COMPARATIVE CONTRACT LAW
PART II: THE LAW OF CONTRACT
(CONTINUED)
COMPARATIVE LAW
LLM
KILAW
SPRING 2013
1
DR MYRA WILLIAMSON
THE STORY SO FAR…
There are 4 main elements, all of which need to be satisfied,
to form a contract in the English common law:
1. Offer and acceptance
2. They must have an intention to create legal
relations/parties must intend mutual obligations
3. The parties must have the capacity to enter into the
contract
4. Consideration
The order is not important. Its only important that all 4 be
satisfied. If any are missing, there will not be a contract.
INTENTION TO CREATE LEGAL
RELATIONS
We have covered the first item: Offer
and acceptance
3
Another element of a contract is the
intention by both parties to create
legal relations
OVERVIEW
This requirement did not exist until the 19th century
It is now established that an agreement will not constitute a binding contract unless it
is one which can reasonably be regarded as having been made in contemplation of
legal consequences
A mere statement made in the course of conversation will not constitute a binding
promise – even though it has been acted upon
PRESUMPTIONS:
•
Social and family situations are presumed NOT to give rise to legal
consequences
•
Business and commercial situations are presumed to give rise to legal relations
•
In both cases, the presumption is the starting point. The presumption can be
rebutted by the facts.
4
Compare with…
WHERE ARE WE HEADING?
5
Three areas of interest:
1. Social Arrangements
2. Family Arrangements
3. Commercial/business
arrangements
1. SOCIAL AGREEMENTS
Agreements of a purely social nature do not usually give rise to a contract
because there is not usually an intention to create legal relations
That doesn’t mean that social agreements can’t have a monetary value – they
often do!
Examples:
• Accepting an invitation to dinner
• An agreement between friends to take part in a golf competition
• An offer to share the cost of petrol on a journey*
In all these types of situations, money is involved
They are agreements in which one party may incur expenses because of the
promise
In social engagements, there is a presumption that there is no intention to create
legal relations
6
BUT whether there is a contract or not turns on whether the Court would
consider that legal consequences could have reasonably been contemplated by
the parties
1. SOCIAL AGREEMENTS
CONT’D…
See this statement in the case of:
Balfour v Balfour (1919) Atkin L.J.:
“…there are agreements between parties which do not result in
contracts within the meaning of that term in our law.
The ordinary example is where two parties agree to take a walk
together, or where there is an offer and an acceptance of
hospitality.
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Nobody would suggest in ordinary circumstances that those
agreements result in what we know as a contract…” (emphasis
added)
2. FAMILY ARRANGEMENTS
 Family arrangements are another area where there is likely to be
no intention to create legal relations
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 Balfour v Balfour (1919) Atkin L.J.:
Facts:
 Parties are husband and wife
 Husband was employed in Ceylon – both lived there.
 Husband and wife both returned to England on leave but wife was
unable to go back to Ceylon for medical reasons.
 Husband promised to pay his wife an allowance of £30 a month until
she rejoined him
 He failed to pay; she sued him
2. FAMILY ARRANGEMENTS
CONTINUED…
Balfour v Balfour (1919)
• Held: it was not impossible for a husband and wife to enter into a
contract for maintenance
• But here, the husband and wife never intended the agreement to
have legal consequences
A similar finding was made in a New Zealand case…
Fleming v Beeves [1994] 1 NZLR 385
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A parent’s promise to pay a child an allowance whilst at university
ordinarily creates only a moral obligation – no intention to be legally
bound
2. FAMILY ARRANGEMENTS
However, the courts will occasionally find that there is an intention to
create legal relations: here is one such case…
Simpkins v Pays (1955) 1 WLR 975
The facts:
Simpkins was boarding in Pays’ house
Pays was an 83-year-old widow
There was a weekly newspaper competition
Simpkins agreed with Pays and with Pays’ granddaughter to jointly
enter in a weekly coupon submitted in a fashion competition
The parties agreed “to go shares” if they won – that was the basis of the
arrangement
After about 7 or 8 weeks, Pays’ grand-daughter’s forecast was correct
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The plaintiff – Simpkins – wanted to share in the prize
SIMPKINS V PAYS
(1955) CONTINUED…
Held:
“there was a mutuality in the arrangement between the parties. It was
not very formal but…it was agreed that if there was success, no matter
who won, all should share equally”
The plaintiff and the defendant entered into an agreement to share
Plaintiff was entitled to one-third i.e.. £250
NOTE: ‘Lotto’ cases come up from time to time. Sometimes one party
sues because there was an understanding about sharing the winnings.
