Certainty and Capacity

Introduction

**Certainty** and **capacity** are the fourth and fifth ingredients of a simple contract under the SRA FLK1 specification. An agreement supported by **offer, acceptance, consideration and intention** is still **unenforceable** if its terms are too **vague or incomplete** for the court to give effect to it, or if one of the parties lacked **legal capacity** to bind itself. The two topics are grouped together because they share a **gatekeeping function**: both can defeat a contract on its face. This chapter covers the requirements of **certainty and completeness** (agreements to agree, vague terms and saving mechanisms), and the capacity of **minors**, persons under **mental incapacity or intoxication**, **companies**, and **unincorporated and public bodies**.

Assessment focus

**Certainty** is routinely tested in scenarios involving **'agreements to agree'**, **open price clauses** and **vague language** — you must identify whether a saving mechanism (agreed formula, market price, arbitration clause, statutory implied term) rescues the bargain, or whether it is void for uncertainty. The Supreme Court's decision in **Wells v Devani [2019] UKSC 4** signals that the modern approach **favours upholding bargains** wherever the parties plainly intended to be bound. **Capacity** is tested through **minors** (necessaries, beneficial contracts of service), **mental incapacity and intoxication** (the two-limb test in Imperial Loan Co v Stone), and — most frequently for the FLK1 Contract syllabus — the **implications of a company's legal personality** and the limits of corporate authority under **ss.39–40 Companies Act 2006**. SQE1 FLK1 questions are single best answer questions (SBAQs) set in **realistic client scenarios**: you must **apply** these rules, not merely recall them. This is a closed-book assessment.

Study tips

1) On **certainty**, work through a fixed order: (i) did the parties **intend to be bound**? (ii) is there a **saving mechanism** — agreed formula, market price, arbitration, **s.8(2) SGA 1979** / **s.15(1) SGSA 1982**? Only if none applies is the contract void. 2) Distinguish the **'lock-out'** (enforceable) from the **'lock-in'/agreement to negotiate in good faith** (unenforceable) — **Walford v Miles**. 3) Memorise the **four categories of minors' contracts**: valid (necessaries / beneficial service) — voidable (continuing obligations) — ratifiable — unenforceable. A minor pays a **reasonable price** (not the contract price) for necessaries. 4) Learn the **two-limb test** for mental incapacity / intoxication: the party **did not understand** the transaction AND the other party **knew or ought to have known** (**Imperial Loan Co v Stone**). 5) For **companies**, **ss.39–40 CA 2006** protect a good-faith third party: ultra vires is abolished externally; a director's breach of the constitution is an **internal** matter.