Topic 2(f): Certainty/Completeness Approach of contracts: Maxim: ut res magis valeat quam pereat (it is better for a thing to have effect that to be found void) Requirements: Sufficiently COMPLETE - parties must at least reach agreement on all terms that they intended to fix by agreement, or at least all the essential terms, and matters which court cannot resolve by implication. Sufficiently CERTAIN/CLEAR – parties understand their rights and obligations, and court can enforce them Must not be ILLUSORY – one party has unfettered discretion as to performance of promise. Completeness: Whether an omission from agreement is fatal to contract: o Importance/essentiality of term Sale of goods: failure to stipulate price not fatal. Obligation to pay reasonable price set by Sale of Good Acts. Lease: commencement date and rental rate essential Sale of land: subject matter and price essential. Other details can be filled by implication, because of court’s understanding of conveyancing transactions. More novel/complex an agreement: court less competent to fill gaps. Milne v Attorney-General (Tas): HC – “no contract is concluded until the parties negotiating are agreed upon all the terms of their bargain – unless the eterms left outstanding are ‘such as the law will supply’…Here the transaction ultimately contemplated was very complex, and it is clear that the law cannot supply it’s terms.” What is essential? Trollope & Colls Ltd v Atomic Power Constructions Ltd: must agree on any terms which is essential to be agreed in order to make contract commercially workable. Australia and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd: law dos not permit court to imply a term into a bargain between parties for purposes of making bargain an enforceable contract. Question not whether expressly agreed terms are sufficient to constitute contract, but whether parties have agreed on all terms that only they can decide. Australia v Frost. o Why term has been left out o Whether agreement remains wholly executory, or wholly/party performed by one side. Agreements to agree: reach agreement on term in the future – NOT enforced. o May and Butcher Ltd v The King: HOL – Sale of Goods law as to reasonable price has not application, where agreement is deferred. Executed contracts: further parties have gone on with contract, more ready is court to imply any reasonable term; reluctant to destroy bargain. o Foley v Classique Coaches Ltd: P sold land to D on which they were to do coach business. P kept petrol station on adjoining land. D agreed to buy all their petrol from P during lifetime “at a price to be agreed by parties in writing and from time to time”. 3 years later, D tried to leave/find cheaper petrol. Court of Appeal held that petrol sold at reasonable price. Distinguished from May and Butcher Ltd v The King, because parties had acted on contract for three years. Machinery for settling a term: defers agreement on essential term allowed if effective mechanism for supplying term in event of failed agreement is provided. o Commercial lease: option for renewal at rent to be agreed, or determined by a specified valuer/arbitrator. o Problem: when machinery to supply term fails – valuer/arbitrator unable/unwilling to perform. HC held that agreement is then NOT enforced: George v Roach. Reason – inconsistent with intention of parties for court to settle terms. Formula for settling term: eg. commercial lease uses mathematical formula for rent increases to reflect movements in Consumer Price Index. Or use of standard (reasonable rental). Validity of contract then depend on court’s decision on whether formula/standard is sufficiently certain. Certainty: Need to identify obligations of parties with some degree of precision. Reasonableness: some cases at a “reasonable price”, others reasonableness cannot be certain. o Hall v Busst: vendor of land given option to repurchase at specified price less “a reasonable sum to cover depreciation”. “Reasonable price” for goods, does not extend to land. o Whitlock v Brew: contract of land including Shell petrol station. Condition that purchaser lease part of land to Shell Company of Australia Ltd (third party) “on such reasonable terms as commonly govern such a lease”. Held: no standard/reasonable terms of a lease Agreements to negotiate/agreement to negotiate in good faith: o England – not binding. Walford v Miles: ATN lacks necessary certainty, obligation to negotiate in good faith is repugnant to adversarial position of parties in neg. o Criticism – should respect their intentions to negotiate, does not force agreement but merely to make good faith efforts to reach agreement. o Australia – rejects Walford v Miles. Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd: majority of NSW Court of Appeal: promise to neg in good faith may (in particular circumstances) be enforceable, so long as promise is clear and part of an undoubted agreement between parties. Illusory Promises: Placer Development Ltd v Commonwealth: illusory because of discretion as to amount to be paid. o Menzies and Windeyer JJ (dissenting): C still under enforceable obligation to determine amount of subsidy to be paid and to pay that amount. Only discretion was to amount payable, not whether they would pay. o Windeyer JJ: unspecified sum of money to be paid pay reasonable amount, determined by court Can be made illusory by EXEMPTION CLAUSE, which with sweeping effect can effectively deprive the promise of any force. MacRobertson Miller Airline Services v Commissioner of State Taxation: clauses set out in an airline ticket gave airline right to cancel flight or cancel booking without any liability o Barwick CJ: clauses occupied “the whole area of possible obligation” and left no room for the existence of a contract. Exception to illusory: where important matters are left to be determined by third party, or if subsidiary matters left to be determined by one party. o Godecke v Kirwan: offer to purchase land, clause 6 provided that purchases would, if required by seller, sign further agreement to be prepared by the vendor’s solicitors “containing the foregoing and such other convenants and conditions as they may reasonably require”. Clause 6 found to not require further agreement but allowed vendor’s solicitors to add terms unilaterally. Whether they were reasonable would be determined by court. Exception to illusory: if discretion relates to fulfilment of condition on which performance of contract depends, or if discretion is to be exercised according to objective criteria. o Meeham v Jones: sale of land subject to purchaser “receiving approval for finance on satisfactory terms and conditions”. RESOLUTIONS Severance: If offending provision is essential contract fails. If offending provision not essential question: can court infer an intention that agrrement should be valid in absence of that provision? If so, then it is severed. Fitzgerald v Masters: sale of a half interest in farm set out essential terms but included clause which purported to incorporate the “usual conditions of sale in use or approved by the Real Estate Institute of NSW relating to sales by private contract of lands held under the Crown Lands Act”. Clause meaningless because there are no such terms. Held by HC as severable because it was not essential, merely appendage. Clear that parties intended to subsist even if clause failed to incorporate any additional conditions. Whitlock v Brew: HC held that uncertain clause could not be severed. Kitto J: to treat the “contract” as binding through shorn of condition 5 would be to turn sale into a different sort of sale from that which the parties contemplated…there can be no justification for holding them to something they have not agreed on. Waiver: May be waived by party for whose benefit that clause was inserted Grime v Bartholomew: a party cannot waive an uncertain clause that is essential to contract, because uncertainty no contract.
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