Contract Law Exam Notes
Offer
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An offer is an expression to another of a willingness to be bound by the stated terms
Australian Woollen Mills Pty Ltd v The Commonwealth
Bilateral Contracts
Under Bilateral Contracts each party undertakes to the other party to do or to refrain from doing something, and in the event of his/her failure to perform his/her
undertaking, the law provides the other party with a remedy.
United Dominions Trust Ltd v Eagle Aircraft Services Ltd
Unilateral Contracts
Under unilateral contracts the promisor undertakes to do or to refrain from doing something if another party, the promisee, does or refrains from doing something, but the promisee does not at the time of the offer undertake to do or to refrain from doing that thing.
United Dominions Trust Ltd v Eagle Aircraft Services Ltd
The position in such cases is simply that the consideration on the part of the offeree on the part of the offeree is completely executed by the doing of the very thing that constitutes acceptance of the offer.
Australian Woollen Mills Pty Ltd v The Commonwealth
Offers to the Public at Large
An offer can be made to the public at large.
Carlill v Carbollic Smoke Ball Company
The defendant (the company) was the manufacturer of a product called the Carbolic Smoke Ball, which was designed to prevent the user of the smoke ball from
contracting the flu. To promote its product, the Company advertised in a newspaper to pay 100 pounds to any person who contracted the flu after using one of their smoke balls in the specified manner for a specified period. The plantiff relied on the advertisement, purchased one of the smoke balls, and used it in the prescribed period. The plantiff contracted the flu and sued the Company to recover 100 pounds.
The English Court of Appeal held that the plantiff was entitled to recover the money from the Company. The court rejected the Company’s argument that the promise was not binding because it was not made with anyone in particular. As stated by lindley
LJ, ‘in point of law this advertisement is an offer to pay 100 pounds to anybody who will perform these conditions, and the performance of the conditions is the
acceptance of the offer’
In Carlill’s case the offer made to the world at large formed the basis of a unilaterial contract. This will not always be the case. Depending on the terms of the
advertisement to the general public, the advertisement may constitute an offer which, if accepted, forms a bilateral contract.
Offers made through the Internet
In recent times, there has been an enormous increase in the extent to which commerce is transacted through the Internet. The expansion of electric commerce has also highlighted a number of difficulties, particularly in relation to issues of contract formation. Given the transnational transactions and processes difficult legal problems can arise- such as establishing the place and time of contract formation, and the appropriate legal regime to govern the transaction. Some of the traditional contractual concepts will continue to be relevant. For example offers made to the public at large still abide by the principals set about in Carlill’s case.
What is not an Offer?
Mere Puff
Sometimes statements can be regarded only as ‘mere puffery’- the claims are made only for advertising purposes and mean nothing. In years gone by, it is particularly common practise to make exaggerated or perhaps unsustainable claims about products.
Carlill v Carbollic Smoke Ball Company
Not all statements made in advertising, however, can be dismissed so lightly. The case of Carlill provides such an example. In that case, it was held that the statement was more than mere puffery.
The deposit of £1,000 in the bank was an indication of the manufacturer’s intention that the offer was genuine.
Supply of Information
The supply of information is not an offer.
A request for information must be discerned from a contractual offer. A clearer indication of a preparedness to enter into a contract, than merely providing terms or information upon which a party maybe prepared to enter into such a contract, is needed.
One party was anxious to purchase property of another, the property being known as ‘Bumper Hall Pen’. The prospective purchasers sent a telegram to the owners in the following terms: Will you sell us Bumper Hall Pen? Telegraph lowest cash price.’ The owners responded: ‘Lowest price for Bumper Hall Pen £900’. The final communication was by the purchasers to say: ‘We agree to buy Bumper Hall for £900 asked by you...’ The purchasers later brought an action for specific performance when the owners refused to complete the purchase.
