Hillas v Arcos (1932) 147 LT 503

House of Lords

Basic Facts: Hilas ordered timber from Arcos, with an option to buy additional timber "of fair specification." When Hilas sought to exercise this option, Arcos had already sold all their stock. Hilas sued for breach of contract, arguing that the option was part of a binding contract.

Issue for the Court: Is a contract enforceable when its terms are not fully certain or clear?

Held : The appeal was allowed, indicating that the contract could be enforceable despite its terms being imprecise.

• Lord Tomlin: The parties had an understanding and a bargain had been concluded, but “fair specification” needed to be clarified. Common practice and the context of the contract could help give certainty to ambiguous terms.

• Lord Thankerton: The contract’s terms must be sufficiently clear to allow the court to ascertain the subject matter. If the terms can be interpreted with reasonable certainty, then the contract is enforceable. Otherwise, the court cannot adjudicate on unsettled matters.

• Lord Wright: The court should aim to give effect to the parties' intentions and the purpose of the contract, even if some terms are ambiguous. As long as a fair meaning can be derived, the contract may be construed and enforced.