Intention to Create Legal
Relations
Remember, if you smoke after sex you're doing it
too fast.
~ Woody Allen
Intention to Create
Legal Relations
 Family, Social and Domestic Relations
 Presumption: no intention to create legal
relations
 Commercial Agreements
 Presumption: intention to create legal
relations
 Other Particular Situations
 Government Transactions
 Unincorporated Associations
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Family, Social and Domestic
Relations
 Generally presumed that there is no
intention to be bound
 Did the parties intend to be met with
legal consequences?
 E.g. did they intend to sue one another
in the event of breach?
 Presumption is weak and easily
rebutted with evidence to the
contrary
2
Family, Social and Domestic
Relations
 Balfour v Balfour [1919] 2 KB 571
 Maintenance paid to wife whilst she
remained in England
 Parties separated – issue was whether
the contract for maintenance could be
upheld?
 No intention to create liability –
agreement was made in an amicable,
domestic environment
 Floodgates issues
3
Family, Social and Domestic
Relations
 Cohen v Cohen (1929) 42 CLR 91
 Husband promised to pay the wife a dress
allowance
 Held that there was no intention to create legal
relations, following Balfour
 Merritt v Merritt (1970) 2 All ER 760
 Parties reached agreement after they had
divorced
 Held that there was an intention to create legal
relations, as they were not in a domestic
situation
4
Family, Social and Domestic
Relations
 Jones v Padavatton [1969] 2 All ER 616
 Mother promised to pay daughter and to give
her a house if she returned to England to study
at the bar and later practice in Trinidad
 Daughter did not return to Trinidad, and did not
practice law
 Mother sought possession of the house
 Agreement found to be within a social / family
setting, and not intended to create legal
relations
 “I didn’t open the door because a normal
mother doesn’t sue her daughter in court.
Anybody with normal feelings would feel upset
by what was happening”
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Family, Social and Domestic
Relations
 Rebuttal of Presumption
 Wakeling v Ripley (1951) 51 SR (NSW)
183
 Significant personal/financial sacrifice was
made
 This construed the agreement as
commercial
 See also Riches v Hogben [1986] 1 Qd R
315; and Todd v Nicol [1957] SASR 72
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Family, Social and Domestic
Relations
 Other issues - consideration
 Dunton v Dunton (1892) 18 VLR 114
 A promise by an estranged wife to conduct
herself “with sobriety, and in a respectable,
orderly and virtuous manner”
Just like Emily here...
 Not only was intention an
issue, but there was also an
issue with consideration
being illusory
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Commercial Arrangements
 Presumption that parties intend to be bound
 This can in some circumstances be displaced
 E.g. honour / ‘gentleman’s’ clauses
 Rose and Frank Co v J R Crompton & Bros Ltd
 Clause ousting court’s jurisdiction
 Presumption was rebutted
 "This agreement is not entered into…as a formal or
legal agreement…it will be carried through by each of
the three parties with mutual loyalty and friendly cooperation."
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Commercial Arrangements
 Edwards v Skyways Ltd [1964] 1 All
ER 494
 ‘Ex gratia’ or voluntary payment
 Was the promise to pay binding – e.g.
was it within a commercial scenario,
where the parties intended to be bound?
 Held that the presumption of intention
was not rebutted – ex gratia payment
still made within a commercial setting
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Commercial Arrangements
 Esso Petroleum Ltd v Commissioners of Customs
and Excise [1976] 1 All ER 117
 Promotional goods and gifts with sale
 Can the intention be rebutted even though it is still
within a commercial setting, and words like ‘free’
and ‘gift’ were used?
 Presumption not rebutted – it was found that Esso
intended to enter a contract for the supply of the
coins to customers
 Note also Carlill v Carbolic Smoke Ball, but
compare with Leonard v Pepsico Inc (2000) 210
F 3d 88
10
Commercial Arrangements
 Roufos v Brewster (1971) 2 SASR
218
 Son-in-law and parents-in-law, arranged
transport of goods to their respective
businesses
 Setting was commercial, not social or
domestic
 “The whole setting of the arrangement is commercial
rather than social or domestic” per Bray CJ
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Particular Situations
 Government Schemes
 The government can enter into contracts, but what of
administrative schemes arising from policy e.g.
welfare?
