Definiteness of a Contract PDF

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Elements of a contract & key mechanisms and procedures....

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DEFINITENESS OF A CONTRACT • An agreement cannot be contractual unless it is sufficiently ‘definite’. • But not all such agreements are invalid for want of ‘definiteness’

Implied terms: ◦ Often the missing stipulations are supplied by mercantile practice governing goods of that kind ‣ If the modalities of the principal obligation are missing, they will be supplied from previous dealings of the parties, the practices in that branch of commerce, or dispositive law • Ex. Price can be derived from "market" price or "reasonable" price Essential vs secondary terms • Art. 2(1) OR assumes that ‘where the parties have agreed on all the essential terms ... the contract will be binding notwithstanding any reser- vation on secondary terms.’ ◦ The agreement actually made will apply provided it is to be assumed that the contract would have been entered into even without agreement on this point. Intention to be bound has to be proved: Even though the agreement was concluded, a party did not have an ‘intention of creating legal relations’, the intention ‘de produire des effets juridiques’ or had acted without ‘Rechtsbindungswillen’

• Agreement to agree: did the parties intend to be contractually bound notwithstanding the incompleteness or indefiniteness of their agreement? ◦ If parties have begun to perform --> effective agreement ‣ However, if there is an essential term which has yet to be agreed and there is no express or implied provision for its solution, the result in point of law is that there is no binding contract. ◦ If parties have not performed --> ineffective agreement • Can the judge complete the contract or render precise the point left indefinite? ◦ Difference between an arrangement which is wholly executory on both sides, and one which has been executed on one side or the other. ◦ Arrangements of supply of goods: if the one does his part without having come to an agreement as to the price or the terms, then the law will say that there is necessarily implied from the conduct of the parties a contract that, in default of agreement, a reasonable sum is to be paid. (at p. 158) ‣ Ex. If a person terminates a contract for the supply of electricity but continues to receive it, a new contract is formed even if the parties are still in dispute over the tariff. Unilateral price fixing agreements: may be wholly or partially invalid for breach of competition law rules, or because they restrict the customer’s economic independence and free- dom of action too much or for too lon ◦ Clauses in a consumer contract that unconditionally binds the consumer to pay whatever the list price may be on the day of deliver--> can be objectionable ‣ German courts only uphold such agreements (Tagespreisklauseln) provided they give the consumer the right to withdraw from the contract if between contract and delivery the price rises much more than the cost of living. ‣ French courts: very narrow-minded approach to the conditions under which a price was déterminable. • price is not déterminable if it depends on some sort of future agreement between the parties, and certainly not if one party has a unilateral right to determine the price by a later change of its list price • Customers can claim invalidity to get out of the contract • Under art. 1164, in ‘frame- work contracts’: if the party unilaterally establishing the price has not acted in good faith in doing so, the counterpart may ask the judge to award damages or terminate the contract. • art. 1165 if someone can demand performance of a service and the price is not determined in the

contract: the party is allowed to determine the price itself, but is liable in dam- ages ‘en case d’abus dans la fixation du prix’ ◦ Said clauses in a B2B contract --> not objectionable ‣ ‘experience shows that market forces prevent a single supplier insisting on prices which are too high in relation to the general market situation’. !

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How to save a contract? • What to do with an invalid clause? ◦ Sometimes, it is sufficient for the clause to be ignored ◦ A rule can be substituted for the invalid clause ‣ If the legal system has a relevant rule (terms implied by law) which it would imply into the contract. ‣ If there is no relevant legal rule --> the judge can replace the invalid provision with a provision based on constructive interpretation ◦ Sometimes, it is possible to separate the acceptable from the unacceptable parts of the clause ◦ Sometimes, it is not --> the entire clause is held invalid...