Agreements Void for Uncertainty

Read (a) and (c) together. The same words, "a hundred tons of oil", are void in one and a good contract in the other. Nothing changed except the surrounding facts, and that is the whole lesson of the section.

Broken down

The test has two stages

Stage one: is the meaning certain? If the words themselves are clear, the enquiry ends. Illustration (b) is this case: oil of a specified description known as an article of commerce.

Stage two: is it capable of being made certain? If the words are unclear, the court looks for something that will fix them. Where it finds it, the agreement stands. Only if nothing will do it is the agreement void.

What can make an uncertain term certain

Four sources, and problem questions turn on spotting one of them.

(a) The nature of the parties' trade. Illustration (c) is exactly this: a dealer in coconut oil only, so "oil" means coconut oil.

(b) A standard of measurement outside the contract. "All the grain in my granary at Ramnagar" in illustration (d) is uncertain in quantity when written and becomes perfectly certain when someone goes and looks. A market price, a published index, or a recognised trade standard does the same work.

(c) Machinery inside the contract itself. A term that the price shall be fixed by a named valuer, or by arbitration, or by a formula, makes the price capable of being made certain. Note the qualification: if the machinery fails and the contract provides no substitute, the term may become uncertain after all.

(d) The course of dealing between the parties, or a usage of the trade, which section 1 of the Act preserves and which can supply the meaning of a word the parties have used before.

The maxim

Id certum est quod certum reddi potest, that is certain which can be made certain. It is the section's own second limb in Latin and it is worth quoting.

Agreement to agree

An agreement to agree in future on an essential term is the standard case of incurable uncertainty. "We shall settle the price later" leaves the most important term to a future negotiation that either party may refuse to conclude, and there is nothing for a court to enforce. The distinction from (c) above is sharp and it is the one examiners test:

• "Price to be agreed between us later": void, because it depends on a future consensus that may never come.
• "Price to be fixed by X" or "price to be the market rate on the date of delivery": good, because the contract supplies machinery or a standard independent of the parties' further agreement.

A worked example

Sunil agrees to supply timber to Tara. Consider five versions of the term.

• "A hundred cubic metres of timber." Timber comes in many kinds at very different prices, and nothing shows which. On the model of illustration (a) this is void for uncertainty.
• "A hundred cubic metres of Burma teak, grade one." A specified description known in the trade. Certain, on illustration (b).
• "A hundred cubic metres of timber", where Sunil deals only in Burma teak. The nature of his trade supplies the meaning, on illustration (c). A good contract for Burma teak.
• "All the timber lying in my Kalyan yard on 1 September." Uncertain in quantity as written, but ascertainable by inspection on the day. On illustration (d) there is no uncertainty to make the agreement void.
• "A hundred cubic metres of Burma teak at a price to be agreed between us next month." The subject matter is certain and the price is left to a future agreement. This is an agreement to agree on an essential term, and it is void.

Now change the last one to "at a price to be certified by the Timber Merchants Association". The contract now supplies its own machinery, the price is capable of being made certain, and the agreement is good.

Uncertainty distinguished from its neighbours

The overlap with section 13 is real. Illustration (a) can be analysed either as an agreement whose meaning is uncertain or as one where the minds never met. In an exam it is enough to note the overlap and answer on section 29, which is the provision the syllabus names.

What it does NOT mean

"A vague contract is always void." The second limb saves it if the meaning is capable of being made certain, and illustrations (c) and (d) both do exactly that.

"The contract must fix the price." It must make the price ascertainable. A formula, a market rate, a valuer or an arbitrator will do.

"An agreement to negotiate in good faith is enforceable." An agreement to agree on an essential term leaves nothing for a court to enforce and is void for uncertainty.

"Uncertainty makes the contract voidable." It makes the agreement void. There is nothing for a party to elect about.

"If the parties performed, the contract must have been certain." Performance may well show what they meant, and a court will use it as evidence of meaning, but the question remains whether the term can be made certain, not whether the parties muddled through.

Quick revision

• s.29: agreements the meaning of which is not certain, or capable of being made certain, are void. Two limbs, and the second saves most cases.
• Id certum est quod certum reddi potest: that is certain which can be made certain.
• Illustration (a): "a hundred tons of oil" with nothing to show which, void. Illustration (c): the same words from a dealer in coconut oil only, a good contract. The words did not change; the context did.
• Illustration (b): a specified description known as an article of commerce, certain. Illustration (d): "all the grain in my granary at Ramnagar", certain because ascertainable.
• Certainty may come from the nature of the trade, an external standard such as market price, machinery in the contract such as a valuer or arbitrator, and the course of dealing or trade usage.
• An agreement to agree on an essential term is void; an agreement fixing machinery to determine it is good.

Test yourself

1. State section 29 and explain its two limbs. Agreements the meaning of which is not certain, or capable of being made certain, are void. The first limb asks whether the terms are clear on their face; the second asks whether, although unclear, they can be made certain from the nature of the trade, an external standard, machinery in the contract or the parties' course of dealing. Only if both fail is the agreement void.

2. Why is "a hundred tons of oil" void in illustration (a) and good in illustration (c)? Because in (a) there is nothing whatever to show what kind of oil was intended, so the meaning can neither be ascertained nor made ascertainable. In (c) the seller deals in coconut oil only, and the nature of his trade affords an indication of the meaning, so the agreement is one for a hundred tons of coconut oil. The words are identical; the surrounding facts supply the certainty.

3. Is an agreement void because the price is not stated? Not if the price is capable of being made certain, for example by reference to the market rate on the date of delivery, by a formula, or by the certificate of a named valuer or arbitrator. It is void if the price is left to be agreed between the parties in future, because that is an agreement to agree on an essential term and leaves nothing to enforce.

4. What is the maxim associated with section 29? Id certum est quod certum reddi potest, that is certain which can be made certain. It expresses the section's second limb, that an agreement is not void merely because its terms are unclear if the contract or the surrounding circumstances provide the means of fixing them.

5. Distinguish uncertainty under section 29 from mistake under section 20. Under section 29 the defect is in the language of the bargain: the court cannot tell what was promised, so it cannot enforce anything. Under section 20 the language is clear and both parties are agreed, but they are commonly mistaken about a matter of fact essential to the agreement, such as the existence of the subject matter. Both make the agreement void, but for different reasons.