Chapter 3: Guidance for end of chapter questions

Certainty and the intention to create legal relations

Question

'In August 2006 Wembledon tennis club agreed a seven-year supply contract with Loadsofballs Ltd. Loadsofballs must supply 'International Tennis Federation approved tennis balls' for the next seven of Wembledon's annual June tournaments with the price to be agreed six months before the start of each tournament. It is September 2006 when Loadsofball's chief executive rings you (his lawyer) in a panic because he has heard that all the top tennis players are pulling out of Wembledon and he wants reassurance that he has a valid contract for the supply of balls. How would you respond?

Would your answer be any different if the call came in January 2010 and there had been no problems between the parties at past tournaments?

Answer

This question tests your understanding of certainty requirements.  There is no suggestion that there was not a matching offer and acceptance nor that the parties did not intend their agreement to be binding.

The subject matter of the contract is clearly specified: Loadsofballs must supply a specific type of tennis ball.

Is the initial agreement certain?

  • At the time Loadsofballs' chief executive calls you, the agreement lacks a price.  Note that this is not necessarily fatal if the price is left to be determined by a third party (as in Foley v Classique Coaches Ltd (1934).
  • On the facts of this case, there is no suggestion that the price should be determined by a third party (e.g. by an arbitrator) and so applying May & Butcher v R (1934)you can conclude that there is no agreement (i.e. the putative agreement is void for uncertainty).
  • One final point you may like to make is why s.8 SoGA 1979 does not apply.  You should not make a habit of stating in exam answers why something is not the case if it is clear that a particular piece of law does not apply, but in this case it is not immediately obvious on the first sight why s.8 should not apply.  Explain that a reasonable price will not be implied under s.8 on these facts because, as determined by Viscount Dunedin in May & Butcher v R (1934), the contract is not silent on the price - it expressly leaves it to be determined in the future.

Is the answer any different if the agreement had been performed until 2010?

The key difference in this scenario is that the agreement is executed rather than executory (i.e. it has been partly performed rather than wholly unperformed).

  • Don't fall into the trap of thinking that the courts will automatically find executed agreements are certain (they will not) - but the courts may be more lenient when interpreting an executed agreement (e.g. compare Foley v Classique Coaches Ltd and May & Butcher v R where in the former case an executed agreement was certain because 'any dispute or difference' was submitted to arbitration but in the later case only 'disputes' where submitted to arbitration.  The wider wording in the former case allowed the court (generously perhaps) to find that the executed agreement was certain).
  • In this case there is possibility of a third party decision and no wording for the court to manipulate.
  • However, if the parties have bought and sold tennis balls for four years then it is possible that the court will find that there was an agreement by conduct on the same terms as the uncertain agreement but this time complete with a price (similar to Brogden v Metropolitan Rly (1877) where the written terms did not constitute an agreement because of a lack of an acceptance by the railway company but the court found that there was a contract based on the fact that the parties' had performed the written agreement over a number of years).