This article has been written by Diva Rai, a student of Symbiosis Law School, Noida. In this article she discusses void agreements due to uncertainty in Section 29 of the Indian Contract Act.
An agreement is void under Section 29 when its terms are vague and uncertain and thus cannot be made certain. Illustration: A agrees to sell a ton of oil. The agreement is void for uncertainty as the kind of oil intended cannot be ascertained.
Requirement for Certainty
An agreement may be uncertain either because the terms in it are ambiguous or vague or because it is incomplete. The general rule is that if the terms of an agreement are vague or indefinite which cannot be ascertained with reasonable certainty of the intention of the parties, then there is no contract enforceable by law.
Section 29 provides the meaning of an agreement that should be clear on the face of it, as shown in Kovuru Kalappa Devara vs Kumar Krishna Mitter [1], but the effect can be provided to the contract if its meaning is found with reasonable clearness. If this is not possible then the contract would not be enforceable. Merely difficulty in interpretation will not be considered as vague. The principle can be formulated as a party who seeks remedy from court for breach of a contract, the obligation must be able to identify the obligation with sufficient precision to justify the remedy. The law thus stated is more flexible, and recognizes that different levels of certainty may be needed for the remedies.
Concluded Contract
As stated in The parties should make their own contract and the court will not construct a contract for parties when the terms are indefinite or unsettled. The court must first be satisfied that the parties have a concluded contract, before seeking to make certain terms.
Capable of Being Made Certain
As given in Bahadur Singh vs Fuleshwar Singh [2], a contract is not void if its terms are capable of being made certain. The meaning of the contract should not be uncertain and further, it needs to be shown that it is not capable of being made certain. Mere vagueness or uncertainty which can be easily removed by proper interpretation does not make a contract void. Even oral agreements will not be considered vague if its terms are ascertainable with precision.
A contract out of which more than one meaning, when constructed, can produce in its application more than one result will not be void for uncertainty. A contract will be void for uncertainty only if its essential terms are uncertain or incomplete unless the uncertain part being not essential is severed, leaving the balance of the agreement intact. To ascertain what is essential and what is not, one must look into the intention of the parties. There is no concluded contract when an essential or critical terin is expressly left to be settled by future agreement of the parties. Also, there will not be a binding contract where the language is obscure and incapable of any definite meaning.
An agreement that provides for the future fixation of price by the parties or by a third party is capable of being certain and is valid under Section 29. Such a contract will not be void for uncertainty.
Resolving Uncertainty
The courts are reluctant to hold a contract void for uncertainty of any provision that is intended to have legal effect as given in Brown v Gould [3]. It has been emphasized that it must always be in such a way as to balance matters that, without violating essential principles, man’s dealings are treated as effectively as possible and that the law cannot be accused of destroying bargaining.
But the courts will not undertake to supply defects or remove ambiguities according to its own notions of what is reasonable as it would not be to enforce a contract by parties but to make a new contract for them.
As Lord Wright said in Scammell v Ouston [4], the object of the court is to do justice between the parties and if it is satisfied that there was an ascertainable and determinate intention to contract then the effect would be given to intention looking at the form and not the mere form.
Implying Terms
A contract that is intended to be binding may be enforceable even though certain terms have not been precisely agreed if the nature of the terms can be ascertained by implication. The courts construe business agreements fairly and broadly and imply terms to the extent that is necessary to give business efficacy to the transaction.
Commercial Agreements
Commercial documents are sometimes expressed in language which does not have a clear meaning. This was seen in Dhanrajamal Gobindram vs Shamji Kalidas And Co.[5]. Cases of commercial contracts are different as there are standards of commercial custom and usage to appeal in deciding what terms are just and reasonable. Words that are grammatically meaningless may be found used in a mercantile sense and constructed accordingly. The mere fact that it is difficult to interpret a commercial contract is not fatal, nor is difficulty synonymous with ambiguity so long as to any definite meaning can be extracted. A contract is not necessarily ineffective because it is open to more than one meaning if the meaning intended can be ascertained.
Custom and Trade Usage
As given in the Indian Evidence Act 1872, vagueness apparent on the face of the contract may be resolved by reference to the custom or trade usage. A commercial contract for the sale and purchase of American cotton was not void for vagueness or uncertainty by reasons of a clause ‘subject to the usual force majeure clause’.
In Ashburn Anstalt v Arnold [6], an agreement to lease a shop in a prime location was not uncertain as it could be determined by expert evidence since the phrase is a commonly used in the particular property trade.
Previous Course of Dealings
In Lani Mia vs Muhammad Easin Mia [7], a covenant for renewal of lease which did not specify the period or rent must be presumed to be for the same period and the rent as the original lease and is not void for uncertainty.
Reasonableness
Where an intention to transact is clear, which is the intention to buy and sell, the terms can be determined by the standard of reasonable. This may be implied by law as Section 46 of the Act. When goods are sold without naming a price, the agreement is understood to be for payable of a reasonable price. Where the remuneration in a contract of service was to be fixed by the employer, the contract was enforceable and the rate fixed on basis of what is fair and reasonable. But a condition for the purchase of a motor van to be partly paid on hire purchase terms over a period of two years was held to be indefinably too vague to constitute a binding contract in Scammell v Ouston , it was held that where remuneration in a contract service was to be fixed by the employer, the contract was enforceable , and the rate fixed on the basis of what was fair and reasonable.