The Privy Council did not grant the relief sought because a contract had not been formed. The plaintiff made two enquiries of the owners: Whether they were willing to sell; and what the lowest price of the sale would be. The owners responded only to the second question by supplying the information. It could not be implied that they responded to the first question by agreeing to sell.
Invitation to Treat
An invitation to treat is an indicator of a party’s willingness to negotiate entry into a contract. It is a technique used by a party who desire another party to make an offer and cannot be construed or the terms be accepted as if it were a valid legal offer in itself.
Carlill v Carbollic Smoke Ball Company
Bowen LJ described an invitation to treat in the following terms:
Cases in which you offer to negotiate, or you issue advertisements that you have got a stock of books to sell, or houses to let, in which case there is no offer to be bound by any contract. Such advertisements are offers to negotiate- offers to receive offers- offers to chaffer, as, I think, some learned judge in one of the cases has said.
Bowen LJ pointed out that advertisements for sale, such as those appearing in advertisements or display of goods on shelves will generally be regarded as an invitation to treat.
They are not offers by themselves, but ‘offers to receive offers’. They are designed to generate offers by others. Therefore an invitation to treat cannot be accepted by the other person and bind the person who advertised the product.
The display of goods in a store is an invitation to treat.
Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd
Pharmaceutical Society GB v Boots Cash Chemists appellant argued display
of drugs in pharmacy (with prices attached) infringed a statute prohibiting sale of drugs except where registered pharmacist in attendance. Did display
constituted an offer so contract of sale at the moment that the customer selected drug when pharmacist not in attendance?
Court of Appeal held display was an invitation to treat; the customer made an
offer at check-out and offer accepted by ringing up on cash register in
presence pharmacist.
Does this make sense? Right not to sell floor stock/window display stock? Fisher v Bell shopkeeper displayed a flick-knife in window with price ticket.
Charged with offering for sale flick-knife contrary to statute
Held ” display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract.” Lord Parker
An advertisement that gives information about goods for sale and their price will generally be an invitation to treat rather than an offer.
Partridge v Crittenden
Appellant charged with statutory offence of unlawfully offering for sale wild live bird (a "Bramblefinch hen") in a periodical.
Held advert an invitation to treat not “offering for sale” in statute.
"when one is dealing with advertisements and circulars, unless they indeed come from manufacturers, there is business sense in their being construed as invitations to treat and not offers for sale.” per Lord Parker CJ.
Categorizing Transactions
Advertisements
Most advertisements are considered invitations to treat but some may be regarded as offers depending on language used in the advertisement and other relevant factors.
a) Advertisements in a catalogue or in a curricular.
Circulars, which provide information about items for sale and their prices, are regarded as invitations to treat. If it were regarded as an offer and the manufacturer ran out of stock, they would be in breach of contract for anyone who accepted such an offer as they could not provide stock
However common legislation also regulates the sale of certain types of products such as fauna and flora that may be offered for sale. The advertising material must be an offer for the legislation to apply but not if it is an invitation to treat.
Grainger v Gough
b) Advertisements in Newspapers and Magazines .
These are also considered invitations to treat unless the advertisement is couched in terms which indicate the retailers willingness to be bound if the specified terms are accepted (eg. there is a promise (Carlill) rather than a mere invitation (Partridge v Crittenden).
c) Advertisements appearing on the Internet.
The application of the same principle as newspapers and magazines is used. d) Display of Goods.
Items appearing in retail outlets, even if the price is attached, are regarded as an invitation to treat.
Pharmaceutical Society of Great Britain v Boots Cash Chemists.
The display of an article together with its price constitutes an invitation to treat. A customer who selects the item and takes it to the counter for payment makes the offer. It is then open to the retailer to accept the offer to form an agreement or reject it.
Auctions
a) Advertisement of Auctions
The advertisement of an auction is considered an invitation to treat on the part of the auctioneer. The auctioneer may withdraw items from the auction or cancel the auction all together without incurring any liability from potential bidders.
Harris v Nickerson
The auctioneer may withdraw various lots from the auction or cancel the auction altogether without incurring any liability from potential bidders.
