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Contract Law - Should the Courts be more or Less Willing to Enforce Contracts with Uncertain and Incomplete Terms

Contract Law - Should the Courts be more or Less Willing to Enforce Contracts with Uncertain and Incomplete Terms

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Published by Philip Reynor Jr.
An examiniation of certain, complete and illusory terms in contract law in Ireland
An examiniation of certain, complete and illusory terms in contract law in Ireland

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Categories:Types, Business/Law
Published by: Philip Reynor Jr. on Nov 26, 2013
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05/02/2014

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Examination No: 1000366 Words: 3,551 1
Contract Law Assignment
I. Certainty, completeness and the intention to create legal relations
In order for a contract to be valid the parties must have expressed themselves such that terms of the contract can be determined with a
reasonable degree of certainty 
 and such that there is agreement on all the
essential terms
. However, this is not absolutely true but is more of a general guiding principle. For example, the idea that all essential terms must be agreed upon does not amount to the claim that every possible eventuality must be catered for in the contract, rather, it indicates that there must be agreement between the parties with respect to those terms agreed to be essential by the parties prior to contracting.
1
 However, a less flexible approach is apparent in
May & Butcher Ltd v R
2
 
where Viscount Dunedin held that a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties ... As a matter of the general law of contract all the essentials have to be settled. What are the essentials may vary according to the particular contract with which you are dealing.
3
 In terms of the notion of a reasonable degree of certainty, Viscount Maugham explains in
Scammell v Ouston
4
 that In order to constitute a valid contract, the parties must so express that their meaning can be determined with a reasonable degree of certainty. It is plain that unless this can be done it would be impossible to hold that the contracting parties had the same intention in other words the
consensus ad idem
 would be a matter of mere conjecture.
5
 The differing levels of expectation ought to be noted here for in
Scammell 
 the threshold is not
an ‘all’ or ‘absolute’ but
 
reasonable certainty
. In addition, Viscount Maugham goes on to explain that this is no more than the general rule and, as such, it may be applied differently under different circumstances. Taken together these two statements reflect similar principles which may be expressed as follows: (i) if the language of a contract is so opaque as to render the extraction of a definitive meaning with a reasonable degree of certainty then the courts cannot attribute an intention to create legal relations and cannot, as a result, enforce the contract; (ii) if the parties have not agreed on all of the essential terms of the agreement the contract will be unenforceable irrespective of the certainty of the language used. From these two principles flow a third which ought to be mentioned at the outset as it mitigates to a certain degree the rather stringent sounding
1
 We see this principle at work in
Supermacs Ireland Ltd & McDonagh v. Katesan Ltd & Sweeney 
 [2000] 4 IR 273 where the debate revolves around the issue of whether or not a deposit is essential.
2
 [1929] All ER Rep 679.
3
May & Butcher Ltd v R
; at p.683-4 (or p.5-6)
4
 [1941] All ER 14.
5
 
Scammell v Ouston
; at p.16. Lord Diplock repeats this principle with regard to the
consensus ad idem
 in
The Hannah Blumenthal 
 [1983] 1 All ER 34; at p.48. Kenny J in
Dore v. Stephenson
 [1981] WJSC-HC 472A (at p.473-4) quoted this passage as an accurate statement of the law, this case will be discussed in Section II.
 
Examination No: 1000366 Words: 3,551 2
provisions of the first two, that is, (iii) if an intention to create legal relations is deemed to be present by the court it will be loath to void the contract. Lord Russell in
Scammell v Ouston
 succinctly points out that The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention.
6
 This principle has been expressed more recently in
Brown v Gould 
 
where Megarry J held that “
only if the court is
driven to it 
 will it be held that a provision is void for uncertainty
8
 and again in
Greater London Council v. Connolly 
9
 
Lord Denning pronounced that “*t+
he courts are always loath to hold a condition bad for uncertainty. They will give it a reasonable interpretation whenever possible
.
10
 This, however, does not mean that the courts a
re willing “to make a contact for the parties, or go
outside the words they have used,
11
 indeed, the courts seem to have adopted a principle of proportionality in this regard with the levels of certainty and incompleteness being inversely proportional to the courts willingness to conclude that there are contractual intentions on behalf of the parties.
12
 In stricter terms, the basic rules to which the courts have recourse in ascertaining the intentions of the parties are threefold where the courts will examine (i) the language used, (ii) the circumstances in which it is used
13
 and (iii) the aim or object of the contract. Furthermore, this test is an objective rather than a subjective one relying on the words and conduct of the contracting parties rather than on any private intentions or objectives.
14
 
II. Uncertainty
(a) Ambiguous and vague terms An ambiguous or vague term is one which permits of multiple meanings within a single context thereby opening up the possibility of manifold contractual interpretations which thus givie rise to contractual uncertainty. In
Scammell v. Ouston
 
Lord Russell, in discussing the meaning of “on hire
-
purchase,”
observed the
existence of a “five
-
fold”
 choice of meaning which he deemed
“embarrassing but eloquent”
. He went on to note that
6
 
Scammell v Ouston
; at p.25. Lord Wright gives expression to the similar notion “
verba ita sunt intelligenda ut res magis valeat quam pereat 
” in
Hillas v. Arcos Ltd 
 [1932] All ER 494; at p.503.
 
