CERTAINTY OF CONTRACT

In order for a contract to be viewed as binding, an agreement must be certain, that is, it should not be unduly vague, or obviously incomplete. However, the courts will usually look to see if there is any way to make an apparently vague or incomplete agreement more certain; as Lord Tomlin observed in Hillas v Arcos (1932), they do not want to ‘incur the reproach of being the destroyer of bargains’. The following methods are used to evaluate the certainty of a contract;
Provision for clarification
In some cases, prices and other factors affecting a contract are likely to fluctuate, and the parties to an agreement will therefore be reluctant to commit themselves to a rigid arrangement concerning those factors. In such cases, contracts may leave such details vague but contain provisions stating how they are to be clarified such as by an independent arbitration. In Foley v Classique Coaches (1934), the defendant broke the agreement and argued that it was incomplete and therefore not binding because the term regarding price was too vague. The contract actually provided that any dispute should be referred to Arbitration in accordance with the Arbitration Act. The court of appeal interpreted this as meaning that there was an implied term that the petrol should be sold at a reasonable price, with the arbitration clause being intended to sort out any dispute as to whether a price was reasonable. Hence to the court, the contract was more certain than it looked at at first glance, and the court decided that it was sufficiently certain to be binding on the parties.
Terms implied by statute
In some cases, statutes provide that certain terms should be read into contracts of particular types, even though those terms have not actually been agreed upon between the parties. For example, under the Sale of Goods Act 1979 an agreement for the sale of goods can become binding as soon as the parties have agreed to buy and sell, with the details of the contract being laid down by law, or determined by the standard of reasonableness.
Previous course of dealing
Where two parties have had dealings in the past, their previous agreements may be used to clarify uncertain terms in a contract. In Hillas v Arcos (1932), the House of Lords held that although the terms used were apparently unspecific, the parties were both very familiar with the way business was done in the timber industry and had done a large amount of business with each other in the past. Consequently, the terms could be interpreted in the light of what they would usually mean in that industry and between the parties. They were therefore sufficiently certain to create a contract.
Reasonableness
The courts will sometimes clarify vague terms by the principle of reasonableness. This position was held by the courts in the case of Sudbrook Trading Estate Ltd v Eggleton (1982).
Custom
Apparent vagueness can be resolved by custom. The customary way of dealing in a particular business transaction can be used to solve the vagueness in a contract as was the case in Hillas v Arcos (1932).
The ‘officious bystander’
A term may be implied by applying the ‘officious bystander’ test. basically the court asks itself whether someone observing the making of a contract would have believed that a particular term was part of the contract.
Removing minor uncertain terms
In extreme cases, a minor term may be not only vague but also meaningless. Providing it is sufficiently unimportant, it can be struck out, allowing the court to enforce the rest of the contract.