Contract A - Certainty and Completeness

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SCAMMELL & NEPHEW LTD V OUSTON [1941]

There was an order of a van on the understanding that the balance of purchase price had to be on 'hire-purcahse terms' over a period of two years. 'Hire purchase terms' was held to be too vague to be enforceable. 

Though the courts do have to be careful not to strike down enforceable contracts on the grounds of legal pedantry. 

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COURTNEY & FAIRBAIRN LTD V TOLAINI BROTHERS (HOTEL

AN AGREEMENT TI AGREE IS NOT RECOGNISED AS A CONTRACT AS IT IS TOO VAGUE TO BE ENFORCEABLE. IT IS IMPOSSIBLE TO SAY WHAT THE AGREEMENT WOULD HAVE BEEN. 

An agreement to employ a building contractor for three projects was held not to be a contract because the price was so fundamental and essential a term that there could be no contract until the price was agreed, or a method of ascertaining the price was agreed, NOT DEPENDANT upon the negotiations between the parties themselves. 

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WALFORD V MILES [1992]

AN AGREEMENT TO NEGOTIATE IS TOO UNCERTAIN TO HAVE ANY BINDING FORCE:

Negotiations for the sale of a business. Agreement by the seller to deal exclusively with the claimant and to terminate any negotiations with any other potential purchaser. 6 days later, rival negotiations terminated, but then they sold to someone else. The House of Lords held that this agreement was unenforceable because an agreement to negotiate lacks certainty. It had no fixed duration, and could not possibly be perpetual. 

A party is and should be able to withdraw from negotiations at any point and for any reasons, and therefore an agreement to negotiate has no legal content. 

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Partly-performed agreements

Where the agreement has been at least partly performed the court will be more willing to find that the contract is sufficiently certain as there is an intention to be legally bound. It will not always be enough to convince the court of sufficient certainty though

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HILLAS & CO LTD V ARCOS LTD [1932]

Previous dealings between the party - if they have had similar agreements in the past the gaps in the current arrangement may be filled by looking at the terms agreed previously. 

In this case there was an agreement between the two parties for the sale of softwood goods of fair specification for the following year. The House of Lords held that the shipping conditions for the 1930 shipment could be used to fill the gaps in the 1931 agreement and that the goods must be the same as the previous contract.

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MAY & BUTCHER LTD V THE KING [1934]

In the Sale of Goods Act 1979, section 8 creates provisions that a REASONABLE PRICE WILL BE PAID UNLESS THE CONTRACT FIXES THE PRICE OR PROVIDES A METHOD FOR PRICE DETERMINATION, OR THAT THE PRICE MAY BE DETERMINED BY PREVIOUS DEALINGS BETWEEN THE PARTIES. 

Therefore, the price in a contract of sale by be fixed by the contract, or left to be fixed in a manner agreed by the parties, or determined by previous dealings. Where the price is NOT determine, the buyer must pay a REASONABLE PRICE. What is reasonable depends on the facts of the case. 

A RESORT TO A REASONABLE PRICE IS BARRED IF THE CONTRACT PROVIDES FOR HOW THE PRICE IS TO BE DETERMINED. 

In this case, a sale of goods 'at a price to be agreed between the parties' was held to be void for uncertainty as a form of agreement to agree on a fundamental matter. Implication of a reasonable price was also precluded because the contract stiplated how the price was to be determined. 

If the contract states a price is to be stipulated by a third party but that third party cannot or will not act then the implication of a reasonable price is precluded because the contract stipulated how the price is to be determined. If the third party is prevented from doing so BECAUSE of one of the parties the other can sue for damages. 

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FOLEY V CLASSIQUE COACHES LTD [1934]

LONG-TERM CONTRACTS. If the parties have operated on the basis of a valid contract when in principle the contract was void? Can one party then deny the validity of the contract?

In this case there was a sale of land from the claimant to the defendant for their coach business, subejct to the defendant concluding a second contract to buy all their petrol from the claimant's business at a price to be agreed from time to time. The defendant purcahsed all their petrol from them for three years, then alleged the petrol agreement was invalid because no written agreement as to the price was ever made. However, the petrol agreement was held to be legally binding as they had acted upon the contract for three years. A term was implied that in default of an agreement a reasonable price was payable, and an arbitrator was allowed to choose a reasonable price due to the inclusion of an arbitration clause. 

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PITT V PHH ASSET MANAGEMENT [1994]

LOCK-OUT AGREEMENTS -  a lock out agreement is an agreement that one party, normally the seller, will not negotiate with anyone else. Such an agreement will generally only be valid if it specifies how long the party is not allowed to negotiate with anyone else. 

PHH accepted Pitt's offer to buy a house 'subject to contract'. PHH later sold to a third party after agreeing to sell to Pitt. The sale to the third party was not allowed due to the lock out agreement that was made which prevented PHH from selling to a third party.

