Factual Background
The recent Hong Kong High Court decision in Maurizio de Gasperis v Shanghai Tang Investment Holding Company Limited [2025] HKCFI 2372 provides a timely clarification of the principles governing “agreements to agree” in the context of commercial licensing.
The dispute arose following the 1st Plaintiff’s resignation as Chief Executive Officer of Shanghai Tang Group Limited. In connection with his departure, the 1st Plaintiff and his nominee company entered into a set of “Separation Terms” with Shanghai Tang Group Limited and related entities.
Part 3 of the Separation Terms contemplates the grant of a licence to the 1st Plaintiff in respect of an eyewear business for a period of 5+5 years, the terms of which will be set out in a license agreement (on terms to be agreed). No royalties are payable in the first 3 years of the license term, but an 8% royalty is payable commencing from the 4th year.
While the language of the Separation Terms stated that the Defendants “shall” perform these obligations, negotiations for the licence ultimately broke down. The parties failed to agree on several critical terms—including exclusivity, territorial scope, sublicensing, and distributor rights. As a result, the new eyewear business was never formed.
The Plaintiffs claimed that the Defendants were in breach of Part 3 for failing grant an exclusive licence in accordance with the Separation Terms. The Defendants, on the other hand, argued that Part 3 amounted to an unenforceable “agreement to agree”.
The Judgment
The Court dismissed the Plaintiffs’ claims based on Part 3 of the Separation Terms and, in doing so, provided guidance on the limits on contractual enforceability where key terms are left unagreed.
Key Takeaways
- Principles on “Agreement to Agree”
The judgment reaffirms that an “agreement to agree” is generally unenforceable. Where a contract leaves important matters to be agreed in the future, and those matters are so material and essential that the contract would be unworkable without them, the contract will usually be too uncertain to be enforced. Although the Court would try to assist the parties in preserving a bargain rather than destroying it, including, where necessary, implying reasonable terms, such endeavours must be reasonable. The Court cannot rewrite the contract solely to make an otherwise unworkable contract workable.
- Essential terms for a license agreement
In the context of a licence agreement, the Court held that the essential terms of a licence were missing from Part 3. These terms include exclusivity (whether Ps’ use of the trademarks under the license was to be exclusive, non-exclusive, or subject to hybrid arrangements e.g. sole license), territorial limits or the territorial scope, right to sublicense the trademarks to third parties, and right to appoint distributors (and the extent of such rights).
The Court found that Part 3 is therefore unenforceable notwithstanding that it provided that Ds “shall grant a license” to Ps and “shall inject USD500,000” into the new business. This is because without the above material terms, the license agreement is simply unworkable. Those terms have a significant effect of either positively enhancing or adversely diminishing the value of rights under the licence. The failure to resolve these essential points meant the purported agreement amounted to nothing more than an unenforceable agreement to agree.
- Post-contractual conduct: Distinction between the identification and interpretation of terms
The Court also reaffirmed the important distinction between identification and interpretation of terms. Once the terms have been identified, their meaning is to be ascertained objectively and without regard to evidence of subjective intent or post-contractual conduct.
This decision is a useful reminder that while Courts should be slow to find a contract/ a clause to be unenforceable due to uncertainty, vagueness or because it is an agreement to agree, parties cannot expect the Court to rewrite the bargains and fill gaps which are too wide to be bridged. It is important that parties ensure that all material and essential terms are included for a contract to be enforceable.
The full judgment can be found at this link.
Mr Terrence Tai and Ms Regina Yip, instructed by Oldham, Li & Nie, for the 1st to 3rd Defendants
