Intention to Create Legal Relations

Question 1

Albert v Motor Insurers’ Bureau: Facts and Ratio

Answer 1

An accident occurred while men were sharing a car to work’ the deceased had been the passenger, and had been carried fir payment. The driver was not insured for the purpose, and a claim was brought on the behalf of the deceased against the Motor Insurers’ Bureau. The question which determined the Board’s liability to pay was whether the vehicle was being used to carry passengers for reward. Although on the evidence the payment terms had been flexible, the majority of thenHouse of Lords found that the arrangement went beyond a mere matter of social kindness even if it was not strictly contractual, and was sufficient to render the Board liable. Lord Cross, differing from the majority, held that a contract was necessary and could be found at least in relation to completed journeys. “

Question 2

Lord Cross’ taxi from Victoria station analogy. Which case and what does he say?

Answer 2

Albert v Motor Insurers’ Bureau: I think the judge was wrong in holding that the facts which he found warranted the inference that there were no legally binding agreements between Mr. Quirk and any if his passengers, it is not necessary in order that a legally binding contract should arise that the parties should direct their minds to a the question and decide in favour of the creation of a legally binding relationship. If I get into a taxi and ask the driver to drive me to `Victoria station, it is extremely unlikely that either if us directs his mind to the question if whether we are entering into a contract,mWE ENTER INTI A CINTRACT NIT BECAUSE WE FIRM ANY INTENTION TO ENTER JNTI INE BHT BECAUSE UF OUT=R MJNDS WERE DIRECTED TI THE POINT, WE SHOULD AS REASONABLE PEOPLE BOTH AGREE THAT WE WERE IN FACT ENTERING ONE. WHEN ONE PASSES FRIM THE FIELD OF TRANSACTIONS F OF AN OBVIOUSLY BUSINESS CHARACTER BETWEEN STRANGERS TO ARRANGEMENTS BETWEEN FRIENDS KR ACQUAINTANCES FOR THE PAYMENT KNY THENPASSENGER KF A CKNTRIBUTIIN TIWARDS EXPENSES THE FACT THAT THE ARRANGEMENT IS NIT MADE OURELYNAS A MATTER IF BUSINESS AND THAT UF THE ANTICIPATED OAYMENT WERE NOT MADE IT WOULD PROBABLY NEVER ENTER JNTI THE HEAD IF THE DRUVER DISPOSES INE TI SAY THAT THERE IS BI CINTRACT, BUT IN FACT THE LIKELIHOOD IF AN ACTUON BEING TINBRIUGHT TI ENFORCE INNCASE IF DEFAULT DOES NOT DETERMINE THE QUESTION OF CONTRACT OR NO CONTRACT.”

Question 3

Name the 4 cases Relations to intention to create legal relations with regard to Domestic Arrangements

Answer 3

Balfour v Balfour; Merritt v Merritt; Pettit v Pettitt; Jones v Padavatton

Question 4

Balfour v Balfour: Facts

Answer 4

The defendant and plaintiff were husband and wife. In 1916 the husband went to Ceylon, but the wife, in the advice if her doctor, stayed in England, she alleged that he made an agreement at this time to pay her £30mmonths until she joined him in Ceylon, they later decided to live separately, the wife sued for the payments, the court of Appeal held there was no contract on which she could sue. Not reasonable to hold that husband had made a binding promise which was to regulate his allowance to her, furthermore, if this were a contract, the same could be said if many promises between husband and wife which were manifestly not designed to be litigated in the courts.

Question 5

Balfour v Balfour- name of judge

Answer 5

Arden LJ
-case simply outside the scope of contract law

-agreements such as these are outside the realm of contract law altogether,r the common law does not regulate the form of agreements between spouses. The consideration that really obtains for the. Is that natural love and affection which counts for so little in these circumstances,d courts.

Question 6

What does Stephen Smith say about Balfour v Balfour?