Harris v Nickerson
b) Auctions with Reserve
Each bid represents an offer, which the auctioneer may reject or accept. Acceptance of an offer occurs, and an agreement is formed, when the auctioneer knocks down the property to the successful bidder.
Because the agreement is not formed until the bid is knocked down, the bidder can withdraw a bid (offer) before this time.
Payne v Cave
c) Auction without a Reserve
Even in an auction without a reserve, each bid represents an offer that could be accepted or rejected by the auctioneer.
The auction was originally advertised as being with a reserve, but ultimately procedded without one. The legal status of bids made at the auction arose because the auctioneer knocked the property down to the second highest bidder, not the highest bidder. The Higest bidder then lodged a caveat over the property on the basis that the purchasers of the property- the contract having been formed when they made the highest bid. The sellers then brought an action against the highest bidders removal of the caveat.
The court held that the caveat should be removed, as the sellers had not entered into a contract with them. According to the court, even in an acution without a reserve, each bid represents an offer that could be accepted by the auctioneer. As the bid was not accepted, a contract had not been formed. The court did not differentiate between the legal character of bids at an auction on the basis of whether or not there was a reserve price.
Internet Auctions
Recent years have seen a proliferation of Internet auctions, often described as ‘online auctions’. Before participating in an online auction, parties will typically first become a registered user of the online site. As part of becoming a registered user, parties will accept relevant terms and conditions appearing on the online site. Acceptance of the stipulated terms and conditions will normally be constituted by the parties clicking on an accept button. The significance of the terms and conditions being accepted by all registered users is that those terms and conditions will govern any contractural relationship arising from an online auction. The position is well illustrated by the result in:
Smythe v Thomas
The owner of a Wirraway Australian Warbird Aircraft, a registered eBay user, listed the aircraft on eBay with a notation of a minum bid of $150,000.
Another registered eBay user made a bid in accordance with the Ebay rules for $150, 000. Bothe parties received a notification from Ebay to the effect that the bidder had now ‘won’ the aircraft. Notwithstanding that both parties had agreed to Ebay’s terms and conditions which required a seller to honour winning bids at the selller’s minim bid, the owner of the aircraft denied any contractual obligations to sell on the basis that the owner had contracted with eBay and not the party bidding for the aircraft.
This contention was not accepted by Rein AJ who found that a binding contract has been formed between the parties. By listing the Aircraft on
Ebay’s site with an effective disclosed reserve of $150,000, the owner offered to sell the aircraft to that bidder who was the highest bodder of any others. Importantly Rein AJ accepted that online auctions were simply a species of
auction:
In circumstances where both the buyer and the seller agree to accept the terms and conditions on eBay I see no difficulty in treating the parties as having accepted that the online auction will have features that are both simular and different to auctions conducted in other
forums... The Parties have agreed to allow eBay, or its computer to automatically close the bidding at a fixed time and the generation of an eBay advice headed ‘won’ appear to have been accepted by the
parities to an eBay auction as the equivalent of the fall of the hammer.
Tendering
An advertisement for tenders will generally be the same as an advertisement for an auction, which is akin to an invitation to treat. Therefore no liability will be incurred if the person does not accept any of the tenders or even consider them in a bona fide way. Each tender will be considered an offer, which can be accepted or rejected.
Spencer v. Harding
Standing Offers
A standing offer is an indication by one party of his/her willingness to provide goods over a specified period of time.
A standing offer is accepted every time an order is placed. If the goods are not delivered or are refused the offending party will be in breach of contract.
Great Northern Railway Co v. Witham
An offeror may withdraw the offer, anytime, before acceptance of the offer is made in the form of an order.
Further, unless the parties agree to the contrary, there is no obligation of the offeree to order goods only through the offeror, (eg. the offeree may choose not to accept the standing offer)
Colonial Ammunition Co v Reid
Options
The standing offer may be revoked at anytime before acceptance by the offeree. However, if the offeree provides consideration (eg paying money) to the offeror to keep the offer open for some period, the offer cannot be withdrawn during this period.
