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

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Certainty

Severance If a contract contains an uncertain term

which is not essential, court may ‘sever’ the term from the contract, and enforce the balance

Only available if severance does not change the nature of the agreement overall