Topic 2(f): Certainty/Completeness

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					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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posted:10/3/2012
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