Certainty

Courts will not enforce a contract if there are key aspects of the agreement that remain uncertain or incomplete. This will be mainly because of unclear language or indeterminate terms for which no means of determination have been envisaged. Mere ambiguity will not necessarily result in uncertainty.

Although agreements to agree are generally unenforceable, agreements to negotiate in good faith could be valid, if the parties have agreed on clear duties and limitations on the task of achieving agreement on specific matters that can be measured and assessed by way of clear and agreed standards.

Agreements that are expressed to be subject to contract are likely to be considered as unenforceable in the absence of a later document requiring execution. However, parties need to exercise caution with such arrangements and be aware that in some situations, courts may consider the preliminary agreement capable of enforcement even if the parties do not proceed to the later contract.

Heads of agreement are commonly used in commercial settings, although care must be taken in their drafting or they may be used by one party to argue that there is sufficient certainty to enforce what has been agreed upon. Heads of agreement are meant to outline, in principle, the structure of a future and proposed bargain between the parties. In other words, they set out the rules of engagement by which the parties intend to proceed towards a final and binding contract.

See Certainty.