Hi Fellow Steemians
Welcome back to another part of the Private Law series. In the previous post, we were introduced to the fourth element of contracts, Certainty. We went over its 3 aspects and went more deeply into the 2 ways in which a contract can be saved from a lack of Certainty. In this post, I'll be going more deeply into the 3 aspects that I talked about in the previous post.
Certainty
I'll go over the 3 aspects of Certainty in Contracts again:
- Contract must be sufficiently complete
- parties must at least reach agreement on all terms or at least all essential terms they intended to fix by agreement, rather than resolution by ulterior persons
- Agreed terms must be sufficiently certain and clear that parties can understand their rights and obligations and courts can enforce them
- If the terms are so vague that meaning cannot be given to them, the agreement will not be enforced.
- Promises made by parties must not be illusory
- Illusory agreement is party is given unfettered discretion as to performance of a promise
Now I'll go more deeply into each one of the aspects
Completeness
Completeness in Certainty is in regards to how wholesome the details of a contract are.
No contract is concluded until the parties negotiating are agreed on all the terms of their bargain - unless indeed the terms left outstanding are 'such as the law will supply'
- Terms which the court cannot provide (listed below)
- Example where Court plays gap-filling role - reasonable price for goods/services
- Court can supply completion date for a contract
- Court can supply reasonable quality for service supplied
What sort of terms will the law not supply?
- Those that go the nature of the agreement --> these create the agreement itself
- Where parties themselves have refrained from setting --> where parties have put off deciding on a matter, considered, will respect wills of parties by not imposing own answer to question
- Too complex
- You and your friend go in for a café 50/50
- What is split? Half the tables? Half the coffee machine v half the kitchen?
- For example the price when it's the sale of land
Do all 'essential terms' have to be set out expressly?
- They must be identifiable, even if not express
Sufficiently Certain and Clear
A term may be 'too vague' or imprecise so that the courts cannot attribute a meaning to it. The courts cannot enforce an agreement if they are unable to discern the obligation with sufficient certainty. Once again, the courts are less inclined to deem a contract incomplete if it has been wholly or partly performed
What are the different ways in which parties set out their essential terms of their agreement with sufficient certainty?
- Express
- Writing it in the original agreement
- Give 3rd party the power
- Let a third party decide a particular detail in the contract
- Objective standard
- From the perspective of a reasonable person (a normal person of society) would it seem to be essential?
- Discretion to party within parameters
- By formula (eg. CPI)
Illusory
Illusory promise = if promisor has unfettered discretion in relation to performance
- The Promisor has a free choice how much (if it all) to perform.
Effect of Illusory promises on a contract
Illusory promises do not constitute good consideration.
- If only illusory promises were made in return for another promise, the contract will collapse for want of consideration
Contracts containing illusory promises are considered incomplete. - If an essential term has been left to be determined at the discretion of one party, the whole contract will be considered as illusory.
Exemptions of illusory promises
- Important matters are to be determined by a third party
- Matters to be determined by one of the parties are subsidiary.
- The discretion relates to the fulfilment of a condition on which performance of the contract depends
- The discretion is to be exercised according to objective criteria.
Michael Kirby's (former Justice of the HIgh Court) guidelines on Contract Law
- Determination of every case depends on its own facts. Meaning of agreement must be discovered objectively.
- Where there is suggested ambiguity or vagueness or where it is urged that a term is illusory, it may sometimes be both necessary and appropriate to have regard to extrinsic evidence in order to give meaning to that which the parties have agreed.
- The courts will, so far as possible, endeavour to uphold the validity of contracts.
- Avoid frustrating wishes of contracting parties
- The court will not get into the business of writing the contract for the parties.
- i.e. The court will not do so where it is asked to spell out, to an unacceptable extent, that to which the parties have themselves failed to agree.
- The court will also not clarify that which is irremediably obscure.
- But they will only do this if it is possible. Usually there is no objectively right decision in these cases.
- Differences in judicial opinion based on personal predilection. However, court will pay regard to features of agreement, relationship btwn parties and of relevant external reference points in order to determine whether term is challenged or cannot be sustained
- In dealing with uncertainty or illusory consideration issues the courts look to:
- (a) whether a third party has been given power to arbitrate the issue;
- The provision in question may be left in adequately clear terms to be settled by an identified third party who is given power to settle ambiguities and uncertainties.
- (b) whether the issue can be resolved by one of the parties;
- (c) whether there is an external and sufficiently certain standard which can clarify the problem clause;
- Where there is a readily ascertainable external standard which is proved, the court will have regard to it in order to add flesh to the provision which, on its own, is unacceptably vague and uncertain or apparently illusory.
- (d) whether the contract provides a range of possibilities.
- (a) whether a third party has been given power to arbitrate the issue;
This is the end of the Contracts section of Private Law. I'll have a look over the posts for this section and see if a condensed version is required. If it is required I'll be posting it tomorrow :) However, if you comment below that you'll like to request a condensed version I'll be making it.
If I don't post the condensed version then the next post will start on the next section of Private Law, Privity.
If you have any suggestions for improvement or questions comment below!