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Intention to Create Legal Relations

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0 Intention to Create Legal Relations
Remember, if you smoke after sex you're doing it too fast. ~ Woody Allen

1 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

2 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

3 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

4 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

5 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”

6 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

7 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

8 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 co-operation."

9 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

10 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

11 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

12 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

13 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

14 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

15 Certainty Completeness Certainty
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

16 Certainty Two competing principles at stake
Courts try to uphold agreements - should adopt reasonable interpretation or insert terms by implication Only terms which parties voluntarily agree to should be enforced - should not impose terms on parties unless clearly adopted by them

17 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

18 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

19 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)

20 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

21 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

22 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.

23 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

24 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

25 Certainty Terms upheld - promises to pay Term not upheld - promise to
‘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

26 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

27 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

28 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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