#17248 - Intention To Create Legal Relations - GDL Contract Law

“To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly.” (Rose & Frank v Compton Bros [1923] per Scrutton LJ)

• Normally presumed absent in domestic and social spheres.

• Strongly presumed in commercial spheres.

Albert v Motor Insurers’ Bureau [1972] – Car share, passengers paid driver. Passenger died in an accident. Held that although payment terms flexible there was an intent to create relations.

• Lord Cross: “enter into a contract not because we form any intention to enter into one but because if our minds were directed to the point we should as reasonable people both agree that we were in fact entering into one.”

Domestic Cases:

• Balfour v Balfour [1919] – husband stopped maintenance payments promised until she joined him in Ceylon. Held no contract.

  • Atkin LJ: “It is quite common, and it is the natural and inevitable result of the relationship between husband and wife, that the two spouses should make arrangements between themselves…”

• Contract Theory by Stephen Smith:

  • The special value associated with such agreements would be diminished if they were legally enforceable.

  • It will become less clear that they are performed because this is part of what the relationship entails as opposed to reasons of self-interest.

  • Making (and performing) such agreements is an integral part of what it means to be in a relationship, and part of the reason they are valuable

• Merritt v Merritt [1970] - A husband promised wife, after separated, that he would pay her 40 a month if she paid mortgage instalments on their house. Once mortgage paid of he would convey her house. Broke last promise. Held there was an agreement.

  • Lord Denning: It is altogether different when the parties are not living in amity but are separated, or about to separate. They then bargain keenly. They do not rely on honourable understandings.

• Pettitt v Pettitt [1970] – husband claimed beneficial ownership in property having carried out gardening and redecorating. HoL denied claim requiring express agreement.

  • Lord Diplock (dissenting): dangerous to extend Balfour principle “to a presumption of common intention of both spouses that no legal consequences should flow from acts done by them”

• Keeping Contract in its Place (1985) by Stephen Hadley

  • The abstract question ‘is there a contract; is unhelpful. Must approach from a practical standpoint.

    • Jill cannot sue Jack because he refused to go to dinner

    • Perspective changes if Jack refuses to pay for his half of dinner.

• Jones v Padavatton [1969] – Jones provided an allowance to her daughter in return she was to study for English Bar. Later bought her a house instead. Daughter failed bar six years running.

  • CA held no contract, vaguely expressed, and intended to be flexible. It was therefore deemed binding in honour only.

Rebutting the Presumption in Domestic Contracts

• Parker v Clark [1960] – couple agreed to move in and look after elder relatives. Sold their house in reliance. D’s promised to leave their house in return. Held the clear drastic steps taken in reliance shod intent to create legal relations.

• Simpkins v Pays [1955] – D, granddaughter and lodger entered newspaper competition every week. Shared cost/answers. Won 750 and refused to share.

  • Sellers J: “I think there was a mutuality in the arrangement between the parties.” Does this imply that consideration is enough to show legal relations.

  • The factor probably driving Sellers J’s decision was the large sum of money at stake; was the law to allow the defendant to keep 500 when she had promised it to others?

• The word mutuality: parties are equally bound

Commercial Agreements:

• Edwards v Skyways [1964] – company promised and ex gratia payment to a pilot accepting voluntary redundancy. Company refused to pay.

  • Held (Megaw J) that the (heavy) onus was on company to show that no intention for legal relations. ‘ex gratia’ was insufficient as it had many meanings.

• Edmonds v Lawson [2000] – pupil sued chambers for not paying her minimum wage during unfunded pupillage. Court held that there was a contractual relationship and intention, but she did not fall within ‘worker’ for purposes of act.

Rebutting Presumption in Commercial Agreements

• Rose and Frank v Crompton [1923] - US company sold English company’s products in America. Contained honourable pledge clause which expressly stated no intention to create legal...