Certainty Flashcards
May and Butcher ratio
There cannot be a contract to make a contract; it is not open to two parties to agree that they will in the future agree upon a matter which is vital to the arrangement between them and has not yet been determined, and thereby assert that a contract has been formed.
May and Butcher - definition of sufficient certainty
A concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by [later] agreement between the parties
Hillas (ratio on facts + quotes from Lord Wright and Lord Tomlin)
On the facts, the parties had attributed to the phrase “softwood goods of fair specification” a meaning capable of being made precise, as both parties were experienced in the trade and had completed similar bargains in the past.
Lord Wright - “Words are to be so understood that the subject-matter may be preserved rather than destroyed.”
Lord Tomlin - the courts will be more ready to overcome problems of alleged uncertainty if the parties have already conducted themselves in a manner suggesting an assumption that a binding contract has arisen.
Foley (Ratio + Factual support)
The court found that notwithstanding failure to agree on the price, the agreement was legally binding.
It had been acted on for 3 years and contained an arbitration clause covering a failure to agree the price of the petrol sold; the court found it possible to imply a term that the arbitrator would impose a reasonable price if the parties were unable to agree.
Should/how may May, Hillas and Foley be reconciled?
The general consensus is that May is too restrictive and should be limited, MacNeil observing that Hillas and Foley merely represent piecemeal interventions to prevent application of the May principle and that searching for coherent principles is a “fool’s errand”.
The most that can be said is that the courts will generally search for sufficient evidence of agreement and if this is found they will conclude the agreement is valid and binding.
Give two example of agreements other than May held to be insufficiently certain to qualify as a valid contract.
Walford – a bare agreement to negotiate (“lock-in” agreement) is unenforceable; a lock-out agreement where the lock-out period is unspecified is unenforceable for uncertainty
Why are lock-in agreements void for uncertainty?
There are no criteria by which the court may determine whether, subjectively, a proper reason existed for the termination of negotiations by D - good faith is ill-suited to commercial negotiations - and consequently if lock-in agreements are enforceable, D cannot know when he is entitled to withdraw from negotiations.
Is an agreement to “use best endeavours” enforceable?
Walford - such agreements are not equivalent to agreements to negotiate since there may (though not always) be some objective criteria by which the court may assess whether “best endeavours” have been used; such agreements may thus be enforceable if directed to a specific objective. They will NOT be enforceable if the agreement is to use best endeavours to agree, for this is equivalent to an agreement to agree (Little)
Petromec (dicta of Longmore LJ + limit on Walford)
Express obligations to negotiate in good faith may be enforceable if they are not bare agreements to negotiate (i.e. the obligation is tacked on to an existing contract) and there is some objective criterion clear enough to enable courts to determine the matter themselves w/o guessing at a fair result.
May limit Walford to cases where there was no concluded agreement at all, everything being “subject to contract” (and possibly where the relevant obligation is sought to be implied, rather than express in the agreement)
Sudbrook
Where the agreed machinery for the determination of issues left unresolved breaks down, if the machinery is not essential the court may substitute its own machinery.
Sudbrook - ratio, decision, dissent of Lord Russell
Where the agreed machinery for the determination of issues left unresolved breaks down, if the machinery is not essential the court may substitute its own machinery.
E.g. here the clause providing that each party would nominate a valuer was construed as meaning that the price was to be fair (thus the machinery prescribed was non-essential, but merely a means to an end)
Dissent of Lord Russell - no reason to impute to vendor and purchaser the intention that the price should be fair, for their interests are normally conflicting
Is it valid to leave the issue to be resolved by a 3rd party?
May suggests it will be provide the issue is resolved. New Hope/Foley illustrate that the presence of an arbitration clause may be decisive in the court’s finding that the agreement is enforceable.
Nicolene (severance of uncertain clauses)
A clause which is meaningless and one yet to be agreed must be distinguished; if an exempting condition is inserted and it later turns out to be so vague no ascertainable meaning can be given to it, this only means that the exempting condition (as opposed to the whole contract) is a nullity.
Thus meaningless clauses can be severed; unresolved ones cannot.
When will the court imply a stopgap term?
The threshold, as w/ any implied term, is one of necessity, but the courts are more likely to do so when the parties have relied on their agreement (Wessex), especially if the transaction is already executed (Percy Trentham)
Baird Textiles (general function of certainty doctrine)
In general the contract must provide some objective standard which the court applies by ascertaining what is reasonable.
