Intention to Create Legal Relations
Remember, if you smoke after sex you're doing it too fast.
~ Woody Allen
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Intention to Create Legal Relations
Family, Social and Domestic Relations Presumption: no intention to create legal
relations Commercial Agreements
Presumption: intention to create legal relations
Other Particular Situations Government Transactions Unincorporated Associations
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Family, Social and Domestic Relations Generally presumed that there is no
intention to be bound Did the parties intend to be met with
legal consequences? E.g. did they intend to sue one another in
the event of breach? Presumption is weak and easily
rebutted with evidence to the contrary
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Family, Social and Domestic Relations Balfour v Balfour [1919] 2 KB 571
Maintenance paid to wife whilst she remained in England
Parties separated – issue was whether the contract for maintenance could be upheld?
No intention to create liability – agreement was made in an amicable, domestic environment
Floodgates issues
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Family, Social and Domestic Relations Cohen v Cohen (1929) 42 CLR 91
Husband promised to pay the wife a dress allowance
Held that there was no intention to create legal relations, following Balfour
Merritt v Merritt (1970) 2 All ER 760 Parties reached agreement after they had
divorced Held that there was an intention to create legal
relations, as they were not in a domestic situation
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Family, Social and Domestic Relations Jones v Padavatton [1969] 2 All ER 616
Mother promised to pay daughter and to give her a house if she returned to England to study at the bar and later practice in Trinidad
Daughter did not return to Trinidad, and did not practice law
Mother sought possession of the house Agreement found to be within a social / family
setting, and not intended to create legal relations “I didn’t open the door because a normal
mother doesn’t sue her daughter in court. Anybody with normal feelings would feel upset by what was happening”
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Family, Social and Domestic Relations
Rebuttal of Presumption Wakeling v Ripley (1951) 51 SR (NSW)
183 Significant personal/financial sacrifice was
made This construed the agreement as
commercial See also Riches v Hogben [1986] 1 Qd R
315; and Todd v Nicol [1957] SASR 72
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Family, Social and Domestic Relations Other issues - consideration
Dunton v Dunton (1892) 18 VLR 114 A promise by an estranged wife to conduct
herself “with sobriety, and in a respectable, orderly and virtuous manner”
Just like Emily here... Not only was intention an
issue, but there was also anissue with consideration being illusory
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Commercial Arrangements Presumption that parties intend to be bound This can in some circumstances be displaced
E.g. honour / ‘gentleman’s’ clauses Rose and Frank Co v J R Crompton & Bros Ltd
Clause ousting court’s jurisdiction Presumption was rebutted "This agreement is not entered into…as a formal or
legal agreement…it will be carried through by each of the three parties with mutual loyalty and friendly co-operation."
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Commercial Arrangements Edwards v Skyways Ltd [1964] 1 All
ER 494 ‘Ex gratia’ or voluntary payment Was the promise to pay binding – e.g.
was it within a commercial scenario, where the parties intended to be bound?
Held that the presumption of intention was not rebutted – ex gratia payment still made within a commercial setting
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Commercial Arrangements Esso Petroleum Ltd v Commissioners of Customs
and Excise [1976] 1 All ER 117 Promotional goods and gifts with sale
Can the intention be rebutted even though it is still within a commercial setting, and words like ‘free’ and ‘gift’ were used?
Presumption not rebutted – it was found that Esso intended to enter a contract for the supply of the coins to customers
Note also Carlill v Carbolic Smoke Ball, but compare with Leonard v Pepsico Inc (2000) 210 F 3d 88
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Commercial Arrangements
Roufos v Brewster (1971) 2 SASR 218 Son-in-law and parents-in-law, arranged
transport of goods to their respective businesses
Setting was commercial, not social or domestic “The whole setting of the arrangement is commercial
rather than social or domestic” per Bray CJ
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Particular Situations Government Schemes
The government can enter into contracts, but what of administrative schemes arising from policy e.g. welfare?