7
 
[1972] Ch 53 [emphasis added].
 
8
 
Brown v Gould 
; at p.6.
9
 
[1972] 1 All ER 870.
 
10
 
Greater London Council v. Connolly 
; at p.6. This statement echoes a similar one made by Megarry J in
Brown v. Gould 
 at p.56 which was reiterated again in
RTS Flexible Systems Ltd v. Molkerei Alois Müller GmbH & Co KG
 [2010] UKSC 14; at p.14, paragraph 45.
11
 
Hillas v. Arcos
 [1932] All ER 494; p.503. See also
Fitzsimons v. O’Hanlon
 [1999] 2 ILRM 551 per Budd J.
12
 See, for example, Edwards J in
Bohemian Football Club Ltd v. Albion Properties Ltd & Conroy 
 [2008] IEHC 447; at p.115.
13
 
In
Nicolene v. Simmonds
 [1953] 1 All ER 822, the court examined the circumstances, in particular the prior course of
dealing between the parties, and found the phrase “the usual conditions of acceptance” to be ambiguous as no such usual
conditions existed.
 
14
 This view was upheld by the Supreme Court in
Emo Oil Ltd v. Sun Alliance and London Insurance Plc
[2009] IESC 2; p.14.
 
Examination No: 1000366 Words: 3,551 3
An alleged contract which appeals for its meaning to so many skilled minds in so many different ways in undoubtedly open to suspicion. For myself I feel no doubt that no contract existed between the parties at all; notwithstanding that they may have thought otherwise.
15
 The leading case on ambiguity in Ireland is
ESB v. Newman
16
 where the issue was an indemnity in respect of the electricity accounts of one Mrs Waddington. In this case the defendant had executed a contract of indemnity "discharging the accounts for electricity supplied to her for a period not exceeding nine months at any time." However, as it turned out electricity was being supplied to Mrs Waddington in no less than four different premises and thus the question as to the extent of the indemnity provided by Mr Newman came to the fore
, i.e. did the phrase “the accounts”
 refer to one or all of these accounts? Inspite of this ambiguity the courts attempted to extract the intention and proper meaning of the parties and, upon hearing the evidence Davitt J upheld the contract with the qualification that it was intended to apply only to the premises mentioned in the contract rather than all the premises at which Mrs Waddington was receiving electricity. By examining the contract through the lens of the intention of the contracting parties it was possible for Davitt J to uphold the contract
in spite of the ambiguity and vagueness surrounding the term “the accounts”
. Note however that Davitt J arrived at this conclusion without imputing any terms into the existing contract or re-writing the contract in order to fit a
 purported 
 intention. The rule that the courts will not re-write a contract for the parties is also evident from the more recent case of
Mackey v. Wilde
.
17
 In this case the plaintiff and the defendant were the owners of a fishery the rights of which, in terms of the regulation and operation of the fishery, had been drawn up in 1920. The main issue with regard to ambiguity and vagueness arose from the wording of a letter sent by the plaintiff to the
defendant in 1987 in which he describes the “legal agreement between the two houses” the terms of which amounted to “the arrangement of 25 annual tickets per side, with
a few day tickets
 to cover people arriving an
d looking for fishing”.
18
 The dispute in this case revolves around the
meaning of the term “a few”
 and, similar to
Scammell 
, the courts appeared to have many meanings open to them. Before offering his conclusion Barron J examines cases of uncertainty where the courts have salvaged the contract There have been many cases in which the full terms of the contract are not set out precisely, but which have been found to be valid binding agreements. Examples are where a terms is implied, where there is a formula for determining the apparent uncertainty with precision or where the term is to be determined upon the basis of what is reasonable, or by reference to custom or trade usage [or] where the court is satisfied that the term which is still to be settled is a subsidiary one and the parties intended to be bound in any event by the main agre
ement …
 In the instant case, the agreement was not capable of being saved by any means available to the
court to which I have referred … there can be no certainty here.
 The learned trial judge held that ten day
15
 
Scammell v. Ouston
; at p.20.
16
 [1933] 67 ILTR 124.
17
 [1998] 2 IR 578.
18
 
Mackey v. Wilde
; p.581 [emphasis added].

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