Formation - certainity

• Terms may be vague or certain. (3)

• Certain: [as to recognize an identifiable legal right or obligation), there will be no problems in finding an intention to create a contract

• uncertain/vague terms: Holistic Assessment: When surrounding events/actions/interactions of parties point towards a contract existing, the court will find a contract exists (Tower Insurance v Nicon)

• Where the invitation for tender allows the requestor to have (absolute) discretion in determining the selection process, here would be no contract made with tenderers who appear to meet the apparent conditions of the invitation (South Waikato District Council v Roading an Asphalt Ltd)

outcomes + scenarios with certainty (3)

• If there is a manifest of intention to not create a binding contract, there will be no contract. (Fletcher Challenge v ECNZ)

• The more nebulous or vague the terms, the more likely the court will find no intention to reach an agreement (Fletcher Challenge v ECNZ)

• The courts are unlikely to find an agreement where the parties have agreed subject to the final transcription of their agreement into a formal consolidated document.

Process contracts

• Agreements to agree.

• Where they are collateral to the formation of a primary or substantive contract = may shape subsequent matters [e.g. negotiations of prince or variations in terms]

  • Preliminary contract [pertains to actual information] - (Invitation to treat, offer to negotiate or offer in practice)

  • Collateral = post contract formation. 

2 step certainty test:

1. Did the parties intend the agreement to be legally binding (immediately)?

   1. If there are matters left for future agreement or significant matters yet to be decided it may be an indication that the parties did not have the requisite contractual intention. (Fletcher Challenge Energy)

2. Are the essential terms sufficiently certain?

• Must strive to cure uncertainty

• If an unessential term is uncertain, it is deemed redundant and the rest of the contract remains intact

Fletcher Challenge Energy: Terms are regarded as essential if:

1. The party asserts there must be agreement upon it and manifests this to the other party; or

2. The term is legally essential for the formation of such a bargain; or

3. The term was regarded by the parties themselves as essential to their particular bargain.