S4: ITCLR and Certainty

Question 1

What is ITCLR ?

Answer 1

This is where parties intend to create legal relations

Question 2

Where are presumptions applied ? Can they be rebutted ?

Answer 2

Presumptions are applied in domestic/commercial relationships. Presumptions can be rebutted.

Question 3

How can courts identify whether they intended to create legal relations ?

Answer 3

If the relationship is business or commercial, courts will identify thereb was intention to create legal relations
If the relationship was domestic or social, courts will identify there wasn’t intention to create legal relations.

Question 4

Commercial Agreements

Answer 4

• There’s a presumption that there’s ITCLR in all commercial transactions
• The subject matter of the agreement may provide a clue as to whether or not the parties intend to be legally bound
• Devices may be used by the parties to express their intention to be contractually bound, such as “this agreement isn’t subject to the jurisdiction of the courts”.

Question 5

What is Onus ?

Answer 5

This is on the party who argues against the presumption
This means the burden of proof is on the party wishing to rebut the presumption

Question 6

Key Cases for Commercial Agreements

Answer 6

Esso Petroleum v Customs and Excise [1976] where it was decided that as there was no transfer of good for far monetary consideration, there was no contract for sale and therefore, the coins were not subject to tax.
Rose Frank Co. v Crompton [1925] where it was held that it was unenforceable, and as the agreement was unenforceable, there was no obligation on the English company to supply the goods and there was no obligation on the American company to place an order for goods.

Question 7

Comfort Letters - Key case?

Answer 7

The question of ITCLR in commercial agreements was considered again more recently in Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd [1989]. It was held by the court that there was no such intention, and this was deemed to be nothing more than a comfort letter.

Question 8

Social and Domestic Agreements

Answer 8

The question of ITCLR depends on the inferences to be drawn from circumstances of each case and the language used by the parties

Question 9

Key cases for social and domestic agreements

Answer 9

B v B [1919] - The courts concluded that there was no intention to create legal relations between the parties as they had separated when the husband had intended to give his wife £30 a month so that obligation is no longer required.
M v M [1970]- It was stated that the presumption in this case suggested it was a domestic and social agreement and therefore lacked the intention to create legal relations. And so as the couple had separated, the agreement doesn’t need to be legally bound by.

Question 10

What is Certainty ?

Answer 10

Vague,incomplete and uncertain agreements which cannot form the basis of a valid contract.

Question 11

What are vague agreements ?

Answer 11

• Ambiguous language/terms
• If the agreement is vague, courts have to consider whether it’s possible to make that agreement clear and complete at a later date.

Question 12

Key Cases for Vague agreements

Answer 12

• Scammell v Ouston [1941] - Agreement was uncertain
• Hillas & Co Ltd v Arcos Ltd [1932]- Agreement was complete and binding

Question 13

What are incomplete agreements ?

Answer 13

• Missing essential elements
• Ambiguous language
• Terms to be agreed at a later date with no mechanism for agreement (e.g. 3rd party or arbitration)

Question 14

Key Cases for Incomplete agreements

Answer 14

• May & Butcher v The King [1929] – Courts conclude that there was no agreement between the parties. It was supported by reference to the Sales of Goods Act at the time, under s.8 providing that a price could be fixed in future.
• Courtney & Fairbairn Ltd v Tolaini Brothers ( Hotels) Ltd [1975] – The court concluded that as a result, the agreement was not advisable.

Question 17

Who has the capacity to enter a contract ?

Answer 17

• Corporations?
• Minors (children)?
• Mental capacity?
• Intoxication?

Question 18

Corporations

Answer 18

• A legal person/being and therefore is separate from it’s individual shareholders and directors. Therefore, corporations can enter into contractual agreements like an ordinary person.
• Comes under s.39/40 of the Companies Act 2006
• ‘In favour of a person dealing with a company in good faith, the powers of the directors to bind the company, or authorise others to do is, is deemed to be free of any limitations under the company’s constitution’.

Question 19

Key Case ?

Answer 19

Ashbury Railway Carriage and Iron Co Ltd v Riche (1875)

Question 20

Minors

Answer 20

• Comes under the Minors Contract Act 1987
• Total failure of consideration

Question 21

What are the exceptions for minors ?

Answer 21

1. Contracts ‘voidable’ by the minor
2. Contracts for necessaries
3. Beneficial contracts of service

Question 22

What is restitution by the minor ?

Answer 22

• Sometimes this area of law can result in injustice for the adult party
• 3 of the Minor’s Contract Act 1987 now provides some redress:
  “The contract is unenforceable against the defendant because he was a minor when the contract was made, the court may, if it is just and equitable to do so, require the defendant to transfer to the plaintiff any property acquired by the defendant under the contract, or any property representing it.”

Question 23

Mental Capacity

Answer 23

• Comes under the Mental Capacity Act 2005
• ‘For the purposes of this Act, a person lacks capacity in relation to a matter if at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain.’

Question 24

Key Case ?

Answer 24

Hart v O’Connor [1985]- Did the other party know or ought they have known of the capacity?

Question 25

Intoxication

Answer 25

Under the common law rules, a contract may not be binding upon an intoxicated individual if:

1. They didn’t understand what they were doing;
   AND
2. Their impairment was known to the other contracting party
   (Gore v Gibson [1843] and Mathews v Baxter)
   However, the intoxicated individual will have to pay a reasonable price for necessaries (Sales of Goods Act 1979).