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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
Domestic agreements
Courts will presume that agreements between friends and/or family members are not intended to be legally enforceable.
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 Bs promise.
Balfour v Balfour
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.
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
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 workers compensation.
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 Vernons Pools Ltd [1938] CASE: Esso Petroleum Ltd v Commissioners of Customs and Excise [1976]
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.
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 Englands 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.
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.