[Law101-Private Law] Fourth element of Contracts [Series 1 - Part 5]

Hi Fellow Steemians

Welcome back to another part of the Private Law series. In the last post, we went over the third element of Contracts, Intention, which can be considered the easiest element to satisfy. In this post, I'll be going over the fourth element of a contract, Certainty.

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Certainty

The 4th element of contract formation is that the agreement between parties must be certain and complete.

Court will only enforce a contract if the terms of the agreement are formulated with sufficient certainty and agreement has been reached on all the terms necessary to carry out the contract

• This requirement may be said to be implicit in requirement of agreement - offer only effective if it identifies with sufficient certainty the terms
• Overlaps with intention - more comprehensive more likely intended
• Impossible to provide for every contingency - courts apply maxim ut res magis valeat quam pereat (it is better for a thing to have effect than be found void)
• Questions of certainty therefore questions of degree --> real issue is whether agreement is sufficiently certain/complete that it is capable of constituting binding contract
  • Deficiencies in expression, semantic or conceptual difficulties
  • Application of language may not intelligible --> facts may not fit contractual description - conflicting set of facts
• 2 reasons for difficulty
  • Resolution of issue involves consideration of nature of agreement + particular circumstances in which agreement made --> abstract principles unhelpful
  • eg. a lease agreement must specify the term of the lease, and a contract for the sale of land must fix to a certain extent the price to be paid.
• Judicial attitudes differ to degree of certainty required --> because contract voluntary, reluctant to write contracts for parties
  • Some judges regard even filling of a gap by reference to what is reasonable/fair as unwarranted interference with individual liberty

The requirement that a contract be certain has 3 aspects:

• 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
• I shall go more deeply into these three in the next post.

Effect of uncertainty will depend essentially on whether it goes to the heart of the agreement.

May be saved in two ways

• Where particular term is incomplete, uncertain or illusory, may be possible to sever offending term/part
• Where uncertain, incomplete or illusory provision has been inserted for benefit of one parties, may be possible for that party to waive compliance with the offending term and enforce remainder of contract
• I'll go into the two ways more deeply below

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Severance

Whether incomplete, uncertain or illusory provision will invalidate entire agreement depends on the essentiality of the term and the intention of the parties disclosed by the agreement.

• Looking at contract as a whole --> would they have intended that this clause need to also come out, or intended it could stand alone
• If not essential, crucial question is whether the court can infer an intention that the agreement should be valid in the absence of the relevant provision
• If such intention can be inferred, then offending provision can be severed, leaving remainder of agreement enforceable.

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Waiver

Possible for uncertain provision to be waived by the party for whose benefit the clause was constructed

• To waive, has to be for benefit of one party only
• Where clause is for their benefit, defective, one party
• If subject to finance clause
  • When buying a business, need to get finance. Reach firm agreement with owners of business to sell it to them. If you don't manage to get finance to go ahead with purchase, that means you can withdraw from the purchase
  • 'this contract is subject to purchaser to getting $1mil from Xandu bank.' And Xandu does not exist - well I waive my rights under that clause, I can still go ahead with contract

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I'll end this post here. I went over the basic outlines of Certainty and went more deeply into how you can avoid getting a contract voided over the Certainty element. In the next post I'll be going more deeply into the 3 aspects of Certainty and their requirements.

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If you have any suggestions for improvement or questions comment below!

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