Kara Sears
Indefiniteness in contract law refers to a contract that is too vague or incomplete to be enforced by a court of law. A contract may be deemed indefinite if its terms are so uncertain that it is clear the parties involved did not regard themselves as having completed a contract. However, the omission of certain terms does not automatically render a contract indefinite, as courts may fill in the blanks through inference. Indefiniteness is one of the seven possible defences related to the formation of a contract, and it is a core principle of contract law.
| Characteristics | Values |
|---|---|
| Completeness of the contract | Courts can fill in the blanks through inference if certain details are left out. |
| Common terms left out | Price and time of performance |
| Traditional contract law doctrine | Requires definiteness; a contract will not be enforced if it is uncertain and indefinite in its material terms. |
| Modern rules and U.C.C. | If a contract is silent on price, a reasonable price can be supplied by the court as long as they believe the parties intended to finalize the contract. |
| Number of terms missing | If too many terms are missing, the court may conclude that the parties did not intend to finalize the contract. |
| Agreement to agree | Where a material term is omitted, a court can fill in the missing term by inferring the parties' intentions. However, with an agreement to agree, the court cannot infer what the parties would have agreed on. |
| Oral agreements | Problems of indefiniteness arise when parties enter into an oral agreement intending to put it in writing but fail to do so. |
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What You'll Learn
Courts may fill in the blanks
The core principle of contract law is the requirement of definiteness. A contract will not be enforced by the courts if it is uncertain and its terms are too incomplete. However, this does not mean that a contract that leaves out certain details is automatically considered indefinite. Courts may fill in the blanks through the process of inference. For example, if the law requires that all houses in an area be painted blue, and a contract for the painting of Michelangelo's house in that area is silent as to colour, the court may infer that the colour should be blue, and the contract will be enforceable.
The two most common terms that are left out of contracts are price and time of performance. Historically, if the price was left out of a contract, the contract was considered too indefinite and therefore unenforceable. However, modern rules and the U.C.C. hold that if a contract is silent as to price, a reasonable price can be supplied by the court, as long as it is clear that the parties intended to finalise a contract and there is some objective value.
Similarly, where the parties have agreed to agree on a material term, the contract will fail because the court will not be able to infer what the parties would have agreed on. However, if a material term is omitted, a court might be able to fill in the missing term by inferring what the parties intended. For example, under U.C.C. 2-305, an agreement to agree on price does not invalidate a contract so long as the court determines that the parties intended to finalise the contract. If so, the court will infer a reasonable price at the time of delivery as the price the parties would have settled on.
Courts may also conclude that the parties did not intend to finalise a contract and were only involved in preliminary negotiations if too many terms are missing. In such cases, the contract will be unenforceable. However, agreements that might be unenforceable because of indefiniteness may become enforceable if the parties have begun performance. For example, in Bettancourt v. Gilroy Theater Co. (1953), the parties did not negotiate the specific terms of a contract but established a method for filling in the omitted terms. If the method reserved for determining the omitted terms is an objective standard, the contract will be enforceable.
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Objective standards
Indefiniteness in contract law refers to agreements that are too vague or incomplete to be enforced by a court. A contract may be deemed indefinite if its terms are so uncertain that it is clear that the parties involved did not regard themselves as having finalised a contract.
However, the omission of certain terms does not automatically render a contract indefinite. Courts can fill in the blanks through the process of inference if there is sufficient evidence of the parties' intentions. For example, if a house colour could be implied based on zoning laws, a court could enforce the contract.
The two most common terms that are often left out of contracts are price and time of performance. Historically, the omission of price would render a contract unenforceable. However, modern rules and the U.C.C. state that if a contract is silent on price, the court can supply a reasonable price, provided there is an objective value and evidence that the parties intended to finalise the contract.
Agreements that might be initially unenforceable due to indefiniteness may become enforceable if the parties begin performance. For example, if parties establish a method for filling in omitted terms, the contract may be enforceable. This type of agreement is called an "agreement to agree". An "agreement to agree" will be enforceable if the omitted term can be determined by an objective standard.
Deliberately incomplete contracts may rely on self-enforcement through reciprocal fairness, which can be more efficient than legally enforceable agreements.