Routledge v Grant
Purchase of Tickets prior to carriage Page 47
Tickets from automatic vending machines Page 47
Purchase of tickets for transport Page 47
Automatic vending machines
Automatic vending machines are in widespread use, and serve a variety of functions. They are commonly used for the automatic issue of snack food, tickets to public transport, and entry into car park. Owners of vending machines may sometimes attempt to impose terms on the other contracting party, so it may be important to determine precisely when the contract is formed. After the offer is accepted it is too late to impose additional terms.
The timing of contract formation in such transactions was considered by the English Court of Appeal in Thorton v Shoe Lane Parking Ltd- a case
involving an automatic ticket vending machine that allowed access to a car park. Once the car approached the machine a ticket was issued to the customer automatically. The question was whether the terms referred to on the ticket issued automatically by the machine as the car approached formed part of the contract.
In finishing that they did not, the Court of Appeal considered that generally for vending machines ‘ the offer is made when the proposition is slightly different in the car park context. If a notice is displayed- giving prices and stating that cars are parked at owners own risk- the offer is contained in the notice.
Acceptance occurs when the care process to the machine and the ticket is taken by the driver.
Communication of an Offer
For an offer to be valid it must be communicated to the offeree by the offeror, or someone authorised by the offeror.
Cole v Cottingham
An offer becomes effective once it is communicated to the offeree
Taylor vLaird
Acceptance must take place in reliance upon an offer. If the offeree performs a particular act that corresponds to the terms of the offer without knowledge of the offer, there is no agreement, and no contract comes into existence.
If it is an offer to the world at large, the offer could be accepted by any fulfilling the requirements of the offer.
Carlill v Carbolic Smoke Company
Termination of an Offer
An offer may be terminated at any time before it is accepted. However, once an offer is accepted it becomes irrevocable.
Goldsbrough Mort & Co Ltd v Quinn
An offer may be terminated by
a) Revocation by the offerorRevocation is the formal withdrawal of the offer by the offeror. Before acceptance, an offer can be freely revoked
Goldsbrough Mort & Co v Quinn Veivers v Cordingly
Unless there is a promise, supported by consideration or under seal, by the offeror to keep it open for a fixed period.
Routledge v Grant
A revocation will only be effective once it has been communicated to and received by the offeree
Bryrne v Leon Van Tien Hoven
Byrne and Co v Van Tienhoven and Co. D, in Cardiff, on 1st October, offered to sell to P, in New York, 1000 boxes tin plates, subject to cable reply by 15th Oct. P received letter 11th Oct and accepted same day. On 8th Oct, D wrote to P revoking offer by letter (received 20 Oct).
Held withdrawal of an offer, made and accepted by letters sent through the post, is inoperative if notice of withdrawal does not reach the person accepting until after the letter of acceptance has been posted.
Lindley J "If the defendant's contention were to prevail no person who had received an offer by post and had accepted it would know his position until he had waited such a time as to be quite sure that a letter withdrawing the offer had not been posted before his acceptance of it...A person who has accepted an offer not known to him to have been revoked shall be in a position safely to act upon the footing that the offer and acceptance constitute a contract binding on the parties.”
The owner offered to sell his property and advised the offeree that he would keep the offer open until 5 January. Before this date, the owner sold to another third party. The original offeree was advised of the sale by another party who was not authorised by the offeror. The offeree subsequently purported to accept the original offer.
The Chancery Division held that the offer to sell to the offeree had been validly withdrawn. There is no requirement for there to be an express or actual withdrawal of the offer.
The focus of the courts in determining the validity of an agreement is whether the two minds were at one, at the same moment of time. On the facts of Dickson v Dodds, this was not the case. That the offeree was advised that the offer was withdrawn by a third party did not alter this fact. The only requirement is that the offeree be informed about the withdrawal from a reliable source. What constitutes a reliable source is a question of fact that must be established in each case.
