Certainty of Terms - Incompleteness and Agreements to Agree

Question 1

May v. Butcher Ltd. v. R. [1934] 2 K.B 17 (H.L.)
(Essential Terms/Missing Price/Agreements to Agree are Not Enforceable)

Issues:
- Were the terms of the contract sufficiently defined for a legally binding contract?
- Is it binding when parties agree to agree upon price later? If they can’t agree, is it binding to have an arbiter clause to set the price?

Answer 1

Rules:
- Generally, agreements to agree about essential term (price) of a contract are not enforceable contracts.
- Arbitrator is not allowed to fix a price for the two parties, he can only arbitrate between the two different arguments in an already settled agreement/contract.
- He cannot arbitrate disagreements in a contract when there is no valid contract at all, since there is no price.
- Price is an essential term of a contract. There must be a price fixed or market metric to base this price for the court.

Conclusion:
- No contract due to essential missing term (price).

Question 2

Hillas & Co. v. Arcos Ltd. (1932), 147 L.T. 503 (H.L.)
(Terms Interpreted In The shared Context/Incomplete Terms Creating Vagueness) Professor even admits that the writing is hard to follow.

Issues:
- Was the option provision was a binding contract for the purchase of timber in 1931?
Were the terms of the agreement too vague to be enforceable?

Answer 2

Rules:
- If uncertain terms of a contract can be construed from context of the agreement and intention of the parties, then it will be binding.
- Courts can exercise and ascertain shared meaning which is derived from the context and intention of the 2 parties.

Analysis:
- Date of delivery: shared understanding and knowledge of the industry, reasonable time can be assessed between them, for future performance parties may not desire to specify date, so court can add if its determinable
- 5% off list price: its specific to an exact amount that can be calculated, read in isolation wouldn’t make sense, so court can add price if its calculable
- Standards: considering the entire relationship clear they meant Russian standards

Conclusion:
- The terms are sufficiently certain to be enforceable

Question 3

Foley v. Classique Coaches Ltd. [1934] 2 K.B 1 (C.A.)
(Market Price/Agreements to Agree Can be Enforceable)

Issues:
- Is there a binding contract?
- Was contract not enforceable because the uncertainty of the price?

Answer 3

Rules:
- When dealing with goods and the price is not listed, the price is not uncertain if there is a market metric for the court to measure against.
- Court motivated to save by serious intention, reliance, and part performance:
- Agreements to agree can be enforceable/binding depending on the circumstances of the case when there is a market metric for the courts to utilize.
- Agreements to agree on price and to send to arbitrator are legally binding when a reasonable price is determinable by the court.

Conclusion:
- There is a binding contract due to uncertain price being determinable through market metric.

Question 4

SALE OF GOODS ACT
[RSBC 1996] CHAPTER 410
(May Overrule May v Butcher)

Answer 4

Rules:

Section 12: agreements to agree are binding in BC with respect to goods, but not services or land. Price for the sale of goods can be set out in the contract or left to be set as agreed. If the parties don’t agree, then the price to be paid is set at a reasonable price by the court even when there is no market metric. Where the price is not determined in accordance with subsection 1 the buyer must pay a reasonable price and what is a reasonable price depends on the facts of the case.

Section 13: Agreements to send the valuation to a third-party arbiter are also binding but if the arbitrator doesn’t come up with a price the contract is void.
Certainty Problems With Agreement to Agree

1) Does the BC Sale of Goods Act apply? Is this a good? If yes then agreements to agree are binding, the court will imply a reasonable price, and arbitration clause is also binding.

2) If BC Sale of Goods Act does not apply: generally, skepticism that agreement to agree is binding (May v Butcher)
a. Essentially, it is enforceable if there are things like part performance, reliance, high motivation for contract, intent, market standard (Foley v Classique Coaches).