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 arenot 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 B’s 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 worker’s 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 Vernon’s Pools Ltd [1938] • CASE: Esso Petroleum Ltd v Commissioners of Customs and Excise [1976]

15. 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.

16. 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.”

17. Jones v Vernon’s Pools Ltd • Issue: • Is there a commercial contract? Is there a relationship that is binding?

18. 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.

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 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.

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.