Certainty of Terms

A key principle of contract law is that a contract, whether oral or written, must be certain.   The terms of the contract must be sufficiently clear such that the parties understand what they are contracting for and what they must do in order to complete their contractual obligations.  This ensures that there is a true meeting of the minds between the parties.  

In considering whether or not a contract is certain, its essential terms must be assessed on an objective, rather than subjective, basis.[1]  The key question is whether a reasonable average person would be able to understand the essential terms of the parties’ arrangement from the information available.  Where the terms of the arrangement are vague, or unclear, such that an average person would be incapable of discerning the essential elements of the parties’ arrangement, the arrangement will fail for lack of certainty of terms.[2]  

In circumstances in which a contract is written, the Court will determine whether the essential elements of a contract are made out by examining the written agreement.  In contrast, if the parties made their arrangement verbally, a consideration of the state of affairs between the parties will be taken into account.  The Court will consider the parties conduct, and assess objectively whether their words and actions resulted in a contract with certainty as to the essential terms to which they are bound. 

The basic principle of which terms are essential, and must be present to form an agreement, is the same regardless of whether an agreement is oral or written.  Their existence is dependent on the type of contract alleged, and whether the specific terms necessarily go to the core of the alleged contract.[3] For example, price is always essential in a contract of sale.  The contract cannot exist without it.  Similarly, in a contract for the sale of property, there must be certainly regarding the identity of the land being sold.  Additionally, essential terms for specific kinds of contracts may be set by statue.  In circumstances where there are statutory requirements related to terms that must be included for a contract to be valid, and the parties fail to include these terms in their agreement, the agreement will be void for lack of certainty.         

Need assistance ensuring your agreement is sufficiently certain to be legally binding?  We can help.  Contact Verjee Law at 403-532-8881 for further information on what constitutes certainty of terms.

[1] Ron Ghitter Property Consultant Ltd. v Beaver Lumber Co. 2003 ABCA 221at 9.

[2] Ibid at 8.

[3] Ko v Hillview Homes Ltd., 2012 ABCA 245 at 91, 100-109.