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Certainty Notes

Law Notes > LAWS202 Law of Contract Notes

This is an extract of our Certainty document, which we sell as part of our LAWS202 Law of Contract Notes collection written by the top tier of Univerity Of Otago students.

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CF - Certainty Saturday, 3 July 2010 11:35 a.m.

Uncertain contract Vague

Incomplete

Cure by: Reference to external standard (Pace) Range of options: enforce minimum requirement (Pace) Fix reasonable price - SOGA s 10(1) Trade/custom/previous dealings - Reesby's Nurseries Discard inessential term - Fletcher Challenge Energy

No cure: contract fails for uncertainty.

Further formal document contemplated

Vital term left open.

Inference Carruthers Show (prior/past) conduct that displaces this inference Verissimo

Show term was not legally/mutuall y essential FCE

'Agreement to agree'

Usually hopeless, but if intended to be binding, minimal performance.
- FCE

'Contract to negotiate'

Formula/machinery omitted/frustrated

If specific enough to enforce, enforceable. WCC v Body Corp

Act as machinery Andrews, find new formula - Pace, substitute machinery if frustrated and subsidiary Nelson

Dilemma: Upholding vs inventing contracts. Courts will not enforce a contract which is unreasonably vague. But err on the side of upholding contracts: Follow Lord Tomlin, don't want to earn the reproach of being the destroyer of bargains. Where terms are left uncertain Fletcher Challenge Energy Ltd v ECNZ Ltd [2002], CA F and ENCZ had signed a 'heads of agreement' which left some terms to be determined at a later date, and a clause saying the parties would 'endeavour to agree' .

Two stage approach a. Court finds whether there is an intention to be bound immediately. b. The court will then do its best to give effect to this intention. Intention to be bound must be appraised objectively. Court willing to look at subsequent conduct of parties, and (with reservations), pre -contractual negotiations, internal memoranda, statements of subjective intent. Limits It may be beyond the ability of the court to fill the gap in the express terms, even with the assistance of expert evidence.. . It will be a matter of fact and degree in each case. The court can supplement, enlarge or clarify the express terms but it cannot properly engage in an exercise of effectively making the contract for the parties by imposing terms which they have not themselves agreed to and for which there are no reliable objective criteria. If an important term is left to be settled later, this in itself is not fatal, though it may be an indication that they do no t desire to be bound.

Essentiality of terms A term is 'essential' if it is i. Legally essential to formation, and 1) e.g. In any sale contract, price will usually be legally essential. ii. Regarded by the parties themselves as essential 1) If one party maintains there must be agreement upon it, and manifests accordingly to the other party. 2) Freedom of contract --> term freedom --> free to identify any term as essential. If an uncertain term is inessential to a contract, the court may uphold the contract while disregarding the meaningless and inessential term. Agreements to agree An 'agreement to agree' will not be upheld, as it is insufficiently precise. Although the court may enforce it to the minimum if one party wholly refuses to come to the negotiation table.

Dissent: Thomas J Held that Heads of Agreement are essential features of commercial activity that generally are intended to be binding. Found that the terms left still to be agreed upon in this case were not essential. Must find objectively whether parties intended to agree - can use extrinsic evidence to interpret this intention. May & Butcher v R [20]
? An agreement between two parties to enter into an agreement in which some critical part of the contract matter is left undete rmined is no contract at all.
? It is not open to them to agree that they will in the future agree upon a matter which is vital to the arrangement between th em and has not yet been determined.

Contract Page 11

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