 The Administration of the Territory of Papua New
Guinea v Leahy (1961) 105 CLR 6
 Tick eradication scheme that was carried out
poorly by the government
 Landholder attempted to sue for breach of
contract
 Held that the arrangement was of an
administrative rather than a contractual nature
 See also Australian Woollen Mills case from last
week
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Particular Situations
 Unincorporated Associations
 Cameron v Hogan (1934) 51 CLR 358
 No tangible or practical proprietary right
 See also Finlayson v Carr [1978] 1 NSWLR 657
 Voluntary Arrangements
 Dietrich v Dare (1980) 54 ALJR 388 – a volunteer
employee was injured, held not to be an employee
(no contract) and could not claim workers’
compensation
 Teen Ranch Pty Ltd v Brown (1995) 87 IR 308 –
voluntary work at a church camp did not create legal
relations
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Conclusion
 Overlap between intention to be
bound, agreement and consideration
 Dunton v Dunton (1892) 18 VLR 114
 Horton v Jones (1935) 53 CLR 475
 Lack of consideration (e.g. illusory)
 Lack of intention
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Certainty
 Completeness
 An agreement must contain all the essential
terms
 Certainty
 Each term must be precise and clear enough
that a court can attribute a meaning to it
 Not absolute concepts - is the agreement
complete and certain enough?
 Courts have wide discretion - some
inconsistency in outcomes
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Certainty
 Two competing principles at stake
1. Courts try to uphold agreements should adopt reasonable interpretation
or insert terms by implication
2. Only terms which parties voluntarily
agree to should be enforced - should not
impose terms on parties unless clearly
adopted by them
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Certainty
 Completeness
1. The essentiality of terms that are
missing
2. Why any essential terms are missing
(did the parties forget to include them,
deliberately omit them? etc)
3. Whether the contract is wholly
executory
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Certainty
 Completeness
 Is the missing term essential?
 Familiar contracts eg conveyance of land,
leases, sale of goods - essential terms
have been identified by courts
 Sale of land - parties, land, price
 Lease - commencement date, rental
 Sale of goods - price not essential
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Certainty
 Completeness
 Unfamiliar contracts
 The threshold question is not whether the
expressly agreed terms are sufficient in
themselves to constitute a contract, but
whether the parties have specifically agreed all
the terms that only they can decide. (my
emphasis)
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Certainty
 Completeness
 Why are the essential terms omitted?
 Parties may attempt to ‘agree to agree’ Not enforceable
 Parties may have overlooked an issue court may supply a term by implication, but
with reluctance
 Parties may have failed to agree on the
issue - Not enforceable
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Certainty
 Completeness
 Is the contract wholly executory, partially
executed or wholly executed?
 Executory - neither party has performed their
obligations ie the promises have not been fulfilled
yet
 Partially executed - one party has performed their
obligations, but the other party has not - eg one
party has provided services but has not yet been
paid. eg goods have been paid for but not yet
delivered
 Wholly executed - both parties have fulfilled their
obligations eg goods have been delivered and paid
for
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Certainty
 Completeness
 Wholly executory - courts will be more
reluctant to ‘read in’ missing terms
 Partially executed - courts will be more
ready to ‘read in’ missing terms by
implication
 Wholly executed - what’s the problem,
guys? The contract is finished.
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Certainty
 Imprecise, vague or meaningless
terms eg;
 Language is deficient in expression
 Semantic or conceptual difficulties
 Language is clear, but application to facts
doesn’t make sense
 No facts fit the contract description
 More than one set of facts fit the contract
description
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Certainty
 Examples
 ‘subject to finance’ - Meehan v Jones
 ‘upon reasonable terms as commonly
govern such a lease’ - Whitlock v Brew
 Value of land fixed but less depreciation Hall v Busst
 Option to participate in company equity
sharing scheme but no such scheme
existed - Biotechnology v Pace
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Certainty
 Terms upheld - promises to pay

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
‘handsomely’
‘a substantial sum’
‘a substantial cut on all work done’
‘a bonus’
‘a fair and equitable price’
‘current bank overdraft rates’
‘supplier’s costs’
 Term not upheld - promise to
 ‘well reward’ employee
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Certainty
 Reasonableness
 Operates as a standard by which courts
can interpret vague or imprecise terms
 Sale of Goods Act - implies promise to pay
a reasonable price
 Can not help if there are several
‘reasonable’ interpretations of the term eg
Whitlock v Brew, Hall v Busst
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Certainty
 Agreements to negotiate
 UK - not enforceable if parties agree to
negotiation ‘in good faith’
 Australia - Coal Cliff Collieries v Sijehama Court said agreement to negotiate could be
enforceable, though not in that case
 Aiton v Transfield - NSW Supreme Court
enforced an agreement to negotiate and
mediate in good faith
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Certainty
 Severance
 If a contract contains an uncertain term
which is not essential, court may ‘sever’
the term from the contract, and enforce
the balance
 Only available if severance does not
change the nature of the agreement
overall
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