clear and Enforceable
Avoiding the trap of agreements to agree is all about clarity, completeness, and foresight. Here are some best practices for real estate contracts to keep them solid and enforceable:
- Nail Down the Essentials:
Identify the essential terms for your deal and make sure every one of them is explicitly agreed upon in writing. For a purchase and sale, essential terms typically include the parties (buyer and seller), the property being sold (with a proper description), the purchase price (and deposit), and key dates like closing. For a lease, essential terms include the parties, premises, term (duration), rent amount, and other fundamental conditions. Do not leave these items to future discussion. If you can’t agree on them now, it’s a sign you don’t actually have a deal yet. It’s better to postpone signing until consensus is reached than to sign a half-baked contract.
- Use Objective Formulas or Standards:
In some cases, parties genuinely can’t pin down a term at the moment but still want a binding deal. If so, provide a formula or objective method to determine that term, rather than saying “we’ll agree later.” For example, instead of “rent for renewal term to be agreed,” the clause could state “rent for the renewal term to be set at the fair market rent as of 2026, as determined by an independent appraiser agreed by both parties.” This way, there’s a clear path to follow. Courts are more willing to enforce a clause that has an objective standard or mechanism (like appraisal, arbitration, reference to an index or formula) because it no longer relies on a future meeting of minds - the term can be determined without further agreement. Make sure the mechanism itself is detailed (How is the appraiser chosen? What if one party refuses? etc.). Essentially, you’re substituting a to-be-determined term with a to-be-calculated term, which is a big improvement in certainty.
- Include Fallback Clauses:
If you absolutely must leave something to later negotiation, include a backup plan in the contract. For instance, “Parties will negotiate in good faith to extend the lease term. Failing a written agreement by December 31, 2025, the lease shall expire on its original end date.” This way, everyone knows what happens if no future agreement is reached - in this case, the default is the deal ends. A fallback could also be a predetermined range or minimum/maximum (e.g., “to be between $X and $Y, or else contract is void”). A fallback clause at least prevents endless uncertainty and can protect against one side stalling. However, remember that even a fallback doesn’t guarantee the missing term will be agreed - it just defines the outcome if it’s not. It’s often functionally equivalent to not having a deal on that point, but at least it sets expectations and avoids litigation over whether there was a contract.
It might be tempting to write “as per standard practice” or “subject to lawyer’s approval of details” in a contract and consider it done. But these shortcuts can backfire. If something is standard, spell out the standard (or attach the standard form as a schedule). If something needs lawyer approval, have the lawyers resolve it before the contract is signed, or make that a clear condition precedent (e.g., “conditional on solicitor’s approval within 5 days” - and if not approved, the deal is off). Don’t rely on unwritten norms or assumptions. Different people have different ideas of what “standard” means. It’s safer to over-communicate in the contract than to leave room for debate.
- Use Established Templates (Carefully):
In Ontario, for example, realtors commonly use the Standard Agreement of Purchase and Sale (APS) forms developed by the Ontario Real Estate Association (OREA). These standard contracts are designed to cover all fundamental aspects of a deal, precisely to avoid missing an essential term. They include sections for price, deposit, closing date, chattels, fixtures, conditions, etc., and they’ve been tested in thousands of transactions. Using such a template is a good starting point because you’re less likely to accidentally omit a key item. However, be cautious when adding any additional clauses or amendments to standard forms. Many deals go sideways when well-intentioned extra clauses (often inserted via Schedule A) introduce ambiguity or conditional language that isn’t clear. If you’re modifying a standard contract or drafting a custom one, it’s wise to have a
real estate lawyer review it. As our own Zinati Kay Real Estate team often reminds clients, even a single vague clause can undermine an otherwise solid contract - so it’s worth having professional eyes on it.
- Document Everything in Writing:
This may sound obvious for contracts, but in real estate deals there are often side conversations, emails, or texts where parties hash out details. Always integrate any agreed detail into the written contract or an amendment before relying on it. Don’t bank on informal understandings outside the contract - if it’s not written, it effectively doesn’t exist legally. For example, if a seller informally “agrees” via email to fix a property issue before closing, put it into the APS or an amendment explicitly. Otherwise, if it’s not done, you may have no recourse. Remember that courts generally don’t consider outside promises due to the parol evidence rule (which limits using external evidence to contradict a written agreement). So make the written contract your single source of truth.
- Consult Legal Counsel Early:
Perhaps the most important best practice is getting expert legal advice when drafting or reviewing any agreement. A skilled real estate lawyer will spot ambiguity or incomplete terms a mile away. They can suggest the proper wording to firm up a clause or advise you when you’re better off not signing and continuing negotiations instead. Lawyers can also add protective clauses (like those fallback provisions or clarifying definitions) that laypeople might not think of. The cost of a lawyer’s review is minimal compared to the cost of a deal collapsing or a court battle. If you’re an agent or broker, involve the lawyer for your brokerage or recommend the client get independent legal advice especially if any unusual term is being used. Preventative lawyering saves headaches: it’s much easier to fix a contract today than to litigate it years later. As a Toronto real estate litigation firm notes, when you do end up in a dispute over contract terms, having an expert advocate is essential to protect your rights - but of course, our goal is to avoid getting to that stage at all.