Answer 6

Argues in his book Contract Theiry is that personal relationships are not bargains in the ordinary sense. The parties do not enter JNTI them to gain personal advantage, rather, domestic agreements are made in order to promote the parties’ shared interests”

Question 7

1st exception to Balfour:

Balfour v Balfour might be correct with regard to domestic arrangements. But which case illustrates the role the law assumes when such domestic arrangements break down?

Answer 7

Merritt v Merritt

Question 8

Merritt v Merrit: Facts

Answer 8

A husband promised njs wife, after the couple had separated, that he won,d lay her £40 a month provided that she would pay mortgage j stale BT’s on their house, he a,so promised that he would convey the house to her once the mortgage was fully paid off. He broke the second of these promises, and the wife successfully obtained a declaration that she was the sole beneficial owner of the property. The husband argued in Appeal that there was no intention to create c=legal relations in an agreement made between spouses. The Court of Appeal held that Balfour v Balfour had no application to the present case, since there the parties had been living in amity at the time the agreement was made.

Question 9

Merritt v Merritt- judge and discussion

Answer 9

Lord Denning MR: “j do not think Balfour v Balfour or Jones v Padavatton have any relation here. The parties there were living together in amity, in such cases their domestic arrangements are ordinarily not intended to create legal relations. It is altogether different when the parties are not living in amity but are separated, or about to separate. They bargain keenly. They do not rely on honourable undertakings. They want everything cut and dried, it may be safely presumed that they intend to create legal relations.”

Question 10

2nd exception to Balfour: there is a distinction to be made between executors and executed agreements between spouses as the next case shows.

Answer 10

Pettitt v Pettitt

A husband claimed a beneficial j. The matrimonial home which was in his wife’s ownership. He asserted that it had arisen from work carried out by him in the form of gardening and redecorating. The Howl denied his claim, requiring an express agreement to underpin a change in the beneficial ownership of property. Lord Diplock, in the course of a dissenting speech, observed that the principle in Balfour v Balfour did not deprive Arrangements between spouses of all legal effect.

Question 11

Pettitt v Pettitt, which judge’s dissenting speech?

Answer 11

-basically Lord Diplock is arguing that Legal intention between spouses may apply to executed (I.e. Already performed) in relation to acquisition, improvement or addition to real or personal property.

Question 12

Who suggete that the intention to create legal relations is a fungible doctrine, enforced according to the the normative context of the case being considered?

Answer 12

Stephen Hedley, Keeping Contract in its Place

Question 13

Which case extends Balfour v Balfour to family relationships beyond that of spouses?

Answer 13

Jones v Padavatton

Question 14

Jones v Padavatton: Facts

Answer 14

Mrs Jones agreed to provide a monthly allowance to her daughter. In return, the daughter was to leave her job in Washington to read for the English Bar with a view to practising in the Trinidad, the daughter did so. Later, the agreement was altered, j. That Mrs Jones bought a house for her daughter and allowed her to live there without Oahu g rent and to support herself by taking in paying lodgers. After six years of studies, the daughter had still not managed to pass her Bar exams, relations between the two broke down and Mrs Jones sought a possession order. He daughter resisted it in the basis that she had a contractual right to continue living in the house. The county court held in favour if the daughter, the court of Appeal allowed mrs Jones’ Appeal. In the view of two members of the court, there had never been an enforceable contract since the situation was a domestic one.

Question 15

Name the two cases in which the presumption against intention to create legal relationships in family situations was rebutted?

Answer 15

Parker v Clark; Simpkins v Pays

Question 16

Name some of the factors that might lead to rebut the presumption at-gains an intention to create legal relations in a domestic arrangement.