The Administration of the Territory of Papua New Guinea v Leahy (1961) 105 CLR 6 Tick eradication scheme that was carried out
poorly by the government Landholder attempted to sue for breach of
contract Held that the arrangement was of an
administrative rather than a contractual nature See also Australian Woollen Mills case from last
week
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Particular Situations Unincorporated Associations
Cameron v Hogan (1934) 51 CLR 358 No tangible or practical proprietary right
See also Finlayson v Carr [1978] 1 NSWLR 657 Voluntary Arrangements
Dietrich v Dare (1980) 54 ALJR 388 – a volunteer employee was injured, held not to be an employee (no contract) and could not claim workers’ compensation
Teen Ranch Pty Ltd v Brown (1995) 87 IR 308 – voluntary work at a church camp did not create legal relations
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Conclusion
Overlap between intention to be bound, agreement and consideration Dunton v Dunton (1892) 18 VLR 114 Horton v Jones (1935) 53 CLR 475
Lack of consideration (e.g. illusory) Lack of intention
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Certainty Completeness
An agreement must contain all the essential terms
Certainty Each term must be precise and clear enough
that a court can attribute a meaning to it Not absolute concepts - is the agreement
complete and certain enough? Courts have wide discretion - some
inconsistency in outcomes
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Certainty
Two competing principles at stake1. Courts try to uphold agreements - should
adopt reasonable interpretation or insert terms by implication
2. Only terms which parties voluntarily agree to should be enforced - should not impose terms on parties unless clearly adopted by them
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Certainty
Completeness1. The essentiality of terms that are
missing2. Why any essential terms are missing
(did the parties forget to include them, deliberately omit them? etc)
3. Whether the contract is wholly executory
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Certainty
Completeness Is the missing term essential? Familiar contracts eg conveyance of
land, leases, sale of goods - essential terms have been identified by courts Sale of land - parties, land, price Lease - commencement date, rental Sale of goods - price not essential
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Certainty
Completeness Unfamiliar contracts The threshold question is not whether the
expressly agreed terms are sufficient in themselves to constitute a contract, but whether the parties have specifically agreed all the terms that only they can decide. (my emphasis)
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Certainty
Completeness Why are the essential terms omitted?
Parties may attempt to ‘agree to agree’ - Not enforceable
Parties may have overlooked an issue - court may supply a term by implication, but with reluctance
Parties may have failed to agree on the issue - Not enforceable
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Certainty Completeness
Is the contract wholly executory, partially executed or wholly executed? Executory - neither party has performed their
obligations ie the promises have not been fulfilled yet Partially executed - one party has performed their
obligations, but the other party has not - eg one party has provided services but has not yet been paid. eg goods have been paid for but not yet delivered
Wholly executed - both parties have fulfilled their obligations eg goods have been delivered and paid for
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Certainty
Completeness Wholly executory - courts will be more
reluctant to ‘read in’ missing terms Partially executed - courts will be more
ready to ‘read in’ missing terms by implication
Wholly executed - what’s the problem, guys? The contract is finished.
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Certainty
Imprecise, vague or meaningless terms eg; Language is deficient in expression Semantic or conceptual difficulties Language is clear, but application to
facts doesn’t make sense No facts fit the contract description More than one set of facts fit the contract
description
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Certainty
Examples ‘subject to finance’ - Meehan v Jones ‘upon reasonable terms as commonly
govern such a lease’ - Whitlock v Brew Value of land fixed but less depreciation -
Hall v Busst Option to participate in company equity
sharing scheme but no such scheme existed - Biotechnology v Pace
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Certainty Terms upheld - promises to pay
‘handsomely’ ‘a substantial sum’ ‘a substantial cut on all work done’ ‘a bonus’ ‘a fair and equitable price’ ‘current bank overdraft rates’ ‘supplier’s costs’
Term not upheld - promise to ‘well reward’ employee
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Certainty
Reasonableness Operates as a standard by which courts
can interpret vague or imprecise terms Sale of Goods Act - implies promise to pay a
reasonable price Can not help if there are several
‘reasonable’ interpretations of the term eg Whitlock v Brew, Hall v Busst
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Certainty
Agreements to negotiate UK - not enforceable if parties agree to
negotiation ‘in good faith’ Australia - Coal Cliff Collieries v Sijehama -
Court said agreement to negotiate could be enforceable, though not in that case
Aiton v Transfield - NSW Supreme Court enforced an agreement to negotiate and mediate in good faith