Withdrawal in Unilateral contracts
In unilateral contracts, the offer cannot be withdrawn after the offeree has begun to perform the necessary conditions of acceptance of the offer and completion of the contract.
Abbot v Lance
b) Rejected by the offeree
The rejection must be communicated to the offeror before it is effective. Once rejected, an offer cannot be later accepted. If an offeree attempts to accept the offer but introduces new terms, the offeree is rejected the offer and is deemed to be making a counter offer
Stevenson Jaques & Co v McLean
D wrote to the P offering to sell warrants for iron for 40s. Offer stipulated open until following Monday. Monday morning Ps sent telegram inquiring whether D would accept 40s for delivery over two months or, if not, the longest limit D would give. D no answer and sold warrants to another, notifying Ps at 1.25pm. At 1.34pm, prior to D's telegram, Ps telegram accepting Ds’ offer. Ps sued for damages for non-delivery.
Held Ps first telegram not rejection of Ds’ offer, but inquiry whether D would modify offer. D at liberty to revoke offer at any time before close on Monday but not effectual until it reached Ps. For this reason, Ds offer still open at time
Ps accepted it. P had no notice of withdrawal of offer and entitled to treat offer as continuing and acceptance was binding
c) Lapse of time
An offeror may stipulate that his or her offer must be accepted within a certain period of time, and if the offeree fails to accept, the offer will lapse. If no time is prescribed, the offer must be accepted within a reasonable time.Ramsgate Victoria Hotel Co v
Montefiore
In Manchester Dioceasan Council for Education v Commercial & General
Investments Ltd,
Buckley J considered two possible basis for the rule that an offer would lapse within a reasonable time
1) It is implied into the offer that if it is not accepted within a reasonable time, it is withdrawn or,
2) If the offeree does not accept the offer within a reasonable time, the offeree must be regarded as having refused it.
• While the legal basis for this rule would generally not alter an assessment of what constitutes a reasonable time, Buckley J considered that in some
instances, this could influence the outcome. Under the first approach, what is reasonable must be determined at the date of the offer based on the
circumstances existing at the time of circumstances reasonably likely to arise during the continuance of the offer.
• If the second approach is adopted it would be appropriate to consider the actual conduct of the offeree after the offer is made. Buckley J favoured the second approach, allowing him to take into consideration the conduct of the offeree subsequent to the making of the offer.
d) Failure of a condition subject to which the offer was made
If a condition upon which the offer is made is not fulfilled the offer will lapse. If the stock has deteriorated, the condition has not been satisfied and the offer cannot be accepted
McCaul Pty Ltd v Pitt Club Ltd
e) Death
If the offeror dies and the offeree has not been notified of that death, it is still possible for the offeree to accept the offer, thus binding the offeror’s estate. If the offeree has been notified of the death he/she cannot accept the offer.
Coulthart v Clementson
Nor can a representative of the offerors estate accept the offer on their behalf therefore the offer lapses
Reynolds v Atherton
Acceptance
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Requirements of Acceptance
Acceptance of an offer is the expression, by words or conduct, of assent to the terms of the offer in the manner prescribed or indicated by the offer. Thus acceptance may be expressed or implied
HBF Dalgety v Morton
There are two requirements to satisfy for valid acceptance to occur: 1. The offeree must agree to accept the terms of the offer
2. This information must be communicated to the offeror.
Acceptance must correspond to Offer
The offeree must assent to the terms of the offer. The acceptance must be unqualified, and there must not be an attempt to induce new terms. It is implicit in the notion of acceptance that the offeree must have knowledge of and responding to that offer.
