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 aect 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 dicult 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 suciently 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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