Performance Executed
The degree of certainty required for creating obligations varies according to the whether the transaction remains wholly executory or has been party formed or acted upon. Whether the alleged agreement has been wholly or partially executed that is performed by any party the very fact of the performance being executed may itself lead to the conclusion that agreement is binding as in Hart v Hart [8].
For example as in the case of many commercial contracts two parties continue to send each other counter offers after they comment performance. A Court may decide that there is a contract one of the following places-
(i)- The terms agreed with the court’s idea of of what are reasonable terms being supplied to fill all areas of omission or disagreement;
(ii)- The entire contract being constructed on what the court thinks is reasonable, the terms which the parties have agreed being evidence of what is reasonable in the circumstances.
Machinery for Ascertainment
A contract would not be vague if it provides machinery for ascertaining a term. In Damodhar Tukaram Mangalmurtiand v The State Of Bombay [9], the renewal clause contained a provision which said “subject to such fair and equitable enforcement as the lessor shall determine”. The clause was not held vague or uncertain. In Talbot v Talbot [10], the provision in a will giving option to the beneficiaries under the will to purchase the farms in which they live at a reasonable valuation was enforceable.
However the High court of Australia in Hall v Busst [11], held by majority that the words reasonable sum to cover depreciation as uncertain and therefore unenforceable. In Milnes v Gery [12], an agreement to sell at a fair valuation was also held to be uncertain.
Severance of Uncertain Part
Where there is agreement on all substantial terms, the court may disregard a subsidiary term on the grounds that it is meaningless as in Nicolene ltd v Simmonds. But this rule cannot be applied to a major term, which was seen in Kingsley & Keith, Ltd. v. Glynn Brothers (Chemicals), Ltd. [13], or subject to a war clause or to force majeure conditions, or an option on terms to be agreed.
Agreements Held Certain
In S.R. Varadaraja Reddiar vs Francis Xavier Joseph Periaria [14], it was held that where both the parties were fully aware of the identity of the property to be conveyed under the agreement, the agreement would not be uncertain merely because the exact boundaries, survey number or location were not mentioned in the agreement, if the identity of the property could be reasonably ascertained there form. In Mithu Khan vs Pipariya wali [15], an agreement for sale of land with the name of the land but without its survey number or are was not void for uncertainty.
In Daulat Ram Rala Ram vs State Of Punjab [16], a clause in the arbitration agreement referring the dispute to the superintending engineer is not vague merely because the reference is to the officer holding the office for the time being. Use of the term approximate does not make a contract vague as it means rounding off in the case of money, few pounds to a round figure (Edwards v Skyways [17]). Nor did the words other necessary and indispensable expenses to be paid besides the purchase price for reconveyance and the cost of execution. A contract is not uncertain merely because the time for performance or the terms for delivery, r the maximum quantity of goods to be purchased is not specified.
Agreements Held Uncertain and Vague
In Deojit v Pitambar [18], where the defendants themselves as residents of a certain place, executed a bond and hypothecated as security for the amount “ our property, with all the rights and interest”, the hypothecation was held too indefinite to be acted upon. The mere fact that the defendants described themselves in the bond as residents of a certain place was not enough to indicate their property in that place as the property that was hypothecated. If they had described themselves as the owners of certain property, it would have been reasonably to refer the indefinite expression to the description.
It has been suggested that an agreement is too uncertain to be enforced if no limit to the time for performance is expressed or can be inferred from the nature of the case. This does not appear acceptable as a general proposition. A document in favor of a bank promising to pay a specified amount on or before a certain date and a similar sum monthly every succeeding month could not be regarded as a promissory note (Carter v Agra Savings Bank Ltd.), as it did not specify the period for which it was to subsist and the amount to be paid. An undertaking given by a party not to enforce payment of cheque till the goods are received by it is void on the ground of uncertainty as the period when the goods are to be received is not determined.
In case of an agreement to sell immovable property, if the property cannot be identified with the certainty and there is no consensus between the parties as regards the price payable, there could not be no concluded contract between the prospective purchasers of flats and the builders.
Conclusion
Agreements whose meaning is not certain or is incapable of being made certain are void in nature. An agreement can be unsure either because it contains ambiguous or vague terms or because it is incomplete. The general rule is that if the terms of an agreement are vague or indefinite, which can not be ascertained with reasonable certainty of the parties ‘ intention, then the law does not enforce a contract.
References
- AIR 1945 Mad 10
- AIR 1969 Pat 114
- [1972] Ch 53
- [1941] AC 251
- AIR 1961 SC 1285
- [1989] Ch. 1
- 33 Ind Cas 448
- (1881) 18 Ch D 670
- 1959 AIR 639
- [1967] 2 All ER 920 (CA)
- (1960) 104 CLR 206
- [1803-13] All ER Rep. 369
- [1953] 1 Lloyd’s Rep. 211
- AIR 1991 Ker 288
- AIR 1986 MP 39
- AIR 1958 P H 19
- [1969] 1 WLR 34
- (1875) ILR 1 All 275