Offeree must have knowledge of and act in reliance to an offer
The offeree must have knowledge of the terms of the offer at the time of purported acceptance. Acceptance is not valid if two identical offers are made or if a party performs the act of acceptance without knowledge of the offer.Tinn v Hoffman
A Counter Offer is not Acceptance
If a counter offer is made, the original offer is rejected and the counter offer can then itself be accepted or rejected. Once a counter offer is made and the original offer rejected, the offeree can no longer accept the original offer
Hyde v. Wrench
A seller offered to sell his farm for £1,000. The buyer replied that he would buy it for 950. The seller refused. The buyer later purported to accept the sellers original offer to buy the farm for £1,000.
In an action for specific performance by the buyer, the Master of the Rolls held that no contract existed between the parties. By making the counter offer
for 950, the buyer rejected the sellers original offer. The original offer cannot later be revived by the buyers purported acceptance.
Butler machine Tool Co ltd v Ex-cell o Corperation ltd
The seller of machinery quoted a price on a standard form. The form
contained a clause entitling the seller to vary that price. The buyer placed an order for the same machinery on its own order form. The order form contained different standard conditions. The seller acknowledged the order by returning the acknowledgment form (which formed part of the buyers order form) to the buyer.
The English court of Appeal held that the seller was not entitled to rely on the price of variation clause as it did not form part of the contract. The buyers order constituted a counter offer because it contained terms different from the sellers original offer. That counter- offer was accepted when the seller
returned the acknowledgement.
Turner Kempson v Camm
A purported acceptance that departs from the terms of the offer but only in a minor non-material way may be effective and not amount to a counter offer. Where the offeree purported to accept an offer to sell a quantity of raspberry
pulp at a stated price, a contract was held not to exist because the offeree purported to add a term requiring the delivery in three separate lots, with approximately ten days between each delivery.
The Australian and English Courts operate in rather inflexible ways in determining whether a new term by the offeree will constitute a rejection of the original offer.
Acceptance must be Unqualified
If there is an agreement on all terms of the offer, and the parties intend to be bound immediately, but they still want a formal agreement drawn up, there is a binding contract and this would be considered unqualified acceptance of the offer.
Masters v Cameron
Mere Inquiry does not Constitute Acceptance
After receiving an offer, an offeree may want further clarification of one or more terms. This inquiry can at most, only communicate interest but not acceptance nor rejection of an offer.
Stevenson Jaques v McLean
The line between rejecting an offer and merely inquring as a to a possible variation is a fine one, but the basic test is the effect on a reasonable person in the shoes of the offeror.
For example, if a person offers to buy stock for sale at a particular price, the offeree may be interested to know whether the seller would be prepared to accept credit.
Notification to the Offeror of the Fact of Acceptance
The offeree must communicate acceptance of the offer to the offeror and agreement is not complete until such communication is affected.
Powell v Lee
Method of Acceptance
What is an appropriate method of acceptance in any given situation will depend on each situation, whether the offeror has outlined a specified method of acceptance with in the offer, or if it is not stipulated, the appropriate method of acceptance will depend on the intention of the parties as derived from the particular facts. Whether
acceptance has occurred depends on whether the offeree has complied with the requirements for the method of acceptance for the particular situation.
a) Method of Acceptance Stipulated by Offeror
The offeror may stipulate how acceptance should take place (eg. the performance of an act, return post etc.). If acceptance does not occur in this way, generally there is no agreement.
Although, if the offeree accepts in a manner that is more advantageous for the offeror, then the acceptance will be valid.
Tinn v Hoffman
Also, if the method of acceptance was inserted for the convenience of the offeree, the offeree may wave the benefit of the clause and accept in a different way
Or even if a manner of acceptance is prescribed in the offer, on the true construction of the terms in the offer, this may not be the only method of acceptance that will be effective
Manchester Diocesan Council for Education v Commercial & General Investments Ltd
P sought to sell by tender school property. Conditions of tender ”person whose tender is accepted… shall be informed of the acceptance… by letter sent…by post ..to the address given and… shall be deemed to have been received in due course of post.” Deposit of 10% within 7 days. P's surveyor
wrote on 1 Sept, P accepted offer and would write when had formal
instructions ( from Minister). D’s letter of the 14 Sept asked for acceptance to be sent to their solicitor’s address (rather than tenderer’s address ). On15th, letter sent by P’s surveyor confirming the sale approved would write when Minster consented (23 Dec ).
