Certainty and Completeness
Statement of the Rule
In order to constitute a valid contract the parties must so express themselves 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 intentions; in other words the consensus ad idem would be a matter of mere
conjecture (G Scammell and Nephew Ltd v HC and JG Ouston).
There are a number of facets to this principle.
 A contract containing language that is so obscure and so incapable of any
definite or precise meaning that the court is unable to attribute to the parties
any particular contractual intention will be unenforceable (G Scammell and
Nephew v HC & JG Ouston). The uncertainty may relate to one of the pivotal
terms of the agreement or may go to the very heart of the agreement.
 Even where uncertain or ambiguous language is not used, if the parties have
not agreed on all of the essential terms of the agreement, the contract will be
unenforceable.
 A contract will be unenforceable if it reserves a discretion for one party not to
carry out his or her obligations (Thorby v Goldberg).
Ambiguity and Uncertainty
Individual Terms
There can be no contract unless what the parties agreed can be determined objectively
with a reasonable degree of certainty. Whether the clause is said to be vague,
ambiguous or uncertain the clause is void. Sometimes the court will label a term
meaningless or illusory. A meaningless clause is one to which a meaning cannot be
attributed and will be treated the same way as an uncertain clause. An illusory clause
has an identifiable meaning but will be treated as uncertain as it promises an illusory
term. The modern approach appears to emphasise the courts willingness to uphold an
agreement entered into by the parties, particularly where the circumstance indicate
that the parties intended to be bound by the agreement.
Agreements to Negotiate
Parties who are interested in pursuing some kind of joint venture, but are not yet at the
stage of being able to commit to final, specific terms, may choose to enter an
agreement to negotiate at a later state, also called a heads of agreement.
If parties do not reach final agreement on essential terms, instead agreeing to finalise
such matters at a later time, the contract is an agreement to agree and is
unenforceable. If an agreement to negotiate is regarded as an agreement to agree, it to
will be unenforceable (Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd).
Saving Ambiguous, uncertain or meaningless contracts
Link to External Standard
A clause in a contract which, on its face, appears uncertain may be enforceable if a
meaning can be given to it by reference to an external standard. The parties may
provide for “a standard, machinery or formula designed by the parties to take the
place of their own agreement” (Hawthorn Football Club v Harding).
The reference may be made in a direct way for example, incorporating standard hire
purchase terms used by the particular hiring company. If such a set of standard hire
purchase terms exists, the clause will be valid.
Recourse may also be made to external standards, even where the contract itself does
not expressly provide such a link. In Hillas and Co Ltd v Arcos Ltd the contract gave
the purchaser an option to buy more timber for delivery next year. The option was
held to be valid despite it not stating the kind, size or quality of the timber to be
supplied or dates or ports of shipment. Specifications agreed in the original contract
could be regarded as an external standard.
Link to reasonableness standard
The court may be willing, in some circumstances, to adopt principles of
reasonableness to make certain something that, on its face, is not. ‘The implication of
what is just and reasonable to be ascertained by the court as a matter of machinery
where the contractual intention is clear but the contract is silent on some detail’
(Hillas and Co Ltd v Arcos Ltd).
In Hillas v Arcos the parties had clearly intended to be bound by the contract and
consequently the court was prepared to give meaning to a clause which gave the
purchasers an option to buy ‘100 000 standards for delivery during 1931’. The
conclsion that this was a reference to a hundred thousand standards ‘of softwood
goods of fair specification’ was reached by the court both by reference to an earlier
clause in the contract and its preparedness to imply standards of reasonableness to
otherwise uncertain clauses.
Severance
The invalidity of one term will not necessarily mean that the whole contract will be
unenforceable. In some circumstances the invalid term can be severed and the
remainder of the contract will be enforceable. Generally, if the parties would have
intended to be bound in the absence of an uncertain clause, the clause can be severed
and the remainder of the contract be enforceable (Fitzgerald v Masters).
A contrary decision will be reached where the offending clause forms a pivotal part of
the contract, so that the parties could not have intended to be bound in its absence. In
Whitlock v Brew the granting of the lease to shell was considered to be ‘definitive of
the ultimate rights which its contemplated the purchaser is to get under his contract’.
Therefore, severance was not possible.