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Agreements to agree
An agreement to agree is a type of agreement that is not enforceable because it does not contain all the necessary details. It is an agreement that binds two parties to negotiate and enter into a contract. There are two types of agreements to agree:
- An unenforceable agreement that is negotiated with the intention that the final agreement will be embodied in a formal written document and that neither party will be bound until the final agreement is executed.
- A fully enforceable agreement containing terms that are sufficiently definite and adequate, but leaving some details to be worked out by the parties.
For example, a letter of intent is a document that outlines the preliminary understanding between two parties intending to enter into a contract. It sets out the basic terms of the agreement and serves as a starting point for negotiations. However, it is not a binding contract.
Courts are generally reluctant to void a term that was intended to have legal effect, particularly if either party has benefited from part-performance or invested premised on the contract. A contract will be considered valid as long as the court can fill in any missing terms through the process of inference. For instance, if a contract is silent on the price, a reasonable price can be supplied by the court as long as they believe that the parties intended to finalise a contract and there is some objective value.
However, if too many terms are missing, the court may conclude that the parties did not intend to finalise a contract and were only involved in preliminary negotiations. In this case, the contract will be unenforceable.
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Oral agreements
In some cases, oral agreements are not permitted because a written contract is legally required. For example, most states require a written contract for the conveyance of real estate. Written contracts are generally superior to oral agreements as they remove any potential confusion and provide a physical document to refer to in the case of a dispute.
Despite the challenges associated with oral agreements, they can hold up in court if there is sufficient evidence to prove the existence and terms of the binding agreement. The outcome of a lawsuit regarding an oral agreement depends on various factors, including the jurisdiction and the type of contract. Oral agreements are generally considered as valid as written contracts, but they are best suited for simple deals, while written contracts are recommended for more complex deals involving a lot of information.
In conclusion, oral agreements are legally binding but carry a higher level of risk due to the potential for confusion and the difficulty of proving their terms in court. While written contracts are often preferred for their reliability and enforceability, oral agreements can be appropriate in certain situations, especially when the parties involved know each other and the risk of loss is small.
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Self-enforcing contracts
Indefiniteness in contract law refers to a contract that is too incomplete or uncertain to be enforced. A contract may be considered indefinite if too many terms are missing, indicating that the parties did not intend to finalise the contract. However, this does not mean that the mere omission of certain details renders a contract indefinite. Courts can fill in the blanks through inference if they believe the parties intended to finalise the contract.
Recent studies in experimental economics suggest that self-enforcing contracts may be more prevalent than previously thought. These studies found that individuals often behave with reciprocity, even in interactions with strangers, suggesting that reciprocal fairness is a potent motivator for compliance. This theory challenges the traditional view that legally enforceable agreements are always more efficient.
The concept of self-enforcing indefinite agreements explores the idea that deliberately incomplete contracts may be self-enforcing. This theory questions why parties would enter into agreements that appear vulnerable to claims of breach of contract due to indefiniteness. It suggests that these agreements may be self-enforcing through reciprocal fairness, providing an explanation for the continued resilience of the indefiniteness doctrine in contract law.
In summary, indefiniteness in contract law refers to incomplete or uncertain contracts, which are generally unenforceable. Self-enforcing contracts are a unique type of agreement where the parties involved are solely responsible for enforcing the terms, as long as mutual benefit is perceived. Recent research highlights the potential advantages of self-enforcing contracts, particularly in contexts with limited legal enforcement, as they promote cooperative behaviour and efficiency through reciprocal fairness.
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Frequently asked questions
Indefiniteness in contract law refers to a contract that is too uncertain or incomplete in its terms to be enforced.
A contract may be considered indefinite if its terms are so incomplete or uncertain that it is clear that the parties involved did not regard themselves as having completed a contract. However, it is important to note that just because a contract leaves out certain details does not automatically make it indefinite.
If a contract is deemed indefinite, it will be considered unenforceable by the court.
Yes, agreements that might be unenforceable due to indefiniteness may become enforceable if the parties have begun performance. Additionally, if the method for filling in omitted terms is an objective standard, such as a reasonable price supplied by the court, the contract may be enforceable.
