Uncertainty Risks
| Author | Robert J. Spjut |
| Pages | 117-138 |
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Uncertainty Risks
UNCERTAINTY HAZARDS
Uncertain Expectations
Uncertainty is defined as “[t]he quality, state, or condition of being
in some degree of serious doubt” and “anything that is indefinite,
indeterminate, or dubious.”1 First, one or more conditions and
contingencies that aect task completion and benefit realization may
be in serious doubt or indeterminate at contract formation. The lack of
information about such conditions and contingencies creates uncertainty
about what actually exists in the case of a condition and what will occur
in the case of a contingency. Second, independent of whether conditions
and contingencies are known, a task or benefit may be indefinitely or
vaguely conceived at contract formation; no one can definitely say which
actions will complete such a task or the value that must be realized. It
will be dicult or impossible to say if the task has been completed or the
benefit realized.
The intentions or expectations stated in a contract can be clear
or vague, they can be concordant or discordant, and they can be
inadvertently or intentionally so: clear or vague and concordant or
discordant. Certainty is at its best when, at contract formation:
1 B’ L D 1756 (10th ed. 2014).
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● A party’s expectations about the benefits it should realize, the tasks
to be completed by all parties, the commitments to complete those
tasks, and responsibility for unknown conditions and contingencies
are suciently specific that there is no reason for doubting what is
required.
● The other party understands and accepts those expectations.
The expectations are clear and concordant and known to be so.
Uncertainty is at its worst when
● Whatever expectations a party has about such benefits, tasks,
commitments, and responsibility are vague.
● The other party does not understand or accept those expectations.
The uncertainty described in the first bullet is the party’s expectation at
contract formation: the party does not know what it will expect when after
contract formation its ideas about the transaction have evolved into more
specific expectations. The hazard is proceeding with only vague expectations,
whether or not the party knows how vague its expectations are. The uncertainty
in the second bullet is whether the party’s expectations will prevail in the event
they are disputed by the other party. The hazard is proceeding with discordant
expectations, whether or not the party is aware of them.
The following cases illustrate such uncertainties.
● Cummings v. Dusenberry2: House buyers told their sellers they
wanted to buy a “year-round house.” This was not a term of art in
the real estate trade. The sellers sold the buyers a house in which
the windows leaked and let in flies, the roof leaked badly during
rains, and the walls dripped with condensation in the winter. At
contract formation, the buyers had a vague notion of the house
they expected to buy, but after living in it for some time came to
expect a house without such shortcomings. The sellers viewed the
buyers’ expectation of a year-round house to be meaningless, like
a “good house,” “nice location,” or house the buyer will be “happy
with.”3 The sellers did not accept the buyers’ revised expectations
2 129 Ill. App.3d 338, 472 N.E.2d 575 (Ill. App. 1984).
3 The house buyers sued for rescission, claiming breach of warranty (because a year-round
house implied a warranty of habitability) and unilateral mistake. The court, while rejecting
the implied warranty, allowed rescission on the grounds of unilateral mistake, holding,
“Although the question of what constitutes a ‘year-round’ home is somewhat a question
Planning and Documentation Risks
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