CONTRACT
LAW
TP1 NOTES
,Week 5 Enforceability - Intention to create legal
relations (ICLR)
What is enforceability?
• If you have an offer and matching acceptance that makes an agreement.
• Not all agreements are legally binding promises.
Which promises are enforceable?
• There must be an intention to be legally bound (ICLR)
AND EITHER
• Promise is contained in a DEED (official record of an agreement), OR
• Promise is supported by CONSIDERATION (something - act or promise-
given in exchange for the promise which is being enforced)
Domestic or social agreements –
Presumption that there was NO intention to create legal relations
Commercial agreements –
Presumption that the parties intended to create legal relations
-
Presumptions = evidential (may be rebutted) depending on the evidence
Domestic and social agreements
Domestic or social - presumption of no intention to be legally bound
Husband and wife: Balfour v Balfour
• Husband and wife living together ‘in amity’ when the agreement was made.
• Held that there was no ICLR.
Reasons underpinning the decision
• Atkin LJ: Hospitality example. No suggestion that would sue if dinner
cancelled or if an invited guest failed to show up.
• Floodgates danger if such domestic agreements could come before the
courts.
When is the presumption of no ICLR rebutted?
Presumption of no ICLR unless
• Husband and wife about to separate (Merritt v Merritt)
But, even in this situation (separating), agreement must be sufficiently certain in its
terms to be capable of enforcement (Gould v Gould – couple separating but no
ICLR).
In Merritt, important that (i) agreement was in writing and (ii) terms sufficiently
certain.
, Compare Gould (husband promise ‘as long as I can manage it’ held not sufficiently
certain).
The presumption of no ICLR may be rebutted where:
•The terms are sufficiently certain and
•There is strong evidence of reliance (Parker v Clark: agreement between
relatives to share a house).
^ Parker: two couples – elderly couple (C1) and their niece/her husband (C2);
agreement that if C2 sold their house and moved in with C1 sharing household
expenses, C1 would leave house to C2; C2 did that and C1-C2 fell out. Held:
agreement enforceable: (i) very clear certain terms and (ii) reliance (C2 selling
house)
Jones v Padvatton- rebutting the presumption:
• Mother suing daughter for possession of house. Daughter argued there was a
binding contract.
CA held: No ICLR despite reliance by daughter on mother’s promise.
Key factors against ICLR were:
• Uncertain terms – currency and duration
• Parties gave evidence that they would not have envisaged legal action
against each other in order to enforce their agreement.
Words used do not amount to promises e.g., comfort letters – statements of policy or
reassurance only which fall short of a guarantee of the debts of a subsidiary company by the
parent.
Kleinwort Benson v Malaysia Mining – comfort letter was non-promissory statement of
policy
Hirst LJ in Bowerman considered ABTA had made only a statement of policy – and had not
made any contractual promise.
Presumption may be rebutted by express words: honour clauses - ‘binding in honour only’
(so agreeing to exclude jurisdiction of the courts).
• Rose & Frank v Crompton Bros
• Jones v Vernon’s Pools Ltd: no action on football pools coupon
Enforceability of formation promises
Formation promises must either:
• Be contained in a DEED – signed (with signature attested by witness) and
delivered.
OR
• Be supported by consideration (some act or promise given in exchange for
the promise which is being enforced)
• Note that there is no need to establish consideration if the promise is
contained in a deed. Deeds are therefore useful to enforce gratuitous
promises.
LAW
TP1 NOTES
,Week 5 Enforceability - Intention to create legal
relations (ICLR)
What is enforceability?
• If you have an offer and matching acceptance that makes an agreement.
• Not all agreements are legally binding promises.
Which promises are enforceable?
• There must be an intention to be legally bound (ICLR)
AND EITHER
• Promise is contained in a DEED (official record of an agreement), OR
• Promise is supported by CONSIDERATION (something - act or promise-
given in exchange for the promise which is being enforced)
Domestic or social agreements –
Presumption that there was NO intention to create legal relations
Commercial agreements –
Presumption that the parties intended to create legal relations
-
Presumptions = evidential (may be rebutted) depending on the evidence
Domestic and social agreements
Domestic or social - presumption of no intention to be legally bound
Husband and wife: Balfour v Balfour
• Husband and wife living together ‘in amity’ when the agreement was made.
• Held that there was no ICLR.
Reasons underpinning the decision
• Atkin LJ: Hospitality example. No suggestion that would sue if dinner
cancelled or if an invited guest failed to show up.
• Floodgates danger if such domestic agreements could come before the
courts.
When is the presumption of no ICLR rebutted?
Presumption of no ICLR unless
• Husband and wife about to separate (Merritt v Merritt)
But, even in this situation (separating), agreement must be sufficiently certain in its
terms to be capable of enforcement (Gould v Gould – couple separating but no
ICLR).
In Merritt, important that (i) agreement was in writing and (ii) terms sufficiently
certain.
, Compare Gould (husband promise ‘as long as I can manage it’ held not sufficiently
certain).
The presumption of no ICLR may be rebutted where:
•The terms are sufficiently certain and
•There is strong evidence of reliance (Parker v Clark: agreement between
relatives to share a house).
^ Parker: two couples – elderly couple (C1) and their niece/her husband (C2);
agreement that if C2 sold their house and moved in with C1 sharing household
expenses, C1 would leave house to C2; C2 did that and C1-C2 fell out. Held:
agreement enforceable: (i) very clear certain terms and (ii) reliance (C2 selling
house)
Jones v Padvatton- rebutting the presumption:
• Mother suing daughter for possession of house. Daughter argued there was a
binding contract.
CA held: No ICLR despite reliance by daughter on mother’s promise.
Key factors against ICLR were:
• Uncertain terms – currency and duration
• Parties gave evidence that they would not have envisaged legal action
against each other in order to enforce their agreement.
Words used do not amount to promises e.g., comfort letters – statements of policy or
reassurance only which fall short of a guarantee of the debts of a subsidiary company by the
parent.
Kleinwort Benson v Malaysia Mining – comfort letter was non-promissory statement of
policy
Hirst LJ in Bowerman considered ABTA had made only a statement of policy – and had not
made any contractual promise.
Presumption may be rebutted by express words: honour clauses - ‘binding in honour only’
(so agreeing to exclude jurisdiction of the courts).
• Rose & Frank v Crompton Bros
• Jones v Vernon’s Pools Ltd: no action on football pools coupon
Enforceability of formation promises
Formation promises must either:
• Be contained in a DEED – signed (with signature attested by witness) and
delivered.
OR
• Be supported by consideration (some act or promise given in exchange for
the promise which is being enforced)
• Note that there is no need to establish consideration if the promise is
contained in a deed. Deeds are therefore useful to enforce gratuitous
promises.
