UK: Hyundai v Vigour Appeal - Enforcing Agreements to Negotiate or Mediate

Last Updated: 5 May 2005
Article by Richard Foley and Eileen Tay

Originally published April 2005

Is an agreement to negotiate in good faith or an agreement to mediate without any defined mediation procedure enforceable? Is an agreement not to arbitrate or litigate enforceable or is it against public policy to oust the jurisdiction of the courts? These were issues dealt with in Hyundai Engineering And Construction Company Limited v Vigour Limited a case decided by the Hong Kong Court of Appeal on 25 February 2005.

The parties in this case had entered into construction contracts which contained arbitration agreements. Disputes arose over the architect's certifications. The parties verbally agreed to enter into settlement negotiations but Vigour then refused to continue negotiations unless Hyundai signed an agreement undertaking not to pursue arbitration or litigation against them. Presented with an ultimatum to ‘fight or talk’ Hyundai agreed to sign an agreement prepared by Vigour (‘the March Agreement’) the entire terms of which were this:

‘The parties will not continue arbitration and will not bring any arbitration or court action forever and any right to sue each other will not be exercised any more mutually and the parties will start to discuss together to resolve any differences under or in connection with the above contracts and any arguments that may come up now and in the future for anything about the above contracts that can not be finalized will be resolved and decided by the managing directors of the ultimate shareholder group of the highest level provided failing an ultimate agreement then both parties shall agree and submit to Third Party Mediation procedure which shall be conducted and completed as soon as possible and in any case no party will exercise the right to sue against each other. To demonstrate this private settlement is in place, the Employer will let this relevant bond for Contract B expire.’

Having persuaded Hyundai to sign the March Agreement, Vigour then stonewalled the settlement negotiations until eventually Hyundai, having lost all confidence that Vigour was sincere in wanting to settle the disputes, tried to invoke the arbitration agreements in the underlying contracts. Vigour contended that the March Agreement had revoked the arbitration agreements under the construction contracts and sought an injunction restraining Hyundai from arbitrating.

Court proceedings were commenced whereby Hyundai sought declarations as to the meaning and effect of the March Update

Agreement including declarations that parts of the March Agreement were contrary to public policy (for ousting the jurisdiction of the courts) and the remainder comprised no more than an agreement to negotiate or mediate and was thus unenforceable and void for uncertainty. Part of Vigour's case was that the March Agreement was a conclusive settlement agreement the effect of which was to bind the parties to the architect's certificates unless the parties could agree some other solution by negotiation or mediation.

In the Court of First Instance, Reyes J held that Hyundai was entitled to pursue its claim in arbitration. His reasoning was as follows:

  1. The wording of the March Agreement was not clear enough to revoke the arbitration agreements between the parties. Neither could it be construed as a surrender of the parties rights to litigate in Court. It was only an agreement to refrain from exercising their right to arbitrate or litigate while the March Agreement was in effect.
  2. The provisions within the March Agreement which provided for negotiation and mediation were neither unenforceable nor uncertain. The learned Judge was of the view that not all agreements to negotiate in good faith were per se unenforceable. General agreements to mediate were also enforceable and the failure to identify a procedure or a time frame was not fatal to the enforceability of the obligation to mediate. The parties here were under a duty to act reasonably to negotiate in good faith and ensure that mediation took place in the event that good faith negotiations broke down.
  3. On the facts, Reyes J found that Vigour's conduct amounted to a repudiatory breach, terminating the March Agreement and thus releasing Hyundai from its promise to forebear from pursuing arbitration.

The Court of Appeal

The Court of Appeal agreed that Hyundai should be allowed to pursue their claims in arbitration but for entirely different reasons. Their reasoning was as follows:

  1. The Court of Appeal did not accept that the March Agreement was enforceable. Insofar as the March Agreement provided for the resolution of differences by the parties' managing directors, the Court of Appeal held that this was no more than an agreement to agree and unenforceable. Rogers VP observed that a court is not in a position to determine the good faith or otherwise of negotiations because a party is entitled to negotiate in any way it feels fit (in some cases part of a negotiating tactic may be to call off the negotiations hoping that better terms would be offered).
  2. Insofar as the March Agreement provided for Third Party Mediation, the Court of Appeal held it was imprecise and unenforceable as it did not define any specific steps which must be taken, by when, within what procedural ambit, etc. Like the agreement to negotiate, the agreement to mediate lacked the necessary certainty which would allow the court to enforce it.
  3. The Court of Appeal held that the wording of the March Agreement did amount to an abrogation of the parties' rights to arbitrate and litigate. Rogers VP of the Court of Appeal held that the use of the words ‘forever’ and ‘in any case no party will exercise the right to sue against each other’ clearly indicated that both parties were agreeing to forego arbitration and litigation on a permanent basis. He was of the view that it might be feasible to enforce such an exclusion provision provided the agreement within which that exclusion provision was contained itself resolved the parties' disputes. However, in this case, as the machinery for settlement of the disputes had fallen away as being unenforceable, the entire March Agreement was unenforceable.
  4. As the March Agreement was unenforceable the issue of repudiation did not arise.


The Court of Appeal's decision confirms that in Hong Kong a bare agreement to negotiate is unenforceable. Moreover, an agreement to mediate which does not contain a defined procedure is merely an agreement to agree and also unenforceable. As for agreements not to arbitrate or litigate forever, it is most unlikely that such agreements, without more, will be enforceable. The key lessons to be learned from this case are:

  1. If you wish to be able to enforce an agreement to mediate or negotiate you must include within the agreement sufficient certainty of what you mean by that to allow the courts to discern enforceable obligations. Bare or general agreements to negotiate or mediate are unenforceable.
  2. Think very carefully about the wording of settlement agreements or agreements providing for settlement. If you wish to prevent a party from litigating/ arbitrating at a later date your agreement must be in clear terms and must resolve, by compromise or otherwise, the matters in dispute.

Masons represented Hyundai - the successful party both at first instance and on appeal. The Court of Appeal's decision is currently the subject of an application for leave to appeal to the Court of Final Appeal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions