Formalization & Certainty

Question 1

formalization rules

Answer 1

• Some offers are subject to a formalization clause, where until the bargain is drawn up/ signed, there is no binding contract (Green).
• Therefore, all terms being settled isn’t determinative of a formalized contract (May dicta, Foley).
• In other cases, formalization clauses are merely that at a later time, the parties will draw up a written agreement (British American Timber Co.).
• An agreement made between two parties is no contract at all if some contractual matter is left undetermined (May and Butcher).

Question 2

British American Timber Co. v. Elk River Timber Co.

Answer 2

• Facts: The parties entered into a binding contract to purchase timber limits that was partially performed, but a formal agreement was not drawn up.
• Rule: Parties can be contractually bound without having yet drawn up a formal agreement.

Question 3

Green v. Ainsmore Consolidated Mines Ltd.

Answer 3

• Facts: A signed letter outlining agreement clauses expressly stated it was “subject to a formal agreement… satisfactory in form to the solicitors”, and the defendant refused to execute it based on tax advice.
• Rule: If an agreement is made “subject to” a formal contract satisfactory to solicitors, a party can refuse to sign for any reason, and the court will not question their motives.

Question 4

May and Butcher, Limited v. The King

Answer 4

• Facts: The plaintiffs purchased surplus tentage where written letters contained clauses stating the price and delivery dates “shall be agreed upon from time to time”.
• Rule: An agreement is no contract at all if some contractual matter is left undetermined.
• Valcke/Class Note: The law can only imply a reasonable price where parties are silent on price; it cannot apply where parties expressly agreed to determine the price themselves in the future.

Question 5

Foley v. Classique Coaches, Limited

Answer 5

• Facts: A sale of land was tied to a petrol agreement where the petrol price was “to be agreed… in writing from time to time,” but the parties acted on it for three years and had an arbitration clause.
• Rule: Even if a price is left “to be agreed,” a contract is binding if the parties have acted on it for years (performance) and there is an arbitration clause to resolve disputes.
• Valcke/Class Note: In these cases, the court will imply a “reasonable price” to save the deal.