Chapter 10: Enforceability of Contract - Intention to Create a Legal Relationship

Question 1

Balfour v Balfour Ratios

arrangement between husband and wife

Answer 1

1. In order for a legally enforceable contract to arise, the parties must demonstrate an INTENTION to be legally bound
2. There is a general presumption against an enforceable contract with respect to domestic arrangements/ agreements between spouses as these are parties “in amity” (natural love and affection) and therefore they do not intend that their agreements should have legal consequences. However, presumption against intention can be rebutted.
3. In a domestic arrangement, the onus is on the party asserting legal effect was intended to rebut presumption

agreement made while happily made, therefore not legally enforcable

Question 2

Merritt v Merritt

Husband and wife arrangment

Answer 2

1. The presumption against the creation of legal relations in a domestic arrangement is rebutted when the parties are not living in amity, because they bargain keenly. In such situations, it can be safely assumed that the parties do intend to create legal relations.

husband had left wife for another woman, were getting divorced

Question 3

Fobasco v Cogan Ratios

Baseball tickets; social relationship between business associates

Answer 3

1. When friends who are also business people do not outline respective rights and leave an arrangement vague and uncertain, the court will assume the parties do not have intention to enter into a binding legal arrangement.
2. test for whether promise legally enforceable: reasonable person in position of promisee
3. The more social the relationship and the more personal the subject matter, the less likely the court will find legal intention
4. Social context, no obvious consideration, failure to carefully outline the respective rights and interests under the contract all point to unenforcable social agreement

Question 4

Edwards v Skyways

Commercial agreement: laid-off pilots offered full pension

Answer 4

1. There is a presumption in business matters that an agreement will give rise to legal relations.
2. Onus is on the party asserting that the presumption does not apply to rebut this presumption and convince the court that no legal effect was intended: onus is a “heavy one”