B. Incompleteness

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 93-100

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The determination of whether the parties have agreed to all the essential terms of a particular agreement rests on an assessment of whether, in a case where there are missing terms, the omitted terms are so important that they warrant the conclusion that the parties have not yet reached an agreement. In applying this test, much will turn on the commercial context of the agreement. In some commercial settings, it will not be possible or may not be customary to reach an agreement with respect to particular matters at the time of formation of the agreement. In other contexts, however, it may be entirely routine to reach agreement on rather similar matters, failure to do so thus signalling that the parties have not yet reached a sufficiently complete agreement. Further, it may be material that the parties have entered similar agreements in the past and have found them to be quite workable. Even in the context of an initial agreement between the parties, it may be material that the agreement has been partially performed with the result that the effect of holding the agreement to be unenforceable will be the unjust enrichment of one of the parties at the expense of the other. These themes can be illustrated by examination of a line of leading English authorities that are often considered to be inconsistent or, indeed, irreconcilable.

In the first of these cases, May and Butcher Ltd. v. The King⁵ the plaintiff had entered into an agreement with the defendant Disposals Board for the purchase of army surplus "tentage" as it became available, from time to time, from the Board. The agreement required the purchaser to post a single deposit as security for carrying out its obligations and, in return, the Board agreed to sell the total stock of tentage, as it became available, to the plaintiff. The agreement further provided that such matters as the prices to be paid, the dates on which payment was to be made, the quantities available for disposal and the dates for delivery were to be agreed to by the parties in due course. Ultimately, the Board refused to perform its obligations and responded to the purchaser’s claim to enforce by arguing that the agreement failed because of the missing terms. The House of Lords held that the parties had simply failed to reach an agreement and placed particular emphasis on the fact that the matter of price had been left at large. The agreement could not be saved by the fact that it contained an arbitration clause. In the absence of a binding agreement, the arbitration clause did not have the effect of creating a binding agreement. The plaintiff’s suggestion that

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the price could be considered to be a "reasonable" price was similarly to no avail.⁶The parties had simply failed to reach an agreement on an essential matter.

The result in May and Butcher is often contrasted with the decision of the House of Lords a few years later in Hillas and Co. Ltd. v. Arcos Ltd.⁷This case concerned the enforceability of an arrangement between a British lumber concern and a Russian Government lumber supplier. The parties had entered into an agreement with respect to the supply of a large quantity of lumber over a two-year period. During the first year, the plaintiff had purchased over 40,000 standards of lumber. The agreement conferred an option on the purchaser for a further 100,000 standards for the 1931 season. Upon its exercise by the purchaser, the seller refused to perform, taking the position that the agreement lacked sufficient certainty of terms. The agreement, which was judicially described as "inartistic, and ... repellent to the trained sense of an equity draftsman"⁸left a number of details such as dates and quantities of particular shipments at large. The prices for 1931 were to be determined by the supplier’s forthcoming 1931 price list. The description of the goods as being of "fair specification" appeared vague. The parties had, however, worked successfully with the agreement in the 1930 season, finding themselves able to agree to appropriate details as the need to do so arose. As was explained in evidence, the process of negotiation that accompanies performance of such an agreement involves the making of proposals and counterproposals by the buyer and the seller until agreement is reached on the quantity and quality of goods to be forwarded in a particular instalment.

In the Court of Appeal, in Hillas, Scrutton L.J. had taken the view that the outcome was preordained by the decision of the House of Lords in May and Butcher and concluded that the agreement was, indeed, un-enforceable for lack of certainty of terms. Scrutton L.J. went on to protest

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mildly, however, that he regretted "that in many commercial matters the English law and the practice of commercial men are getting wider apart."⁹

On appeal to the House of Lords, however, the agreement was held to be an enforceable one. Lord Wright made the following observation:

Businessmen often record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is, accordingly, the duty of the courts to construe such documents fairly and broadly without being too astute or subtle in finding defects.... [This,] however, does not mean that the court is to make a contract for the parties or go outside the words they have used, except in so far as there are appropriate implications of law as, for instance, the implication of what is just and reasonable to be ascertained by the court as matter of machinery where the contractual intention is clear but the contract is silent on some detail.¹⁰Applying this approach to the facts at hand, Lord Wright suggested that it is commonplace in some commercial settings for many matters of detail to be adjusted in the course of performing an agreement. In the present context, it was impossible or undesirable to fix precise dates for shipments and, if in the event, the parties were unable to agree, "the standard of what is reasonable can, in the last resort, be applied by the law."¹¹Lord Wright did not take exception to the fixing of prices on the basis of the seller’s price list for the coming year. As far as the description that the goods were to be "of fair specification" was concerned, Lord Wright noted that the parties did...