Answer 16

-indications that the agreement was meant as an enduring and not merely a makeshift allocation of rights and burdens;
-the formal and accurate drafting to enable that inference to be made;
The serious nature of the agreement’s subject matter;
The fact that it was relied upon, perhaps at length or regularly, or to the detriment of one of the parties.
-intention of both parties

Question 17

Parker v Clark

Answer 17

The plaintiffs, a married couple, co clouded an agreement with the defendants, an older couple to whom they were related and for whom they had already provided some care, the plaintiffs were to leave their own home and move in with the defendants, sharing household expenses.in return, the defendants promised to leave their house e to the plaintiffs, in reliance on the agreement, the plaintiffs sold their home and lent part of the proceeds to their daughter to enable her to buy a flat. The relationship between the two couples deteriorated’ the plaintiffs moved out and brought an action for damages against the defendants,
- the court held that it was unrealistic for defendants to argue that the agreement had given rise to no legal relations. THE FACTOR LEADING TO THIS CONCLUSION WAS THE DRASTIC AND IRREVERSIBLE CHARACTER IF THE PLAIINTJFFS’ RELIANCE IN THE AGREEMENT. IN THE CIRCUMSTANCES BOTH SIDES MUST HAFE ENFISAFED THAT A LEGAL REMEDY WOULD BE AVAILABLE IF THE AGREEMENT WERE BREACHED.M

Question 18

Simpkins v Pays: Facts

Answer 18

The defendant and her grand-daughter took part every week j. A newspaper fashion competition. She was helped by her lodger, the plaintiff, the plaintiff filled out the competition entry from in the defendant;S name, filling in the individual prediction made by each if the three of them. At length one of their entries (the grand-daughter)’S won the prize og\f £750. The defendant refused to pay the plaintiff the one-third share she claimed. Seller J held that the plaintiff succeeded, the true basis of the arrangeme of the arrangement between the parties had been that they would go shares if any of them won.

Question 19

Simpkins v Pays, Judge and controversy

Answer 19

Sellers J’s judgement did not contain very much discussion of principle. The best account of the ratio if the case is normally taken to be that he had asserted that there was a “mutuality” between the participants.

• but is’t mutuality just consideration, David Herling asks? And then if Legal intention automatically arises whenever consideration is found, what is the function of the doctrine? Isn;t it superfluous?
• Herling than goes against this somewhat. Mutuality can denote a fundamental type of relationship- an experience of having one;S fates bound to another in time. Mutuality is meant to provide assurance, I.e. It is meant to fo the job if a contract.

Question 20

Commercial Agreements: Edwards v Skyways

Answer 20

A company promised to make an ex gratis oahment to an employee who was accepting voluntary redundancy. The company got into financial difficulties declined to pay, asserting that it was not legally bound to do so. The arguments in the company;S defence were that the agreement was too vague to be enforced and that there was no intention to create legal relations. It was admitted that the employee had given consideration by electing to abandon certain pension rights in favour of the ex gratis payment. Megaw J held that it was for the company to bring evidence to show why presumption that legal intentions were intended should not apply, and that the onus of rebutting it was a heavy INE, it was not enough to say that the payments were ex gratia. That could mean several things- for example that the company admitted no ore-existing liability to pay. It did not mean that the promise, when accepted, should have no binding effect in law.

Question 21

Edmonds v Lawson : Facts

Answer 21

The claimant, a pupil barrister and former GDl student, sued the head if chambers and her two pupil masters at 23 Essex street clam j g that she was entitled to be paid the minimum wage during the pupillage year, her pupillage was otherwise unfounded, to succeed, she needed to bring herself within the provisions of the National Minimum Wage Act 1998, which required that she had a contract with the sett if chambers, and that she was a “worker”. In answer TI the first point, the defendants argued that there was no j tentjin TI create legal relations and no consideration moved from the claimant, the court of Appeal dismissed those arguments, holding that the relationship was contractual. However, she was not a worker within the meaning of the Act.

Question 22

Edmonds v Lawson: Detail & Significance.

