Certainty and Completeness
The need for certainty and completeness
• Court will not enforce contract if
o Terms are uncertain
o All essential terms aren't agreed to
• Conflicting policy issue
o Court's desire to give effect to agreements
• E.g. courts will apply standard of reasonableness
o Desire not to hold a party to an obligation that is so vague
• Intention to be bound is questionable
Statement of the rule
• In order to constitute a valid contract the parties must so express themselves that
their meaning can be determined with a reasonable degree of certainty. It is plain
that unless this can be done it would be impossible to hold that the contracting
parties had the same intentions…
o Basically it must be possible to objectively determine the meaning of the
agreement with a reasonable degree of certainty
o Viscount Maugham in G Scammell and Nephew Ltd v HC and J Ouston [1941]
AC 251
• Reasonableness = Dixon CJ: "A contract to sell at a reasonable price is sufficiently
certain because the law itself provides the means of ascertaining what is reasonable"
o Fitzgerald case
• Illusory promises are unenforceable
o No imputations that explains how contract should be carried out. Language is
so obscure and so incapable of any definite meaning
o Essential terms aren't agreed upon
o One party reserves discretion to not carry out their obligations
o Placer Development Ltd v The Commonwealth (1969) 121 CLR 353
• A promise isn't enforceable
• Points 1,2 are issues of certainty, point 3 = illusory promise
• None are enforceable at the end of the day
Ambiguity and Uncertainty
Individual term
• A clause struck down for want of certainty will be void
o Clause too vague, ambiguous, uncertain will be void
o Labelled meaningless or illusory
• The courts will make certain that which is capable of being made certain
o Where possible the courts will imply a standard of reasonableness
o Hillas & Co Ltd v Arcos Ltd (1932) 137 LT 503
• Contract for sale for Russian timbre gave the purchaser the option to
buy more for delivery in the following year at a discount of 5%
, • Arcos refused to uphold the agreement as price of timbre had gone
through the roof in that time, so Hillas sued
• They tried to get out of the contract by saying the contract was void
due to unspecific price of quantity
• Contract was held to be valid even though there was no specification
of how much, what kind, when it would be delivered, etc.
• Court referred to previous contract engaging the two parties and used
those terms to stipulate current contract terms due to preference to
uphold contract where possible
▪ Court held that it made sense that the original contract was
the price point to be used to determine the 5% discount
• Court will do what it can to give intent to the parties but won't write
the contract for them
o Whitlock v Brew (1967) 188 CLR 445
Individual agreements
• Alleged agreement as a whole can be struck down the same way indiv. clause can be
for want of certainty
Agreements to agree
• Issue of uncertainty and extend to agreement as a whole
o Agreement to finalise final agreement on essential terms at a later time
• "Heads of Agreement"
• Enforceability issues arise when on party backs out of negotiations or is considered
to not be negotiating in good faith
Saving ambiguous or meaningless contracts
Link to external standard
• An uncertain clause may be enforceable if parties specifically incorporate external
standard
o External standards can be incorporated w/ or w/o specific reference
• Direct = providing specific machinary or formula
• Indirect = Hillas and Co Ltd v Arcos Ltd (1932) 147 LT 503
Link to reasonable standard
• Willingness to adopt principles of reasonableness to make certain of smth uncertain
o Gives meaning to otherwise uncertain clauses
• Intention must be clear (Hillas v Arcos)
o There are appropriate implications of law - court to ascertain matters where
contractual intention is clear, but contract is silent on details
• Contracts for sale of land are subject to purchaser obtaining satisfactory finance
o E.g. getting a loan
Severance
• Severance = relevant term(s) of contract are severed and rest of it is enforceable
• A contract containing uncertain term(s) may be upheld if severance of the term(s) is
possible
o Fitzgerald v Masters - severance possible
• Sale of an interest in land, clause 8 involved conditions that didn't
exist. Parties intended to be bound in absence of clause 8, HCA
