Lecture 2 Intention to Create Legal Relations
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Transcript of Lecture 2 Intention to Create Legal Relations
Intention to create legal relations
In must be shown that the parties to the agreement intended to be legally bound by the agreement.
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
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)
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
B’s promise.
Balfour v Balfour
Issue: Did this promise by a husband to his wife
amount to a contract?
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.
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.
Todd v Nicol
Issue: Did the Todds have a contractual right to
stay? Did this family arrangement amount to a contract?
Todd v Nicol
Decision: It was a contract.
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.
Simpkins v Pays
Issue: Was there an understanding between the
parties that their agreement amounted to a contract?
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.
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 worker’s compensation.
CASE: Teen Ranch v Brown (1995)
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 Vernon’s Pools Ltd [1938] CASE: Esso Petroleum Ltd v Commissioners
of Customs and Excise [1976]
Jones v Vernon’s 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.
Jones v Vernon’s 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.”
Jones v Vernon’s Pools Ltd
Issue: Is there a commercial contract? Is there a
relationship that is binding?
Jones v Vernon’s 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.
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 England’s 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.
Esso Petroleum v Commissioners of Customs and Excise Issue:
Is there a commercial contract? Is there a relationship that is binding?
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.