P tried to avoid the purchase.
b) Acceptance by Silence
The offeror cannot stipulate silence to constitute consent under any circumstances.
Felthouse v Bindley
The technique of delivering a product with a notice stating that unless the goods are returned within a stated period (or rejection communicated in a different way), the buyer will be taken to have agreed to buy the product on the stated terms is now prohibited by statute.
Trade Practices Act 1974 (cth) s. 64 & s.65 Fair Trading Act 1989 (qld) s.52 & s.53
c) Acceptance by Conduct
An offeror may stipulate the manner of acceptance by advising the offeree that if he/she wishes to accept the offer, the offeree should perform stipulated acts waiving the need to communicate acceptance. Acceptance can be express or implied.
Brogden v The Director of the Metropolitan Railway Company
Although there has been no formal recognition of the agreement in terms by the one side, yet the course of dealing and conduct of the party to whom the agreement was propounded has been such as legitimately to lead to the inference that those with whom they were dealing were made aware by that course of dealing, that the contract which they had propounded had been in fact accepted by the persons who so dealt with them.
Empirnall Holdings Pty Ltd v Machon Paull Partners
A property developer engaged an architect to undertake a property development. The architect forwarded a printed contract to the property developer. The property developer preferred not to sign contracts, and the architect was told this. Nevertheless, building work proceeded and a number of progress claims were paid by the property developer to the architect. In a claim for payment of outstanding fees, the property developer denied the existence of a contract.
It was held by the NSW Court of Appeal that a contract existed between parties. Although the offeror indicated that the acceptance should be effected
by signing and returning the formal document, the conduct of the offeree indicated acceptance of the terms of the offer.
Instantaneous Communication: Acceptance must be communicated
a) General Rule
When the mode of acceptance is instantaneous communication, the general rule of law is that the contract will be formed when acceptance of the offer is communicated to the offeror and that communication is received.
Entores L D v Miles Far East Corporation
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels-Gesellshaft mbH
b) Meaning of instantaneous Communication
Face to face communication, telephone conversations and telex messages are all considered forms of instantaneous communication.
Entores L D v Miles Far East Corporation
Reese Bros Plastics Ltd v Hammon-Sabelco Australia Pty Ltd
Postal Acceptance Rule
The postal acceptance rule is the exception to the general rule that acceptance occurs when it is communicated to the offeror.
a) Statement of the rule
Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is completed as soon as it is posted.
Henthorn v Fraser
The rule operates only where the post is an acceptable method of communication between the two parties (eg. the offer was made by post or it is stipulated in the offer that the post is an acceptable method of communication)
Adams v Lindsell
b) Policy behind the rule
The postal rule promotes contractual certainty. c) To what communication does the rule extend
The postal acceptance rule applies to forms of communication that are akin to mail but does not extend to any form of instantaneous communication, even if that communication bears some similarities to communication by post.
Coot Pty Ltd v Admin Management Pty Ltd
d) Where is the rule displaced?
The rule is displaced if the court decides that it was not within the contemplation of the parties that the post was an accepted method of communication. Whether the postal rule is displaced turns the intention of the offeror. If the offeror says or implies that actual notification is required before an agreement if formed the postal
acceptance rule will be displaced.
Bressan v Squires
A buyer was given an option to buy land. The option was to be exercised ‘by notice in writing addressed to me at any time on or before 20 December, 1972’. Notice was posted by the offeree on 18 December but not received until December 21. The offeree argued that the postal acceptance rule applied and occurred on 18 December, within the time stipulated by the offeror. The NSW supreme court held that the postal acceptance rule did not apply in
the circumstances of the case. The wording of the option implied that the seller required actual notice by the specified date. This requirement was not fulfilled by simply posting a letter of acceptance.
e) Revocation of the acceptance prior to receipt
The offer is formed when the letter of acceptance is posted. A subsequent purported withdrawal of that acceptance will be ineffective.
