Certainty Flashcards
Introduction
Even though the parties may have appeared to make an agreement by the exchange of a matching offer an acceptance, the courts may refuse to enforce it if there appears to be uncertainty about what has been agreed or if some important aspect of the agreement is left open to be decided later. This is because the function of the courts is limited to the interpretation of the contract and it does not extend to making contracts on the parties’ behalf. Courts will try to uphold contracts where possible, especially where performance has commended.
Two main ways contracts can be uncertain
Vagueness
Incompleteness
Vagueness cases
Raffles
Scammel
Hillas
Raffles
here, the plaintiff promised to sell the defendant 125 bales of cotton to arrive ex Peerless from Bombay. However, there were two ships called Peerless, one leaving in October and one leaving in December – it was not clear which one this meant. The defendant refused to accept the cotton shipped in December. It was held that the level of ambiguity was such that there could be no agreement between the parties therefore the court held there was no contract. The term was too weak and unable to identify which ship is the specific one contracted with.
Scammel
Scammel, here the respondents were to buy a new lorry from the appellants, trading in an old lorry and paying the balance of the agreed purchase price “on hire-purchase terms”. The exact terms were not settled, and so it was impossible to determine exactly which terms this meant. The appellants refused to go ahead, stating there was no contract. The court agreed, there was no contract as this was too vague. The courts had insufficient information to fill in the gaps. Usual information would be, for example, about the deposit, what was the end price, the length of hire etc. None of the terms were further explained
Hillas
Here, contract for “22,000 standards of softwood at fair specification”. The court rules that fair specification was not a vague term as companies had done business before and knew each other’s terms and conditions. Lord Wright found “it is the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects…” The difference is – even though there is no clear contract, they have both done business before and they know the fair specification from the previous dealings they had done.
Meaningless terms
Meaningless terms are those which do not have much effect on operation of the contract. If the term is deleted, it is not going to affect each party or the judge’s understanding of the contract as a whole.
Meaningless terms case and facts
Simmonds - Nicolene Ltd ordered 3,000 steel bars from Simmonds. They had never done business before but the written agreement provided that the “usual conditions of acceptance” applied. There were no usual conditions of accepted. After Simmonds failed to perform delivery of the steel bars, Nicolene sued for breach of contract and Simmonds argued that there was no agreement because the contract was vague and uncertain. Court found the contract did not fail for uncertainty or vagueness. The phrase was a meaningless phrase that could be severed from the from the rest of the agreement. The essential terms of the agreement itself were identifiable and could be upheld by the court. One party cannot focus on one unclear / uncertain term to make the whole contract void if the rest is clear.
Incompleteness
Generally, there needs to be agreement on all important terms. If an agreement leaves undecided, and undeterminable, some important aspect of the contract, the courts will not enforce it.
Incompleteness cases
Jordan Grand Prix v Vodafone
Walford v Miles
Pitt
May and Butcher
Jordan Grand Prix v Vodafone
- Grand Prix team trying to find a sponsor for their team. They negotiated with Vodafone, discussing many details but did not discuss important terms. The phone call was 15 minutes and there was no agreement on team colours, bonus payments, IP rights etc. Jordan continued to negotiation with other sponsors after the call was concluded. It was held there was no contract as the terms were not complete – the agreement would not be enforceable by court thus the agreement is void.
How can incompleteness be split
Agreements to negotiate
Agreements to agree upon price
Agreement to negotiate cases and facts
Walford v Miles here Miles agreed to negotiate with Walford for the sale of a photography business. Miles withdrew from the negotiation to sell to a third party, and Walford sued him for breach of contract. The Court held he had not breached as it was a contract to negotiate. This case did however leave open the possibility that a lock-out agreement not to negotiate with anyone else, which is sufficiently limited in terms of time, might be enforceable
This possibility was confirmed in Pitt. Here, the parties were in negotiations over the sale of a property and the plaintiffs, the prospective purchasers, were concerned that the defendants would accept a higher offer from a third party. An agreement was arrived at under which, in return for the plaintiffs agreeing to exchange contracts in 2 weeks, the defendants agreed not to consider any further offers in that period. Defendants went back in this and sold to a third party. Court of Appeal held that the lock out agreement was sufficiently specific to be binding and the plaintiff’s action was successful.
Agreements to agree case and facts
May & Butcher. Price was left to be agreed upon from “time to time”. The price could not be agreed upon and the plaintiffs sought to enforce at a reasonable price. It was held by the House of lords that there was no binding contract. “An agreement between two parties to enter into an agreement in which some critical part of the contract matter (e.g. price) is left undetermined is no contract at all.”
