3 Contracts Intention :Social Flashcards
Need intention for a contract
It’s a question of fact. But it’s a question of fact reckoned objectively rather than subjectively.
Burden of proof
The plaintiff has the burden of proof on each and every element of the cause of action on a balance of probabilities, which means if I want to sue you in negligence, for example, as the plaintiff, I have to satisfy the judge that it’s probably true, 51% or higher, that you owe me a duty of care, that you reached the standard of care, and that I suffered a loss.
Belford Vs Belford
Question: who has the burden of proving whether there’s an intention to create legal relations?
Rule: If your operating in a social context, there
Facts:
late early 20th century-Britain still ruled the colonies.
- a man who was going to be sent to Sri Lanka , an island off the tip of India. He was going to take his wife with him, but it was decided, I think because she had some health problems, that he would go ahead but she would stay behind, get better, and then join him in the course of time.
And as he’s about to depart, the parties come together and the man makes his way for promise.
He says, I promise you, so long as you’re staying back here in England, and I’ve gone off, that I’ll send you 30 pounds per month.
So he goes off and he decides he’s not coming back. He wants a separation. He has no intention whatsoever of paying the 30 pounds per month.
The wife tried a number of actions. Example, she sued for alimony. And she was successful in securing alimony. But the fact of the matter is that at that point, alimony was a very small sum and certainly not enough to let her remain in the stage of life, in the circumstances to which she’d become accustomed.
So she received alimony, but it’s not going to be anywhere near enough. So she sued in contract. She says, well, we had an enforceable agreement.
You promised that you would send 30 pounds per month, and the court should hold you to that.
Question here: Who has the burden of proof to create legal relations?
RATIO: In contrast to Rose and Frank, no presumption of intention to create legal relations if not in a commercial context. In Social or familial context, we don’t assume intention. Plaintiff has burden of proof
Belfour and Belfour is premised upon a fundamental distinction that judges drew back in 1919 between the public world and the private world.
Parties were agreeable when made agreeable. If it was after they separated it wouldnt be a private matter inso much.
The public world, the world of men, the world of business, the world of commerce is one in which judges want promises to be enforced because it provides certainty and presumption
Commercial: presumption, help business
Private: no presumption, hard to prove
Rose and Frank general rule and summary
Even though usually the plaintiff has the burden of proving all of the elements Including the intention to create legal relations ….if the parties are operating in the commercial context then the law simply presumes on the plaintiff’s behalf that there is an intention if we’re operating in the commercial context and promises are exchanged.
That first part of the equation is satisfied simply by assumption.
What we also saw in Rosen Frank, that it’s a reputable presumption.
We presume that people in the business world intend to be bound to the promises, intend to create contracts simply because that’s what they almost always do.
REBUTTABLE: if it’s not true on the facts, one of the parties can induce sufficient evidence to show even though we assume normally business people intend to have an attention to great legal relations, in some circumstances it might not be the case.
Rose and Frank: large document that looked exactly like a contract, but there was one clause or two clauses within that large document that stated this is not a contract.
Ultimate conclusion out of the House of Lords: was that even though it looks like a contract, even though we’ll assume that the party’s intended to create a contract, on the fact we know that there wasn’t really a contract (no intention based on fact).
Rule: in some cases , such as commercial, we’ll assume part of the equation on the plaintiffs behalf –> That there is an intention to create legal relations if you’re doing business in commercial sphere.
TD V Leigh Instrument
Contract can be a contract between two entities, people or legal entities such as corporations
Companies are treated the same as human beings, more about risk management
o in this case we have an enormous company called GE General Electric.
As all sorts of assets, it’s done many things around the world.
One of the things that it’s done is to create a subsidiary called Plessie.
So GE is a company and in fact it has a child named Plessie.
As a result, when Lee comes to Toronto Dominion Bank and says we would like to borrow, we’d like to borrow $45 million, TD says, well, we’d like to do business with you because again, that’s how we earn our living, but we simply don’t trust that you can come up with $45 million to repay us. And so, Toronto Dominion contacts Plessy and asked for a guarantee.
