Contractual terms under the spotlight: Court of Appeal considers implied terms about price, and what constitutes a condition precedent

This update covers two recent cases which consider the nature of express and implied contractual terms. In the first, KSY Juice Blends v Citrosuco [2025] EWCA Civ 380, the court found that a contract which appeared to be ambiguous on pricing terms, was nevertheless fixed by reference to the reasonable or market price. 

What were the facts?
The case concerned a contract for the sale for orange pulp. The parties had a multi-year deal for the sale of pulp which was split into various instalments each year. The price for the first instalment was expressly fixed in the contract; the remainder was stated to be open to be fixed at a later date.
The market price for pulp dropped and Citrosuco, the buyer, refused to take delivery of the later instalments arguing that the relevant pricing term was unenforceable because it was an ‘agreement to agree’.  The judge at first instance agreed with the buyer. However, the decision was subsequently unanimously overturned by the Court of Appeal. The Court of Appeal found that the relevant term was enforceable by reference to an implied term, which was that the parties had agreed to fix the price for the later installments by reference to a reasonable or market price.
The decision is interesting because there has been a long-established principle that parties to a contract for the supply of goods, do not agree to be bound until they've agreed to be bound on price. Is this an example (as some of the legal commentary on this case has suggested) of the court implying a price into a contract which was otherwise incomplete? We don’t think that is what the court did. Ultimately, it found that the parties intended to enter into an agreement that was binding across all the installments and therefore this contract was firmly in the territory of those which the court will strive to uphold. 

The starting point for the court was whether the parties had evidenced an intention to reach a binding contract for the full quantity and this was supported by various aspects of the contract:​

• the Term which was fixed to 31 December 2021;​
• the agreement to invoice for the full amount, subject to some adjustment;
• the amount to be supplied was ‘fixed’ at 3600 MT, split into 1200MT per year; and​
• other mechanisms in the contract for deciding delivery, quality, timing of delivery and form of payment.​

​It was common ground that the market was generally volatile, so there was an incentive for the parties to leave some flexibility in the pricing, particularly as they were entering into a multi-year contract. The judge found that the difficulties were not such as to preclude him from finding that the parties had intended to conclude a binding contract on the basis that the price would be fixed by reference to an objectively reasonable price, if necessary by a court, in the absence of agreement.

The buyer has been given permission to appeal the decision to the Supreme Court, and we will provide an update once that is decided. In the meantime, if you are agreeing complicated commercial terms that leave pricing mechanisms flexible, then it is prudent to include within your contract some sort of objective way to discern what the price should be in those circumstances.  
 

The second case, DBS v Tata  [2025] EWCA Civ 380, was another appeal judgment. The single point on appeal related to the construction of a contractual clause entitling the customer (DBS) to claim liquidated damages from the supplier (Tata) for delay in delivering an IT modernisation project. DBS argued that the clause in question was not a condition precedent. The leading judgment in the Court of Appeal was given by Lord Justice Coulson and DBS’ appeal was dismissed, with the court finding that the clause was a condition precedent.

The relevant clause is set out below: 

In summary, the clause provided that if a deliverable did not meet the relevant criteria or milestone, DBS (the ‘Authority') would have to communicate this in a ‘Non-conformance Report’ ('NCR') to Tata (the ‘Contractor’) before DBS could choose from various options which were set out in clause 6.2, one of which was a right to receive delay payments. DBS failed to serve the report.
DBS made nine submissions as to why this clause should not be regarded as a condition precedent, and Lord Justice Coulson rejected 8 of them and said it was the 9th point which led him to grant the permission to appeal.
 

Key observations by the Court 

DBS said the judge at first instance over relied on the words ‘ If.. then’, in the first and penultimate lines of the clause. These words are typically regarded as denoting a condition precedent. Instead, counsel for DBS argued that the condition engaged by clause 6.1 was the failure to achieve a milestone and was not connected to the provision of an NCR. However, this interpretation of clause 6.1 would effectively render the NCR meaningless, the judge said. What was key was to look at the words in their context and to assess whether there was a conditional effect. 
DBS also made an argument about the utility of the NCR and said that there was no reason for it, because in instances of delay, the report would simply state that a milestone had not been achieved, something that Tata would already know as they were delivering the project. That point was also rejected on the basis that clause 6.2 contained a number of other options which would require the prior delivery of a report. So, in the context of the wider contract, it made sense for the report to be a condition for provision of these other options. 

DBS also argued that the absence of any precise time to provide the report weighed against it being a condition precedent. However, the judge held that the word ‘promptly’ was sufficiently certain to be effective. The clause provided some flexibility in terms of timing and this was ultimately in DBS’ benefit. The judge noted that it was a complicated project and it was difficult to know how much time would be reasonable to put the report together and, therefore, a requirement to issue it promptly was reasonable. 

DBS also pointed to another clause in the agreement, clearly a condition precedent, which was to their benefit but which had been drafted differently to clause 6.1. 
DBS argued that the different phraseology yielded a presumption that clause 6.1 must mean something different. The judge in the Court of Appeal recognised the force of the argument. However, he was doubtful there was any such presumption. He held that the court should focus on the actual words used in the relevant clause and ultimately question whether or not there was any rational explanation for why the two clauses should be treated differently. The judge held that ultimately there was no such reason in the present case. 

The decision provides a useful overview of the general principles applying to the establishment of a condition precedent. It also reminds parties that, ultimately, the drafting of the particular clause will be crucial: the words of clauses 6.1 and 6.2 were sufficiently clear to amount to a condition precedent and the failure to provide a Non-conformance Report was fatal to DBS's claim.

English contract law is at the heart of much of the work that lawyers in our London office do. To ensure we keep up to date with developments, we continuously monitor new contract cases and identify any that we think will be relevant to our commercial and disputes lawyers. For more information on this, or any other recent decision, please contact Esther Johnson or your usual Bird & Bird contact.