Essential Terms in Contracts: Certainty, Completeness, and Uncertainty, Lecture notes of Contract Law

Download Essential Terms in Contracts: Certainty, Completeness, and Uncertainty and more Lecture notes Contract Law in PDF only on Docsity! CERTAINTY Agreement between the parties must be certain and complete •! It is not necessary for the parties to provide every possible contingency OR articulate terms so they can only be interpreted one way •! Courts when interpreting contracts will apply the maxim ut res magis valet quam pereat (it is better for a thing to have effect than to be found void) •! The real question is whether something is sufficiently certain and sufficiently complete Completeness: An agreement will be sufficiently completely if the parties have reached agreement on essential or critical terms 1. Essential Terms: •! A term, without which the contract cannot be enforced o! Thompson v White 2006 •! “No contract is concluded until the parties negotiating are agreed upon all the terms of their bargain-- unless indeed the terms left outstanding are “such as the law will supply”” o! Milne v Attorney-General (Tas) •! There can be no binding and enforceable obligation unless the terms of the bargain, or at least its
essential or critical terms, have been agreed upon.
o! ANZ v Frost Holdings Pty Ltd •! There is no concluded contract where an essential
or critical term is expressly left to be settled by future agreement of the parties o! ANZ v Frost Holdings Pty Ltd citing Thorby v Goldberg
•! It is for the parties not for the courts to decide which terms are essential to the contract o! Pagnan SpA v Feed Products ltd 1987 •! Whether a particular absent term is essential depends on the nature of the contract and circumstances o! Vroon BV v Fosrters Brewing Group 1994 !! Lease Agreements – Commencement Date, Rental to be paid Harvey v Pratt !! Sale of Land – parties, dates, price OR effective mechanism for determining price, do not have to agree on settlement date (title transfer date) typically 60-90 days Hall v Busst !! Sale of Goods – No price needed but necessitates a reasonable price is paid, this term may be implied to an agreement only where the parties have reached agreement on all other essential contractual terms
o! Sale of Goods Act 1954 s.13(2) 2. Agreement to Agree •! An agreement to agree on an essential term will result in an unenforceable contract due to incompleteness •! Even when the court could imply such a term •! Obligation to pay a reasonable price will have no application where the party had deliberately deferred agreement on price o! May and Butcher Ltd v The King Exceptions: "! Courts are less likely to find an agreement incomplete if it has been wholly or completed o! Foley v Classique Coaches Ltd ask have the parties completed so much of the contract it would be commercial unviable to unwind? "! If an appropriate mechanism has been provided for the determinacy of the essential term in the event of failure to reach an agreement o! George v Roach ⋅! BUT if that machinery fails or is inadequate the contract may be void for uncertainty "! A formula may be used in place of a mechanism such as CPI Certainty: A particular term may be so vague and imprecise that a court cannot give it any meaning, the term is not missing but there is uncertainty as to its meaning •! Uncertainty is more likely to be an issue if the parties are yet to perform their obligations, where parties have been performing courts are reluctant to find the contract unintelligible o! York Air Conditioning and Refrigeration v Commonwealth •! Courts avoid taking the pedantic approach and will attribute meaning to the language used by the parties unless it is impossible to do so •! So long as it is not “so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention” the contract cannot be held to be void or uncertain or meaningless (citing Scammell v Ouston).
o! Upper Hunter Council v Australian Chilling & Freezing Co •! No narrow or pedantic approach is warranted, particularly in the case of commercial arrangements.
o! Upper Hunter Council v Australian Chilling & Freezing Co •! Courts cannot enforce a contract if they cannot identify the obligations of the contract with some degree of precision Reasonableness, Objective Testing of Certainty: “reasonable” or “fair” can sometimes be impossible to work out, especially if objective standards are elusive
⋅! Inability to ascertain “reasonable terms in common use” will render a contract void o! Whitlock v Brew ⋅! “The value of all additions and improvements” is not sufficiently certain to give rise to an enforceable
contract. There could be no external standard of value of additions and improvements, no standard yielding a figure reasonably fixed or ascertainable. Unenforceable o!
Hall v Busst NB Jason does not like the argument of this case seems it would be possible to ascertain values of depreciation and value added Agreements to Negotiate •! Agreements to agree or negotiate have been held as inherently repugnant to the adversarial positions of the parties” thus will not amount to certainty •! It is counter intuitive where parties disagree to hold agreements to negotiate to agree to be certain and binding •! BUT where negotiations have been formally agreed to be undertaken in good faith (honestly and reasonable) or to mediate disputes then the law should up hold this o! Untied Rail Services Limited v Rail Corp NSW #! Upheld: “agreement to meet and undertake genuine and good faith negotiations with a view to resolution” #! BUT the parties are not forced to resolve with a harmonious outcome, simply upholding the process by which the parties have clearly committed to.