Answer 22

Lord Bingham

• intention to create legal relations determined by an OBJECTIVE TEST.
• here, the written offer came at the end of a long, time-consuming and expensive process. It was a process of great ck sequence to them since, a,though barristers are in practice Independent self-employed practitioners, it is of benefit to all, at every level, that chambers have best blah blah blah….when as a culmination of a long process, it would in our judgement be surprising that the parties intended to bind themselves in honour only.:
• rejected arguments from James Goudie QC relying on the educational nature of the agreement. Which had suggested that the relationship lacked the characteristics of a commercial contract and involved no payment to the pupil. Also rejected the argument that there was no need for a contract because the relationship was created through other documents and that bar disciplinary measures were to provide judicial function. Also rejected argument that lack of written terms and conditions was important.

Question 23

Rebuttal of presumption of intention to create legal relations in COMMERCIAL relationships: name the two cases

Answer 23

Rose and Frank Comp v Crampton and Brothers; Klienwort Benson Ltd v Malaysia Mining Corporation

Question 24

Rose and Frank Co v Crampton and Brothers: Facts

Answer 24

In 1913, two firms, an Englishnand American company entered into an agency agreement whereby the American company was to sell the other’s products in the USA for a period of years, the document contained the following clause, described as an ‘Honourable Pledge Clause.’ Namely, this armmentnjs nit witten as a formal legal agreement and shall not be subject to the legal jurisdiction in either the law courts of England or the US. “ the House of Lords held that the Clause was sufficient to prevent legal relations from arising at of the agreement of 1913. HOWEVER, LEGAL RELATJONS WERE CREATED BY THE PLACING AND ACCEPTANCE KF SPECIFIC ORDERS JNDER THE AGREEMENT FROM TIME TO TIME.

Question 25

Rose and Frank Comv Crompton: Herling Nugger

Answer 25

The decision in Rose and Frank v Crompton clearly gives effect to the ‘Honourable Pledge Clajse; that both parties meant to have at the time it was drawn up. However, it also raises the question whether one party to a commercial, agreement could escape being bound by careful drafting when the other had no intention of going without legal remedies in the case of breach, the next case, Kleinwort Benson Ltd v Malaysia Mining makes that a real possibility

Question 26

Kleinwort Benson Ltd v Malaysia Mining Corporation

Answer 26

The plaintiff merchant bank had made a loan of £10 million to the defendants; subsidiary and had sought a security for it I.e. A guarantee, the defendants had refused to give a guarantee, but instead provided a “comfort letter: stating that “it is our policy to ensure that the business of (subsidiary) is at all times able to meet its liabilities to you under the above arrangements.: subsidiary sent into liquidation and plaintiffs sought repayment if the loan from the defendants. The defendants denied any contractual liability. The Court of Appeal rejected suggestion of Legal intention, they distinguished Edwards v `Skyways in the basis that it involved a promise, whereas this case did not. The defendants had stated what their policy was, they had not promised what it would be in the future.

Question 27

Which Australian case criticised Kleinwort?

Answer 27

Banquet Brussels Lambert v Australian National Industries Ltd the decision was bitterly criticised by Rogers C`j. He argued that RalphnGibson LJ in Kleinwort had engaged j. A semantic exercise “inimical, to the effective administration of justice.m

Question 28

In which cases are there been calls for the ‘ossified’ doctrine of consideration to be done away with in favour of the intention to create legal relations?

Answer 28

Russell LJ in Williams v Roffey Bros; Digilandmall.com Pte.

Question 29

How does Herling consider the relationship between consideration, offer and acceptance and intention to create legal relations?

Answer 29

These approaches seems to suggest a single, inescapable analysis/ the name by which it will be known is a secondary matter.. In some case, courts will describe it in the ,anguage KF consideration. In other in the language of intention to create legal relations In every case however, the objectives must be determine whether the parties’ exchanges are such to merit legal consequences. The search is, as Lord Blackburn out it in Bridgend v Metropolitan Railway Co, for the ‘extraneous act’ that clenches the matter.”