There was continued discussions between Plessy, the parent, and Toronto Dominion, the bank, and Plessy repeatedly said, we will not guarantee Lee’s debt.
Plessy sends to Toronto Dominion is something called a comfort letter.
And the key clause in the comfort letter is this: Plusy says it’s our policy that Lee be managed in such a way that it could always pay its debts. And at that point, Toronto Dominion says, that’s good enough for us and extend the $45 million loan.
And of course, it turns out that Lee can’t repay the money.
TD is looking at an enormous loss.
And so it wants to be able to sue Plessy. And the question is, in these circumstances, is there a contract between Plessy and Toronto Dominion?
And the court says, in effect, it’s a question of an intention to create legal relations.
The question is, when Plessy gave this letter to Toronto Dominion, Did Plessy intend, objectively speaking, to be bound to that letter?
Would the reasonable person standing beside Plessy and Toronto Dominion, the moment before the letter was handed over, would that reasonable person have thought that if things don’t go well, this letter that was provided is something that can provide the support, the foundations for a lawsuit, a successful claim for breach of contract.
It’s a question of fact, but it’s a fact reckoned objectively. We don’t care what went on in the minds of Toronto Dominion.
And the court concludes that if you look at all the circumstances, it’s clear that Plessy did not intend to be bound to the contract.
Plessy did not intend for this letter to provide TD with a basis for a breach of contract action.
And it reaches that conclusion on two bases. It says, first of all, These are sophisticated parties.
And secondly, related point, the court says you have to read this letter in context. And the context is that Plessy emphatically repeatedly refused to provide Toronto Dominion with a guarantee.
Plessy refused to act as a surety. So the court says if you read the letter in the context, not only in its context of the document, the words itself, but in the broader context of the negotiations between the parties, It’s abundantly clear that Plessy never intended to be bound by this promise.
And so Toronto Dominion takes one last shot at it and says, well, that can’t be true.
What was the purpose of Plessy giving us this comfort letter if we can’t actually sue on it?
And the court quite rightly explains that the business world doesn’t operate exclusively on the basis of law.
It operates on a number of bases. It operates on law. That’s just one factor. It also operates on the basis of reputation. If you’re a business person, your reputation is bold.
And so according to the courts, I think it’s right, when Plessy handed this comfort letter to TD, Plessy was saying to TD, we give you a promise that’s leading and managing in such a way that it can always satisfy its debts. But we won’t be held to that legally. We’ll simply be held to that in terms of reputation in the marketplace.
And in this case, Plessy was simply willing to take the hit to its reputation.
But even though we’d have given up this letter, it won’t be held to what it said, not legally, but not even morally.
And so at the end of it, the court was really presented with two different interpretations of the key phrase, it’s our policy that Lee always be managed in such a way that it can satisfy its debts.
TD said, Plessy was saying that it’s Plessy’s policy that Plessy would always manage its child Lee so that Lee could satisfy its debts.
The court said no, that’s not right. The correct interpretation of that sentence in the document is that it’s Plessy’s policy, that its child always manages its own affairs so that it can satisfy its debts.
And the court says that sounds about right. It’s not a guarantee, it’s not a surety situation, it’s just a comfort letter, and all Plessy was saying to TD is that it’s our policy that when we send our children out into the world, they should take care of themselves.
But if that turns out not to be true, that’s not on us as the parents.
That’s on the child. And the court says that’s the proper interpretation of the letter in this situation.
Last point about Toronto Dominion and Lee Instruments.
Bear in mind in trying to understand these cases, trying to understand the motivation of the parties, is that business people, again, aren’t always driven by legal considerations.
The law is just one of many factors that they take into account and decide how to behave.
One of those other factors is reputation. Another factor is pure profitability. But sometimes parties act not on the basis of what the law says they should do, but simply on the basis of other things.
Understand that this really goes back to Rose and Frank. This was a commercial context. We would have presumed in the situation that Plessy intended to be legally bound to the letter that it gave to Toronto Dominion.
But on the facts, that presumption was rebutted, even though we assume that they would have intended to be bound to it.
We know from their previous negotiations and plus these confided consistency that it would not just guarantee that in fact, there was no intention.