Waiver or Removal of Uncertainty
If a clause is inserted in a contract for the benefit of one party only, but is drafted in
such vague terms as to make it void, that party can choose to waive the benefit of the
clause and have the remainder of the contract specifically enforced (Whitlock v Brew
(1967)).
Incomplete agreement
Parties must reach final agreement on the essential aspects of the contract before they
will be regarded as having entered a contract. It is not enough for them to leave a
matter to be agreed upon at a later state ie an agreement to agree. However, if parties
provide a mechanism for finalizing terms it will no longer be regarded as an
agreement to agree and will be enforceable.
Agreement contains mechanism to complete
It may suit the needs of contracting parties not to finalise various aspects of their
agreement, but rather to insert in a mechanism for determining one or more terms at a
later date for example external standard or third party.
a) Reference to a third party
Parties to a contract may leave terms of the contract to be decided by a third party,
even essential terms (Godecke v Kirwan).
b) Discretion retained by a contracting party
It is uncertain that a contract that leaves terms to be determined by one of the
contracting parties is enforceable. A contract that leaves essential matter for later
determination by one of the contracting parties will be unenforceable as it is either
incomplete or uncertain or because the promises contained in the agreement are
illusory (Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd). However, if a subsidiary
matter was left to the determination of one of the parties such as how the contractual
obligation are carried out by that party, it may be enforceable (Godecke v Kirwan).
Breakdown of Mechanism to Complete
The traditional view of contract formation is that the court will not rewrite the
agreement for the parties where the parties themselves have failed to agree on all
terms. If the parties have established a mechanism for determining a term and the
mechanism fails, the court will not substitute its own view and complete the
agreement (Milnes v Gery).
Saving Incomplete Agreements
Implication of Terms
The willingness of the courts to imply terms into agreements is, however, illustrated
by the decision in Hillas v Arcos, which involved the enforceability of an option to
sell timber which did not specify the quality or price of the timber nor the dates for
delivery. The court held that it is not for the court to make the contract for the parites,
or to go outside the words they have used, except insofar as there are appropriate
implication of law, as for instance, the implication of what is just and reasonable to be
ascertained by the court as matter of machinery where the contractual intention is
clear but the contract is silent on some details.
However, the court may not rewrite the agreement for parties where the parties
themselves have failed to agree on essential terms. The greater the number of terms
not finally agreed upon by the parties, the less inclined the court will be to exercise its
discretion to imply a term. In Hall v Busst, Fullagar J opined that the contract could
only be regarded as concluded if the parties agreed on the three essential elements: the
parties, the subject matter and the price and if these elements have been agreed upon
with sufficient certainty the court will provide the rest.
In addition, there are two other factors which may be relevant in the courts
determination. First, if it is clear that the parties have gone beyond the state of
negotiation and intend to be contractually bound, the court will be more minded to
imply a term and enforce the agreement (Hillas v Arcos). Secondly, and related to the
first, if the contract has between partly executed, for example in a contract for the sale
of goods, property has been delivered and title has passed, the court will seek to imply
a term necessary for the validity of the agreement (Hall v Busst).
Failure to specify price
a) Contract silent on price
The general principle is that a contract will only be regarded as validly constituted if
the parties to agree on price would mean that the contract is not complete, and would
not be upheld by the court.
However, there are exceptions. There is a distinction between the sale of land and
sale of goods with respect to the implication of terms by a court. For the sale of
goods, the court is sometimes prepared to imply a term that the purchaser will pay a
reasonable price for the goods. This intention is demonstrated for example, where the
contract is partly executed and property in the goods has passed. A court will not
imply a term for payment at a reasonable price into a contract for the sale of land
(Hall v Busst (1960)).
b) Contract provides for parties to agree in future
An agreement to agree in the future also offends against the general principle of
completeness. However, in some instances, in contracts for the sale of goods the
court may imply a reasonable price and the contract will be upheld (Foley v Classique
Coaches Ltd). However, if the contract is to sell land, or on rental in an option to
renew a lease, it is unlikely to be upheld (Stocks &Holdings Pty Ltd v Arrowsmith)
and will be treated as such matters which are silent on price.
c) Contract makes provision for mechanism to complete
A contract that contains a mechanism for setting a term at a later time is likely to be
valid. It is not uncommon for such a mechanism to be used in relation to setting a
price.
d) Contract provides for payment of a reasonable price
Again, whether the agreement is upheld as being sufficiently certain may turn on the
nature of the subject matter in dispute. A contract for the sale of goods at a
reasonable price is likely to be valid. Reasonable price is an objective standard that
can be determined without further agreement between the parties. If one party
breaches the agreement, the court can assess the price to be attributed to the goods,
and damages can be awarded accordingly. However, clause to attribute to reasonable
price to the sale of land will be generally be uncertain or for the sale of goods if they
are unique or of very special character eg original painiting (Hall v Busst).