upheld contract of sale
The need for certainty and completeness
• Court will not enforce contract if
o Terms are uncertain
o All essential terms aren't agreed to
• Conflicting policy issue
o Court's desire to give effect to agreements
• E.g. courts will apply standard of reasonableness
o Desire not to hold a party to an obligation that is so vague
• Intention to be bound is questionable
Statement of the rule
• In order to constitute a valid contract the parties must so express themselves that
their meaning can be determined with a reasonable degree of certainty. It is plain
that unless this can be done it would be impossible to hold that the contracting
parties had the same intentions…
o Basically it must be possible to objectively determine the meaning of the
agreement with a reasonable degree of certainty
o Viscount Maugham in G Scammell and Nephew Ltd v HC and J Ouston [1941]
AC 251
• Reasonableness = Dixon CJ: "A contract to sell at a reasonable price is sufficiently
certain because the law itself provides the means of ascertaining what is reasonable"
o Fitzgerald case
• Illusory promises are unenforceable
o No imputations that explains how contract should be carried out. Language is
so obscure and so incapable of any definite meaning
o Essential terms aren't agreed upon
o One party reserves discretion to not carry out their obligations
o Placer Development Ltd v The Commonwealth (1969) 121 CLR 353
• A promise isn't enforceable
• Points 1,2 are issues of certainty, point 3 = illusory promise
• None are enforceable at the end of the day
Ambiguity and Uncertainty
Individual term
• A clause struck down for want of certainty will be void
o Clause too vague, ambiguous, uncertain will be void
o Labelled meaningless or illusory
• The courts will make certain that which is capable of being made certain
o Where possible the courts will imply a standard of reasonableness
o Hillas & Co Ltd v Arcos Ltd (1932) 137 LT 503
• Contract for sale for Russian timbre gave the purchaser the option to
buy more for delivery in the following year at a discount of 5%
, • Arcos refused to uphold the agreement as price of timbre had gone
through the roof in that time, so Hillas sued
• They tried to get out of the contract by saying the contract was void
due to unspecific price of quantity
• Contract was held to be valid even though there was no specification
of how much, what kind, when it would be delivered, etc.
• Court referred to previous contract engaging the two parties and used
those terms to stipulate current contract terms due to preference to
uphold contract where possible
▪ Court held that it made sense that the original contract was
the price point to be used to determine the 5% discount
• Court will do what it can to give intent to the parties but won't write
the contract for them
o Whitlock v Brew (1967) 188 CLR 445
Individual agreements
• Alleged agreement as a whole can be struck down the same way indiv. clause can be
for want of certainty
Agreements to agree
• Issue of uncertainty and extend to agreement as a whole
o Agreement to finalise final agreement on essential terms at a later time
• "Heads of Agreement"
• Enforceability issues arise when on party backs out of negotiations or is considered
to not be negotiating in good faith
Saving ambiguous or meaningless contracts
Link to external standard
• An uncertain clause may be enforceable if parties specifically incorporate external
standard
o External standards can be incorporated w/ or w/o specific reference
• Direct = providing specific machinary or formula
• Indirect = Hillas and Co Ltd v Arcos Ltd (1932) 147 LT 503
Link to reasonable standard
• Willingness to adopt principles of reasonableness to make certain of smth uncertain
o Gives meaning to otherwise uncertain clauses
• Intention must be clear (Hillas v Arcos)
o There are appropriate implications of law - court to ascertain matters where
contractual intention is clear, but contract is silent on details
• Contracts for sale of land are subject to purchaser obtaining satisfactory finance
o E.g. getting a loan
Severance
• Severance = relevant term(s) of contract are severed and rest of it is enforceable
• A contract containing uncertain term(s) may be upheld if severance of the term(s) is
possible
o Fitzgerald v Masters - severance possible
• Sale of an interest in land, clause 8 involved conditions that didn't
exist. Parties intended to be bound in absence of clause 8, HCA
upheld contract of sale
