Intention to create legal relations

1
Intention to create legal relations

• In must be shown that the parties to the
  agreement intended to be legally bound by the
  agreement.

2
Types of agreements

• Intention to create legal relations

Intention to create legal relations
Social and domestic agreements (Presumption
parties do not intend legal relations
Business or commercial agreements (Presumption
parties do intend to create legal relations
3
Domestic agreements

• Courts will presume that agreements between
  friends and/or family members are not intended to
  be legally enforceable.
• CASE Balfour v Balfour (1919)
• The presumption can be rebutted.
• CASE Todd v Nicol 1957
• CASE Roufos v Brewster (1971)

4
Balfour v Balfour (1919) 2 KB 571

• Facts
• Mr B promised to pay his wife 30 per month.
• Mr B had to return to Ceylon. Mrs B was to remain
  in England for medical reasons.
• The couple later separated.
• Mrs B claimed 30 per month pursuant to Mr Bs
  promise.

5
Balfour v Balfour

• Issue
• Did this promise by a husband to his wife amount
  to a contract?

6
Balfour v Balfour

• Decision
• An agreement to pay 30 per month existed.
• The parties had not intended it to be legally
  binding.
• There is a presumption that domestic arrangements
  are not intended to finish up in court.

7
Todd v Nicol 1957 SASR 72

• Facts
• Mrs N resided in South Australia.
• She wrote to her sister-in-law and niece (the
  Todds), in Scotland, inviting them to come and
  live with her.
• She promised them free accommodation and that she
  would alter her will so that after she died, the
  house would become theirs.
• Mrs T quit her job and she and her daughter moved
  to Australia.
• Later an argument developed and Mrs N told the
  Todds to leave the house.

8
Todd v Nicol

• Issue
• Did the Todds have a contractual right to stay?
  Did this family arrangement amount to a contract?

9
Todd v Nicol

• Decision
• It was a contract.

10
Simpkins v Pays 1909 1 WLR 975

• Facts
• Three people lived together in a house and
  jointly took part in a competition organised by a
  newspaper.
• The entries were made in one name only.
• One entry won a prize and the defendant, in whose
  name the entry was submitted, refused to share it
  with the other two contributors claiming there
  was not intention to create legal relations.

11
Simpkins v Pays

• Issue
• Was there an understanding between the parties
  that their agreement amounted to a contract?

12
Simpkins v Pays

• Decision
• It was a joint enterprise to which each
  contributed in the expectation of sharing any
  prize that was won.
• There was a contract.

13
Voluntary agreements

• In cases of voluntary agreements, e.g. where a
  person volunteers their services, the parties do
  not normally intend to create legal relations.
• Important in determining whether the parties in a
  work situation intended to create an employment
  contract and therefore be covered by workers
  compensation.
• CASE Teen Ranch v Brown (1995)

14
Commercial agreements

• Courts will presume that agreements arrived at in
  a commercial context are intended to be legally
  enforceable.
• The presumption can be rebutted.
• CASE Jones v Vernons Pools Ltd 1938
• CASE Esso Petroleum Ltd v Commissioners of
  Customs and Excise 1976

15
Jones v Vernons Pools Ltd 1938 2 All ER 626

• Facts
• VP ran a football pools operation in the UK.
• During a dispute the court had to determine
  whether a contractual relationship existed
  between VP and each entrant.

16
Jones v Vernons Pools Ltd

• The following appeared on each coupon
• It is a basic condition of the sending-in and
  acceptance of this coupon that it is intended and
  agreed that the conduct of the pools and
  everything done in connection therewith and all
  arrangements relating thereto (whether mentioned
  in these rules or to be implied) and this coupon
  and any agreement or transaction entered into or
  payment made by or under it shall not be attended
  by or give rise to any legal relationship,
  rights, duties or consequences whatsoever or be
  legally enforceable on the subject of litigation,
  but all such arrangements, agreements and
  transactions are binding in honour only.

17
Jones v Vernons Pools Ltd

• Issue
• Is there a commercial contract? Is there a
  relationship that is binding?

18
Jones v Vernons Pools Ltd

• Decision
• Because the relationship is clearly commercial
  there is a presumption that the relationship is
  binding.
• However, the court held that the clause in the
  coupon was sufficient to rebut the presumption.
• Therefore, there was no contract between VP and
  the entrants.

19
Esso Petroleum Ltd v Commissioners of Customs and
Excise 1976 1 All ER 117

• Facts
• E conducted a trade promotion.
• E produced coins depicting the members of
  Englands 1970 World Cup soccer team.
• Each motorist who purchased four gallons of Esso
  petrol received a free coin.
• CCE argued that E should pay tax on the coins as
  they were produced for sale.
• In other words, CCE argued that the coins were
  supplied by E as part of a contract with
  motorists.
• E, on the other hand, argued that the coins were
  not sold as part of any contract, but rather were
  given away.

20
Esso Petroleum v Commissioners of Customs and
Excise

• Issue
• Is there a commercial contract? Is there a
  relationship that is binding?

21
Esso Petroleum v Commissioners of Customs and
Excise

• Decision
• A contract for the supply of the coins existed.
• Everyone who purchased 4 gallons of Esso petrol
  had a contractual right to claim a free coin.
• That is, E and the motorist who bought 4 gallons
  intended to create legal relations.
• Although the coins had little intrinsic value and
  E used words such as free and gift, this was
  not sufficient to rebut the presumption of
  enforceability.