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English Law/Contract/Certainty

< English Law | Contract

While agreement is the basis for all contracts, not all agreements are enforceable. A preliminary question is whether the contract is reasonably certain in its essential terms, or essentialia negotii, such as price, subject matter and the identity of the parties. Generally the courts endeavour to "make the agreement work", so in Hillas & Co Ltd v Arcos Ltd,[1] the House of Lords held that an option to buy softwood of "fair specification" was sufficiently certain to be enforced, when read in the context of previous agreements between the parties. However the courts do not wish to "make contracts for people", and so in Scammell and Nephew Ltd v Ouston,[2] a clause stipulating the price of buying a new van as "on hire purchase terms" for two years was held unenforceable because there was no objective standard by which the court could know what price was intended or what a reasonable price might be.[3] Similarly, in Baird Textile Holdings Ltd v M&S plc[4] the Court of Appeal held that because the price and quantity to buy would be uncertain, in part, no term could be implied for M&S to give reasonable notice before terminating its purchasing agreement. Controversially, the House of Lords extended this idea by holding an agreement to negotiate towards a future contract in good faith is insufficiently certain to be enforceable.[5]

Jones v Padavatton[6] held that a daughter studying for the bar at Lincoln's Inn could not sue her mother to keep a house.

While many agreements can be certain, it is by no means certain that in the case of social and domestic affairs people want their agreements to be legally binding. In Balfour v Balfour[7] Atkin LJ held that Mr Balfour's agreement to pay his wife £30 a month while he worked in Ceylon should be presumed unenforceable, because people do not generally intend such promises in the social sphere to create legal consequences. Similarly, an agreement between friends at a pub, or a daughter and her mother will fall into this sphere,[8] but not a couple who are on the verge of separation,[9] and not friends engaged in big transactions, particularly where one side relies heavily to their detriment on the assurances of the other.[10] This presumption of unenforceability can always be rebutted by express agreement otherwise, for instance by writing the deal down. By contrast, agreements made among businesses are almost conclusively presumed to be enforceable.[11] But again, express words, such as "This arrangement... shall not be subject to legal jurisdiction in the law courts" will be respected.[12] In one situation, statute presumes that collective agreements between a trade union and an employer are not intended to create legal relations, ostensibly to keep excessive litigation away from UK labour law.[13]

A bill of exchange, for instance a cheque, is an order by one person to another (typically a bank) to pay a sum of money to a third person. Under BEA 1882 s 3 it must be written and signed.

In a limited number of cases, an agreement will be unenforceable unless it meets a certain form prescribed by statute. While contracts can be generally made without formality, some transactions are thought to require form either because it makes a person think carefully before they bind themselves to an agreement, or merely that it serves as clear evidence.[14] This goes typically for large engagements, including the sale of land,[15] a lease of property over three years,[16] a consumer credit agreement,[17] and a bill of exchange.[18] A contract for guarantee must also, at some stage, be evidenced in writing.[19] Finally, English law takes the approach that a gratuitous promise, as a matter of contract law, is not legally binding. While a gift that is delivered will transfer property irrevocably, and while someone may always bind themselves to a promise without anything in return to deliver a thing in future if they sign a deed that is witnessed,[20] a simple promise to do something in future can be revoked. This result is reached, with some complexity, through a peculiarity of English law called the doctrine of consideration.

References

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  1. ↑ Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2
  2. ↑ [1941] 1 AC 251
  3. ↑ nb Sale of Goods Act 1979 s 8(2) stipulates that where a contract for goods is silent on price, a reasonable price must be paid. See also May and Butcher Ltd v R [1929] UKHL 2
  4. ↑ [2001] EWCA Civ 274
  5. ↑ Walford v Miles [1992] 2 AC 128, overturning a decision of Bingham LJ in the Court of Appeal.
  6. ↑ [1968] EWCA Civ 4
  7. ↑ [1919] 2 KB 571
  8. ↑ Jones v Padavatton [1968] EWCA Civ 4
  9. ↑ Merritt v Merritt [1970] EWCA Civ 6
  10. ↑ Parker v Clark [1960] 1 WLR 286
  11. ↑ See Esso Petroleum Co Ltd v Customs and Excise [1975] UKHL 4
  12. ↑ See Rose & Frank Co v JR Crompton & Bros Ltd [1924] UKHL 2, Lord Atkin, however, emphasising that it was a case where "business people" were regulating their "business relations", rather than a situation involving two parties with an imbalance of bargaining power.
  13. ↑ See Trade Union and Labour Relations (Consolidation) Act 1992 s 179. This follows an old theory popularised by Otto Kahn-Freund of the best kind of industrial relations being one of "collective laissez-faire".
  14. ↑ See L Fuller, 'Consideration and Form' (1941) 41 Columbia Law Review 799
  15. ↑ Law of Property (Miscellaneous Provisions) Act 1989 s 2(1)
  16. ↑ Law of Property Act 1925 ss 52 and 54(2) require that such leases are made by deed.
  17. ↑ Consumer Credit Act 1974 ss 60 and 61
  18. ↑ Bills of Exchange Act 1882 s 3(1)
  19. ↑ See Statute of Frauds 1677 s 4 and Actionstrength Ltd v International Glass Engineering In.Gl.EN.SpA [2003] UKHL 17, holding that while this requirement may be undesirable, it could not be circumvented through estoppel.
  20. ↑ Law of Property (Miscellaneous Provisions) Act 1989 s 1
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