It’s hard to prove that there was a contract. There have been some
interesting cases:
http://www.telegraph.co.uk/finance/personalfinance/8832648/Spouseshave-no-right-to-lottery-winnings.html
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It’s hard to tell in advance which way the court will go. It very much
turns on the individual facts of the case.
PARKER V CLARK
(1960)
Here is another “family arrangement” case where the court went against the
presumption and found that there was an intention to create legal relations
The facts:
•
Mr and Mrs Clarke agreed that their niece (Parker) and her husband could
live in their house, share the bills and then the Clarkes would leave the house
to the Parkers when they died
•
Mrs Clark wrote to the Parkers detailing the expenses and setting out the
agreement
•
An agreement was made whereby the Parkers would sell their house and
would move in with the Clarkes – to share the household expenses
•
The Parkers then sold their house and moved in with the Clarks (the Clarks
also changed their will to leave the house to the niece on death)
•
BUT then there was a falling out and the Parkers were asked to leave
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What do you think the court found? Was there an intention to create legal
relations? This is a family situation – so the starting point is the presumption
against legal relations
PARKER V CLARK
(1960) CONTINUED…
Held: the exchange of letters showed that both couples were serious
about this arrangement
They intended it to be legally binding because:
1) The Parkers sold their own home; and
2) Mr Clarke changed his will so that the house would be left to the
Parkers.
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The court held that, even though it was a family arrangement, here
there was a contract; the parties did intend to create legal relations
so the Parkers were entitled to damages for breach of contract
2. FAMILY ARRANGEMENTS
SUMMARISED
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 Generally, agreements between husbands and wives and between
parents and children are presumed not to be enforceable
contracts
 The Presumption: no intention to create legal relations
 Sometimes the court upholds the presumption (see Balfour v
Balfour and Fleming v Beeves) and other times they go against
the presumption and find that the parties did intend their
agreement to have legal consequences (see Simpkins v Pays and
Parker v Clark)
 It will depend on the facts
3. COMMERCIAL
/BUSINESS
ARRANGEMENTS
 In commercial arrangements, the law starts from
the opposite point of view – it is presumed that
the parties intend their agreements to have legal
consequences
 This presumption may be negated by express
terms – there has to be strong evidence that
there was no intention to create legal relations
15
 At least three cases which are authority for this
proposition, we will look at them in turn…
3. COMMERCIAL
/BUSINESS
ARRANGEMENTS





16
Rose v Crompton Bros (1925)
The facts:
Defendants were paper manufacturers
Plaintiffs were to act as sole agents for the defendants in the US
The parties entered into a written agreement which contained a
clause that stated:
“This arrangement is not, nor is this memorandum written, as a
formal or legal agreement and shall not be subject to legal
jurisdiction in the law courts.”
ROSE V CROMPTON
BROS (1925)
CONTINUED…
The parties wrote that they would carry out the agreement with
“mutual loyalty” and “friendly co-operation”
 The “Honourable Pledge Clause”
Plaintiffs placed orders for paper;
Defendants accepted the orders;
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Before the paper was sent, the defendants terminated the agreement
and refused to send the paper
ROSE V CROMPTON
BROS (1925)
CONTINUED…
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 Held:
 The agency agreement was not legally binding
 The court said it would respect the intention on the parties upon
entering into the contract*
 They agreed to enter it on the basis of “mutual loyalty” and
“friendly co-operation”
 [However, note that with respect to the orders that had been
placed and accepted, the court found that there had been
contracts created and the defendants were in breach of contract
for failing to fill them]
JONES V VERNON’S
POOLS LTD (1939)
Facts: The plaintiff (Jones) tried to claim football pools winnings (football
betting) but the coupon had the words “Binding in honour only” printed on it
Held:
These words were sufficient evidence to rebut the presumption of an intention to
create a legal relationship
Similar case:
Appleson v Littlewood (1939)
Facts:
Appleson sent in a football pools coupon
It had the words “it shall not be attended by or give rise to any legal relationship,
rights, duties, consequences”
Held:
Plaintiff could not recover
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There was no intention to create legal relations
SUMMARY ON
COMMERCIAL/BUSINESS
ARRANGEMENTS
Court presumes that there IS an intention to create legal relations
But this can be rebutted
However, clear evidence is needed - an express term is usually
required
If a reasonable person would consider that there was an intention to
create a contract, then the court will find the parties to have been
bound
20
The test of whether there was an intention to create legal relations is
an objective test
END OF THIS ELEMENT
Remember the differences between
social and family arrangements v
business arrangements
A different presumption applies
21
It will often turn on the facts as to
whether the presumption can be
rebutted