Certainty

To be enforceable, **//an agreement must be sufficiently certain//** and **//sufficiently complete.//** The **//essential//** terms of the contract must be sufficiently certain and complete: **//__Godecke__//**, BUT not necessarily all the terms.

Technically, the three related problems refer to different issues:  **// Incompleteness //** : lack of terms- parties have failed to reach agreement on all of the essential elements or have decided that an essential matter should be determined by future agreement  **// Certainty //** : lack of clarity- the terms are too vague or ambiguous for a meaning to be attributed by the court (**//__Biotechnology v Pace__//**__)__  **// Illusory Promise //** : contract effectively gives the promisor an unfettered discretion as to whether to perform the promise

 where a particular terms or part of an agreement is incomplete, uncertain or illusory, it may be possible to **//sever//** the offending term or part;  where an uncertain, incomplete or illusory provision has been inserted for the benefit of one of the parties, it may be possible for that party to **//waive compliance//** with the offending term
 * There are two ways an agreement affected by uncertainty can be saved and be legally binding: **


 * (I) Elements of certainty **

 The contract must be sufficiently **//complete//**  The contract must be sufficiently **//certain and clear//** that the parties understand their rights and obligations  The promise must not be **//illusory//**
 * (a) Three elements of certainty requirement **

 The issue of definition of these elements will depend on the circumstances of the particular case in question  Lord Tomlin in **//__Hillas & Co Ltd v Arcos Ltd__//** said: “The principles are not in dispute. It is the application of them to the facts of a particular case that the difficulty arises...”  Cases reflect tension between the desire to hold parties to their bargains in accordance with the principle //pacta sunt servanda// (agreements must be kept) c.f. the courts’ reluctance to make a bargain for the parties  The difference in judicial opinion as to the role of the court in giving effect to a contract is illustrated by the judgments in **//__Biotechnology v Pace__//** and **//__Hall v Busst__//**//.//  The decision in **//__Hall v Busst__//** can be seen to reflect a more restrictive approach to questions of certainty than that which is now applied by the courts
 * (b) Difficulty with defining sufficiently certain and complete **


 * (II) Completeness **

The contract must be sufficiently **//complete//**. No binding contract can be made **//unless//** the parties have reached agreement on **//all of the (at least) essential terms//**

 This means that the parties must at least reach agreement on all terms that they **//intended to fix by agreement//**, rather than have someone else set for them, **AND** also on **//all matters the court cannot resolve by implication//**.  Courts will generally fill omissions if possible: **//__Cavallari__//**//__.__//  Whether terms are essential depends on the **//nature of the contract//** and the **//surrounding circumstances//**. (a) Importance or essentiality of the term (b) Why the term has been left out: did the parties fail to reach agreement on the issue, deliberately defer agreement or fail to put their minds to the issue? (c) Whether the agreement remains wholly executory or has been wholly or partly performed on one side.
 * Whether an omission from an agreement is fatal to contract formation, need to determine— **

 An agreement will be sufficiently complete if the parties have reached agreement on all the terms or at least all the essential terms  A contract will be incomplete where the parties have failed to reach agreement on all of the essential terms of the contract  Essential terms include: Price, Quantity, Quality etc.  Whether a particular absent term should be regarded as essential depends on the **//nature of a contract//** and **//circumstances of the case//**
 * (a) Essential terms **

 Essential terms for a sale of land contract include price/effective method of determining price, subject matter (i.e. property) and the parties’ names: **//__Hall__//**//__.__//  No binding contract if these details are not fixed with certainty
 * (b) Examples of essential terms **
 * __Contract for the Sale of Land-__ **

 Price is generally **//not//** essential;  Court will often **//imply a reasonable price//** if contract is silent/omits price: **__Sale of Goods__**  It will **//not//** do this if the price mentioned is merely vague  the provisions of the Sale of Goods Acts implying an obligation to pay a reasonable price can operate **//only//** where agreement has been reached on **//all other essential terms//**:  provision of the Sale of Goods legislation implying an obligation to pay a reasonable price has **//no application//** where parties had **//deliberately deferred agreement on price//**: **//__May and Butcher Ltd v The King__//**
 * __ Contract for the sale of goods- __**
 * __ Act 1958 (Vic) s.13 (2) __**
 * //__ Australia and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd __//**


 * //__ Sale of Goods Acts— __//**
 * S 13 ** - The price in a contract of sale may be fixed by the contract or may be left to be fixed in manner thereby agreed or may be determined by the course of dealing between the parties.
 * S 13 (2) ** Where the price is not determined in accordance with the foregoing provisions the buyer must pay a reasonable price.


 * S 14 Agreement to sell at valuation **
 * S 14 (1) ** Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party, and such third party cannot or does not make such valuation, the agreement is avoided: Provided that if the goods or any part thereof have been delivered to and appropriated by the buyer he must pay a reasonable price therefore.
 * S 14 (2) ** Where such third party is prevented from making the valuation by the fault of the seller or buyer the party not in fault may maintain an action for damages against the party in fault.