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BALFOUR V BALFOUR [1919]

For an agreement to be a contract, the parties MUST have an INTENTION TO CREATE LEGAL RELATIONS and CONSIDERATION MUST BE PROVIDED. Sometimes an agreement is wanted but not legally binding. 

A contract will only be formed if both parties intend their agreement - judged objectively - to create legal relations. Did the words and conduct of the parties indicate an intention to create a legally binding contract? In DOMESTIC AND SOCIAL AGREEMENTS, the assumption is that the parties DO NOT INTEND TO BE LEGALLY BOUND but this PRESUMPTION CAN BE REBUTTED. The opposite is true for COMMERCIAL AND BUSINESS TRANSACTIONS. 

Generally, in familial relations, it is inappropriate for contract law to enter the domestic sphere. Parties do not intend domestic agreements to have legal consequences. 

In this case, the husband promised his wife £30 per week while ill-health prevented her from returning to Sri Lanka with him where he worked. He stopped paying after difficulties in their relationship and it was held that there was no breach of contract as this was a housekeeping domestic arrangement, not a binding contract. 

STANDARD DOMESTIC CASE = NO INTENTION TO CREATE LEGAL RELATIONS

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PARKER V CLARKE [1960]

An elderly couple agreed with the younger couple that if they sold their house and lived with the defendants sharing household expenses. The husband of the defendant couple would then leave the house to the wife of the claimant couple in their will. The claimants sold their house and lived with them but after a year of not getting on the defendants repudiated the agreement and told the claimants to leave. It was held that the contract was binding as the claimants had sold their house. 

If it is a domestic agreement, but a third party is involved, this makes it more likely to be binding and there to be an intention to create legal relations. 

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MERRITT V MERRITT [1970]

IF one party has performed their side of the agreement and is seeking to hold the other party to their side, the courts will be more likely to find that the presumption of no intention to create legal relations is rebutted, and where both sides have performed their obligations it may be unrealistic to suggest that they did not intend to be legally bound. 

In this case, after leaving his wife, the husband promised to transfer the matrimonial home into her name if she paid all the outgoings until the mortgage paid off. This was held to be legally binding, as following a divorce

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JONES V PADAVATTON [1969]

A mother promised her daughter that if she gave up her job as a secretary in the USA to read for the Bar in England she would give her £200 per month. The daughter agreed, but they fell out and the daughter gave her notice to quit. It was held to be a family arrangement like Balfour v Balfour. 

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WILSON V BURNETT (2007)

The domestic presumption is equally prevalent in social agreements. But the courts are equally open to the presumption being rebutted provided there is sufficient evidence. 

The Court of Appeal rejected the claim of two women that they had a binding agreement with a friend who won over £100,000 at bingo, that any winnings would be shared 3 ways. The claimants could not rebut the presumption that there was no intention to be legally bound. 

Courts are more likely to hold that there is an inteniton ot create legal relaitons where someone is putting their financial security at risk. 

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ROSE & FRANK CO V JR CROMPTON & BROS LTD [1925]

With ordinary commercial transactions there is a presumption that legal relations are intended. There is a burden of proof on the party disputing the existence of contractual intention and it is not easy to discharge. 

Some parties may state through an HONOURABLE PLEDGE CLAUSE that they have NO INTENTION TO BE LEGALLY BOUND. It is a clause contained within a contract that stipulates that the contract has no legal basis and therefore cannot be enforced. 

This will, as in this case, demonstrate that there is no basis to deny a clear intention for the agreement to have moral force only and not legal force. 

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BAIRD TEXTILE HOLDINGS LTD V MARKS & SPENCERS PLC

The claimant was one of the four main garmant suppliers to the defendant, and had supplied to them for 30 years. There was never any express contract. Suddenly and without warning Marks and Sepcners terminated the arrangement. The claimant claimed that there was an implied contract with terms that they needed more reasonable notice to terminate the agreement. But the Court of Appeal held that there was no contract. 

There can be no breach if there is no record of a contract. No longer-term commitment, only individual orders made. The uncertainty of their orders and lack of criteria for determining quantities and price. Lack of evidence of an intention to create legal relations. Abstaining from entering into an express contract demonstrates a desire to maintain flexibility. The presumption that there was an intention to be legally bound was rebutted in this case. 

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KLEINWORST BESON LTD V MALAYSIA MINING CORP BERHAD

Sometimes even where legal intent is present, one wonders what they are actually saying. 

The claimant banke xtended their facility to a subsidiary company in reliance of a comfort letter from the parents company. Matter of interpretation. It seemed more to be expressing a desire to be legally bound but not specifying what to. 

THE GREATER THE DEGREE OF PRECISION WITH WHICH THE PARTIES SET OUT THEIR AGREEMENT, THE MORE LIKELY THERE WILL BE LEGAL INTENTIONS FOUND. 

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Contractual formalities

No compliance with any formality is required. Contracts do not have to be in writing. It is sensible, but not legally required. Sometimes compliance with a formality is required, perhaps to prove a reliable record of faact and content of teh contract. 

Most contacts for land must be made in writing. 

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