Domestic and social agreements

In this type of agreement, there is a presumption that the parties do not intend to create legal relations.

            In Balfour v Balfour a husband returned to Ceylon to take up employment and he promised his wife, who could not return with him due to health problems, that he would pay her £30 per month as maintenance. When the marriage later ended in divorce, the wife sued for the promised maintenance. It was held that the parties had not intended the original promise to be binding and, therefore, it was not legally enforceable.

            It is essential to realise that the intention not to create legal relations in such relationships is only a presumption and that, as with all presumptions, it may be rebutted by the actual facts and circumstances of a particular case. A case in point is Merritt v Merritt After a husband had left the matrimonial home, he met his wife and promised to pay her £40 per month, from which she undertook to pay the outstanding mortgage on their house. The husband, at the wife’s insistence, signed a note, agreeing to transfer the house into the wife’s sole name when the mortgage was paid off. The wife paid off the mortgage but the husband refused to transfer the house. It was held that the agreement was enforceable, as, in the circumstances, the parties had clearly intended to enter into a legally enforceable agreement.

            ‘Social’ agreements, such as lottery syndicates, have also been the subject of legal dispute. In Simpkins v Pays a relatively vague agreement about contribution to postage and sharing of any winnings in competitions made between a lodger, a landlady and her granddaughter was alleged not to be a contract for lack of intention to create legal relations. However, the court decided that there was a binding contract to share winnings, despite the apparently social nature of the agreement. The agreement was commercial in nature and related to a matter unconnected with the running of a household; there was a degree of mutuality in the agreement which indicated an intention that it was binding. In Albert v Motor Insurers’ Bureau an agreement between colleagues in relation to lifts to work was held to be a contract because there was intention to create legal relations. It was said to be unnecessary to show whether the parties had thought about whether there was a contract, nor did it matter that, if asked, they would have said that they would not have sued if the arrangement failed. Clearly, therefore, the presumption does not purport to find the actual intention of the parties. Perhaps the best advice, particularly in relation to lottery syndicates, is to reduce the agreement to writing so that there is written evidence that the parties did intend the agreement to be a binding contract.

Collective agreements

Agreements between employers and trade unions may be considered as a distinct category of agreement for, although they are commercial agreements, they are presumed not to give rise to legal relations and, therefore, are not normally enforceable in the courts. Such was the outcome of Ford Motor Co v AUEFW in which it was held that Ford could not take legal action against the defendant trade union, which had ignored previously negotiated terms of a collective agreement.

            This presumption is now conclusive by virtue of s 179 of the Trade Union and Labour Relations Act 1992, unless the agreement is in writing and expressly states that it is a binding agreement.