Incomplete Agreements And ICLR - Cases Flashcards
Which three cases would you use for conditional agreements?
Winn v Bull
Was an open contract (I.e. a contract with no terms)
Conditional agreements are not binding until the condition is fulfilled.
Harvey v Facey
Clifton v Palumbo
Highlights that more formality is needed for land contracts, so courts take a more paternalistic attitude in relation to land contracts.
What are deferred agreements? Which cases would you use to highlight these?
What is the effect of these contracts?
Agreements subject to contract - they’re not binding
CBA
Chillingworth v Esche
They introduce a condition into the contract, so enables negotiation and constructive communication (worth out fear of being bound)
Branca v Cobarro
Provisional agreements may be binding since provisional is something operating until something else happens.
Alpenstow
Exceptional circumstances may displace the meaning of stc.
Here is was an agreement to exchange contracts (planning permission for the sale of land)
What are pre-emptive agreements?
A contract to make an agreement in the future - agreement to agree. (Note that option clauses are NOT agreements to agree!)
They’re not binding since would be too uncertain since fundamental terms not agreed (how would the court tell if negotiations went ahead?)
Courtney v Tolaini
Walford v Miles
There is not such thing as binding good faith agreements. Good faith is inherently too uncertain to be out into legally binding form.
What is the difference between executory and executed agreements?
Executory - to be performed in the future (no binding contract since saying the terms will be agreed - an agreement to agree)
Executed - already performed. Two contracts here to fill lacuna. New agreement formed when performed.
Novinex
Justice demanded this result. The alternative would be one party becoming unjustly enriched at the other’s expense. So a new contract was formed on performance of the contract.
I.e. Executory (not binding) turned into an executed (binding) contract.
What is a resolution of incompleteness and which case would you use to show it?
Sudbrook Trading
Appointed TWO valuers as an umpire to set the price. So had a valid and agreed mechanism to resolve the price (removed and objective), so legally enforceable - so helps business efficacy since court presuming that they want the agreement to work and not fail.
Two pints here : broad approach in that valuation mechanism allowed contract to be found (relational approach (staying in business) rather than freedom of contract).
Then: courts had too much POWER. Court decided ‘fair price’ on the evidence.
Criticise this - Lord Russell’s dissent: one wants a high price and the other wants a low price, why are they assumed to want a fair price now? How can they agree it if they don’t know what it is?
Disagree with dissent - because they agreed to a valuer! They therefore assume the risk! Yes but two valuers - how did they resolve the difference in valuations? Agreement, or an average? To what extent did they agree to the risk?
This highlights that a relational approach (attributing value to the a parties stating in business together) may be at odds with freedom of contract (since taking a fundamental term out of the hands of the parties). Sudbrook is more often distinguished than applied.
What will be the effect of an arbitration clause?
It will make the contract enforceable
Foley v Classique Coaches
Scrutton taking a broad approach. He does like arbitrators - thinks parties are leaving the courts as they think a contract to make a contract with ref to arbitrator is binding. Thinks English law lagging behind reality. Relational approach (rather than freedom of contract approach) so wide.
thinks the court should retain the power to fill in the gaps.
Scrutton dissented in May and Butcher, and in Hillas
What can you do with meaningless clauses?
Sever them!
Nicolene v Simmonds
(Uphold the rest of the contract)
Here “usual conditions of acceptance” was severed since these usual conditions didn’t exist!
Three cases on vague agreements?
Scammel v Ouston
Nonsense term governing price of contract, so void for vagueness.
Hillas v Arcos
“Fair specification” in an option agreement. Has two meanings - just (not binding as would be an agreement to agree) OR representative of what is on offer (binding)
So the second option was preferred. BROADER perspective taken. Parties thought they had a contract and acted on it. In business contracts are often basic, so it was correct for the HoL to uphold it in this instance.
May and Butcher v The King
Parties negotiated but failed to agree a price, the arbitration clause covered disputes only. A ‘failure to agree’ was deemed different from a dispute (Viscount DUNEDIN). Casuistry - clever but unsound reasoning.
Reasoning: usually courts would fill the gap but here the inclusion of an arbitration clause precludes them from doing so - they have expressly excluded the court, so the court can’t fill the gap.
A curious decision.
The two general rules in ICLR?
Need intention to create legal relations - must be mutually communicated expressly or impliedly (Rose and Frank co v Crompton Bros)
ICLR is judged objectively (Smith v Hughes) and depends on context (Edmonds v Lawson)
What is an honourable pledge? And what is the effect of such a clause?
An express clause rebutting ICLR
E.g. This is not a formal or legal agreement
Rose and Frank Co v Crompton Bros
Do parties intend to bind themselves in honour only?
No!
Edmonds v Lawson
Pupil barrister case.
Generally ICLR is presumed in the commercial setting, what are the 6 exceptions to this?
Advertisements (carbolic smoke ball)
Comfort letters (Kleinwort Benson) these assure the soundness of a company’s financial position.
Honourable pledge clauses (Rose and Frank)
Stc clauses (chillingworth, branca, alpenstow)
Agreements to agree (Courtney v Tolaini, walford v miles)
Agreements made socially or in jest or anger.
What is a comfort letter? Case? Criticism?
A letter of assurance regarding the company’s financial situation
Kleinwort Benson
Klein! Benson doesn’t have Worts!
Rogers criticised - it renders the courts irrelevant in commercial disputes. He thinks comfort letters are as good as promise.
This is wrong, they make no commitment, they are simply a statement of fact.
How high is the threshold for the rebuttal of the ICLR presumption? What must you look at to rebut?
What about where language is ambiguous?
Very high! Have to look at how typical the term clarity of the terms, experience of parties involved.
Where language ambiguous it will be interpreted against the party trying to disprove an ICLR
Edwards v Skyways
What is the general rule in relation to ICLR in non-commercial, domestic or family settings?
Reason?
Presumption is against ICLR in this context.
Jones v Padavatton (mother and daughter)
Balfour v Balfour (husband and wife)
Atkin gave reason: policy. Floodgates. They didn’t intend to be bound in contract! Idea of marriage is shared interests.