Professional Implications: Protecting Your Reputation and Clients
For real estate attorneys and law firms, drafting a clear, enforceable contract is a fundamental duty. Overlooking an “agreement to agree” clause can expose you to professional liability. Clients rely on us to safeguard them from ambiguity and unenforceable terms. If a deal falls apart because of a drafting issue, the client may question our competence or even pursue a negligence claim. At the very least, it can harm the trust they place in us and our firm’s reputation. On the flip side, being diligent about clarity reinforces our value. Clients often don’t see the disasters we avert behind the scenes, but they do appreciate smooth closings and deals that stay closed. One of the reasons our firm emphasizes transparency and no hidden surprises is to align with this principle - everything should be out in the open, in writing, and understood by all sides.
Real estate brokers and agents also have a huge stake here. Your commission, your referral network, and your license all ride on successfully closed transactions and happy clients. Recommending or using sloppy agreements can kill deals and erode client confidence. For instance, if you encourage a client to sign a quick letter of intent just to “lock in” a deal and later it falls through, that client will be justifiably upset.
They might lose a property they loved or money they invested in due diligence. In Ontario, agents have a responsibility to use the standard forms properly and advise clients to seek legal advice on anything unusual. If you identify a problematic clause (say, a seller insists on “terms to be worked out later” for something), speak up. Explain the risk to your client and involve a lawyer to get it right. Your professionalism in catching these issues will enhance your reputation. In contrast, if you gloss over them and the deal fails, you could face not only a lost commission but also damage to your credibility or even regulatory complaints. Remember, your clients count on you to guide them - sometimes that means urging patience to finalize terms now, rather than rushing into an uncertain agreement.
For investors, developers, and business clients, there’s a tendency to think “we’ll sort it out as business people” or rely on relationships rather than formalities. While business flexibility has its place, real estate deals are too high-stakes to leave to handshake promises. An investor should consider that an unenforceable contract doesn’t just risk one deal, but can also mess up related plans - financing arrangements, construction schedules, tenant agreements, etc., all can crumble if the main deal isn’t secure.
Moreover, if you’re working with partners or investors, you owe them the diligence of securing enforceable agreements. If you present an LOI as a done deal and later have to report that it fell apart due to a legal technicality, your partners will question your acumen. Savvy investors know that a strong contract is as important as a strong business case. It’s part of risk management. So, insist on clarity and completeness in every agreement, and have your legal team review everything. It’s a lot cheaper to do it right at the start than to untangle a mess afterward.
In summary, whether you’re a lawyer, broker, or principal in a real estate transaction, avoiding “agreements to agree” isn’t just about legal theory - it’s about protecting your clients, your deal, and your own professional future. Clear contracts lead to closed deals and satisfied parties. Ambiguous contracts lead to finger-pointing and regrets. By championing clarity and enforceability, you position yourself as a trusted advisor who gets deals done and stands up to scrutiny.
TL:DR
Agreements to agree may seem harmless in the rush of negotiations - a convenient way to “keep the deal moving” - but as we’ve explored, they carry a serious risk of unenforceability. In the realm of real estate contracts, clarity is truly power. When every essential term is nailed down and every clause is crystal clear, you set the stage for a successful closing and minimize the chance of disputes. On the other hand, if you leave key matters up in the air, you’re effectively building your deal on quicksand. It might stand for a while, but it can collapse when tested, taking your time, money, and peace of mind with it.
The good news is that these pitfalls are entirely avoidable. With diligence and the right guidance, you can ensure your contracts protect you rather than expose you to risk. As we’ve advised, be vigilant for red flags like vague terms or “TBD” provisions, and address them upfront. Invest in professional legal review - a small expense that can save a fortune in litigation or lost opportunities. Use the tools and standard forms available, but customize them thoughtfully to fit your deal with no loose ends. In our experience at Zinati Kay, having closed over 27,000 transactions without a title claim, the deals that succeed are the ones where everything important is in writing and understood by all.
In real estate (and in life), you rarely regret getting clarity. By avoiding agreements to agree and embracing clear, enforceable contract terms, you are protecting not just one deal, but your entire business and reputation. Every contract is a foundation for a relationship - make sure yours is built on solid ground. With clear terms and proper legal support, you can move forward confidently, knowing that when you shake hands on a deal, it’s truly a done deal. Here’s to closing transactions with certainty, and to the peace of mind that comes from knowing your agreements will stand strong when it counts
John Zinati is a veteran experienced real estate lawyer and partner at Zinati Kay Barristers & Solicitors. He holds a Bachelor of Arts from the University of Toronto and a Bachelor of Laws from Osgoode Hall Law School.
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