 Essential terms for a lease contract are the **//commencement date & lease rental//**  (option to renew lease at a rent “to be agreed” is **//NOT//** binding)
 * __Contract for the lease of rental-__ **

If, on the facts, it appears that an essential term is missing, or is ‘to be agreed upon’ (agreement to agree), the contract will be incomplete //__(**Booker**__//) **UNLESS**—
 * (c) Exceptions to essential terms **

 Parties may make a valid contract that defers agreement on the essential term if they provide an effective backup mechanism for determining the term, IF they fail to reach agreement  **// EG //** : ‘renewal of lease at conclusion of term at rent to be agreed, //or by specified valuer//’.  In **//__George v Roach__//**, HC held that an agreement was ineffective when part of the purchase price was to be fixed by a nominated valuer who refused to carry out the task  Also, **__Sale of Goods Act 1958 (Vic) s. 14__** says where the third party cannot make the valuation, ‘the agreement is avoided.’  This approach, both in CL and statute, is justified on basis that it would be inconsistent with the intention of the parties for the court to set the term
 * __ Machinery for settling a term __**
 * BUT **, difficulty arises when the **//machinery//** specified by the parties for supplying a term also fails. (i.e. the specified arbitrator or valuer unable/unwilling to perform task of supplying a term)

 Parties may also agree on a formula for settling a term/s of their agreement, which can be applied by the court in the event of a dispute  An effective formula (more precise means of settling the term c.f. a standard) or standard has been provided to determine the term, e.g. ‘reasonable rent’ where there is such a standard; ‘fair market value’; CPI movements  The validity of the contract will then depend on whether the court regards the formula or standard as sufficiently certain
 * __ Formula for settling a term __**

 Courts less likely to find agreement incomplete if the contract has been wholly/partly performed: **//__Hillas & Co Ltd v Arcos__//**//.//  The court may be willing to say the contract is certain despite the apparent incompleteness – it would be unfair not to  **// EG //** : Where land has been conveyed, goods delivered, or services performed under an agreement, a finding that it is **//not//** binding will have more serious consequences than if it remains wholly executory
 * __ Executed contracts __**


 * (III) Certainty **

The agreed terms must be sufficiently **//certain//** and **//clear//** that the parties can understand their rights and obligations and the courts can enforce them.

 The agreed terms must not be **//vague//** and **//imprecise//** such that the courts cannot attribute a meaning to them, because the obligations of the parties must be identifiable with some degree of precision.  The courts do **//not//** take a narrow approach to certainty element and will attribute a meaning to the language used by the parties unless it is impossible to do so: **//__Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd__//**  As with completeness, uncertainty is more likely to affect a contract that is wholly executory.

 the standard of reasonableness can often be employed to provide completeness and certainty that would otherwise be lacking  The court may, in instances of uncertainty, use an **//external standard of reasonableness//** in order to fix a reasonable sum where, for example, the price is too vague: **//__Biotechnology v Pace__//**  The court might look for expert advice/industry standards but where no such norm exists, the contract will be void for uncertainty: **//__Whitlock v Brew__//**  In other instances, the reasonableness standard will not be sufficiently certain (see below)
 * (a) Implying objective standards (reasonableness) **

 A contract for the sale of land at a ‘reasonable price’ is void for uncertainty as price is essential for the sale of land contracts: //**__Hall v Busst__**//  A contract which mentions costs, but does not clarify them, but provides a criterion by which to work them out will NOT be void for uncertainty: **//__Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd__//**  The expression ‘upon such terms as reasonably govern a lease’ will render a contract void for uncertainty where there no such set of terms is available: **//__Whitlock v Brew__//**
 * (b) Examples of uncertainty (where reasonableness cannot apply) **

The English approach in **//__Walford v Miles__//** (that an agreement to negotiate lacks the necessary certainty to constitute a legally enforceable obligation) has been rejected in Australia A promise to **//negotiate in good faith may be enforceable//**: //**__Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd__**// promises to negotiate and mediate in good faith to resolve disputes arising under an agreement as sufficiently certain to be enforceable: **//__Aiton Australia Pty Ltd v Transfield.__//**
 * (c) Agreements to negotiate **


 * (IV) Illusory promises **

A promise made by a party is **//illusory//** if the party is given an **//unfettered discretion as to//** that essentially looks more like an obligation a party will fulfil if he wishes, will be uncertain:
 * // performance //** of a promise: **//__MacRobertson Miller__//__.__** So a contract which contains a promise
 * //__ Placer Development Ltd v Commonwealth __//**

 If a party has an unfettered choice as to whether to perform a promise, then that promise cannot be said to give rise to any contractual obligation.  A promise will **//not//** be illusory if the discretion doesn’t relate to actually performing the contract, but rather to performance of **//a condition upon which the contract relies//** (eg **//__Meehan v Jones__//** – satisfactory finance, held- not illusory and sufficiently certain).  The discretion must relate to an **//actual//** **//contractual undertaking//** to make the contract uncertain  If the discretion relates to something **//collateral,//** the contract is **//still enforceable.//**  A promise may be rendered illusory by an **//exemption clause//** which is so sweeping in its effect that it effectively deprives the promise of any force
 * // EG //** : In **//__MacRobertson v Commissioner of State Taxation__//**, the clauses (to cancel a flight without incurring any liability) rendered illusory any implied promise the airline might have made to carry the passenger

 An illusory promise will **//not//** constitute good consideration for a counter-promise made by another party. Thus, if one party makes only illusory promises, the entire contract will fail for want of consideration  A contract containing an illusory promise may be regarded as incomplete. The entire contract will be regarded as illusory where an essential term has been left to be determined by one of the parties; **BUT**, a contract will **//not//** be regarded as illusory if important matters are left to be determined by a **//third party//**, or if **//subsidiary matters are left to be determined by one of the parties: __Godecke v Kirwan__//**
 * (a) The effect of an illusory promise can be analysed in two ways **