Subject to agreements
Sometimes parties may be ready to sign a contract but not able or not prepared to
commit to one or more aspects of the agreement. In these circumstances pares may
decide to enter into agreements subject to the happening of a particular event.
Subject to finance agreements
Contracts for sale may contain a clause stating that the contract is subject to the
purchaser receiving approval for finance on satisfactory terms and conditions. The
contract is immediately binding on the parties but will come to an end of the
purchaser is unable to obtain finance and terminates the contract pursuant to its terms.
a) Satisfactory Finance
It has been argued that a clause which provided for finance to be obtained on
‘satisfactory terms’, is either to uncertain to be valid or gave the purchaser such a
wide discretion that it was illusory. The High Court disagreed, and stated that as the
clause was inserted for the benefit of the purchaser, the determination of whether the
finance was satisfactory was left to he purchaser (Meehan v Jones).
b) Steps to be taken to obtain finance
The finance clause in most standard land contracts impose an obligation on the
purchaser to take all steps reasonably necessary to obtain finance approval.
Subject to Contract
For agreements that are formed subject to contract, the case could fall into one of
three categories:
1. The parties have reached finality in arranging all terms and intend to be
immediately bound to perform those terms, but at the same time propose to
have the terms restated in a form which will be fuller or more precise but not
different in effect. The parties intend to be bound immediately thus a binding
contract is formed.
2. The parties have completely agreed upon all terms and intend no departure
from or addition to those terms, but have made performance of one or more of
those terms conditional upon the execution of a formal document. An offer is
such a case is not expressed to be subject to or conditional upon a formal
execution of a contract and all essential terms have been agreed upon thus a
binding contract is formed.
3. The intention of the parties is not to make a concluded bargain at all, unless
and until they execute a formal contract. Parties in such a case do not intend
to be bound until they entered into a formal document thus no binding contract
is formed.
The category a particular case falls into turns on the intention of the parties. If the
parties intend the agreement to be binding on them even before entry into the final
contract, the contract will fall into one of the first two categories.
The case law provides illustration of the three categories described by the High Court
in Masters v Cameron.
a) First Category Branca v Corbarro
The parties agreed to the sale of a mushroom farm, the buyer paying a deposit to the
seller. The agreement contained a clause stating that the agreement was a provisional
agreement until a fully legalized agreement, drawn up by a solicitor and embodying
all the condition herewith stated is signed.
The court held that the parties intended to be bound immediately. Relevant to this
determination was the use of the words provianl and until. Also relevant was the
payment by the purchaser to be made by a date before the formal agreement was to be
executed.
b) Second Category Niesmann v Collingridge
The parties agreed on the sale of land, the seller signing a written document which
provided for certain portion of the price to be payable on the signing of the contract.
The document also contained a statement that value received for option sixpence and
that amount was paid by the purchaser to the seller.
The court held that the parties had entered into a binding agreement. The offer was
not expressed to be subject to or condition upon the execution of a formal contract.
The execution of the contract was simply relevant for the fixing of a date of payment
for the purchase money. All of the essential terms had been agreed upon.
c) Third category Masters v Cameron
The parties agreed to the sale of a farm. The agreement was stated to e ‘subject to the
preparation of a formal contract of sale which shall be acceptable to the vendors
solicitors on the above terms and conditions. The purchaser agreed to the purchase in
these terms, paid a deposit to the vendor’s agent and, among other things, made some
minor structural alteration to the property. The purchaser subsequently claimed that a
binding contract had not been entered into.
The court agreed and held that a binding agreement had not been entered into. The
parties had not intended to be bound until they entered into a formal document. The
payment of deposit to the seller was made on the basis that if a formal contract should
be executed, the amount should be treated as a deposit and, if such an agreement were
no entered into, should be returned to the purchaser.