There is still no definitive Australian authority on the issue, only early New Zealand dicta that’s suggests that it cannot be withdrawn in this way and an even earlier Scottish authority to suggest that it can!!
Weinkheim v Arndt (NZ)
Dunmore (Countess) v Alexander (Scottish)
Acceptance in Unilateral Contracts
Acceptance commonly by conduct
The requirement for acceptance to be communicated is often impliedly waived. Acceptance is affected by the offeree by performing the requirements that are specified by the offeror.
Withdrawal of an offer after acceptance has commenced
Generally, once an offeree has begun to accept the offer by performing the acts stipulated, it is likely to be too late for the offeror to withdraw the offer and claim there has been no contract formation.
Abbot v Lance
Who may accept an offer?
An offer can only be accepted by the person to whom it was made.
Reynolds v Atherton
Acceptance may be communicated only by the offeree or his or her agent
Powell v Lee
If an offer is made to the public at large it can sometimes be accepted by a number of people. In Carlill’s Case the offer was capable of acceptance by anyone who
qualified under the terms of their offer (eg. anyone who purchased a smoke ball, however, in the case of a reward, while many people may have the information which qualifies them for the reward, only the first person to come forth will be eligible).
Carlill’s case
Contract formation: time and place
Instantaneous communication
A contract is formed when and where the offeror receives and accepts the acceptance communicated.
Hampstead Meats Pty Ltd v Emerson & Yates Pty Lty Entores L D v Miles Far East Corporation
Post
If the postal acceptance rule applies, the contract is formed when, and at the place that, the letter of acceptance is posted.
Henthorn v Fraser
The Postal Rule can be excluded {Covered earlier in “The postal Acceptance Rule” at (d)}
Holwell Securities Ltd v Hughes Bressan v Squires
Certainty and Completeness
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Concepts of uncertainty or vagueness are relevant to a determination of whether there has been an offer made which is capable of acceptance, and whether the parties could have had the requisite intention to enter into legal relations. If an offer is so vague that the respective obligations of the parties on acceptance are unclear, it is unlikely to be a valid offer in legal terms. Similarly, if the terms of the offer are vague and uncertain, it may indicate that the parties lack intention, not having yet reached the stage of negotiations at which each intends to be legally bound to the other party.
Statement of the Rule
In order to constitute a valid contract the parties must so express themselves that their meaning can be determined with a reasonable degree of certainty. It is plain that unless this can be done it would be impossible to hold that the contracting parties had the same intentions; in other words the consensus ad idem would be a matter of mere conjecture
G Scammell and Nephew Ltd v HC and JG Ouston
Facets to the principal
There are a number of facets to this principle:
• A contract containing language that is so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention will be unenforceable The uncertainty may relate to one of the pivotal terms of the agreement or may go to the very heart of the agreement.
G Scammell and Nephew v HC & JG Ouston
O agreed to buy a new van from S stipulating “this order .. on the understanding that the balance of .. price can be had on hire-purchase terms over a period of two years”.
House of Lords (now Supreme Court) held sentence “so vaguely
expressed that is cannot, standing by itself, be given a definite meaning... it requires further (emphasis added) agreement to be reached between the two parties before there would be a complete consensus ad idem”.
Viscount Maugham -reasonable degree of certainty; Lord Wright- Court needs to be able to attribute contractual intention
• Even where uncertain or ambiguous language is not used, if the parties have not agreed on all of the essential terms of the agreement, the contract will be unenforceable.
Loftus v Roberts
An option to renew a lease “at a rental to be agreed upon by the lessor” created no contractual obligations
This option relied not upon agreement but upon unfettered discretion of the lessor.
This is an example of an illusory agreement as the lessor’s unfettered discretion sets the tent.
• A contract will be unenforceable if it reserves a discretion for one party not to carry out his or her obligations
Thorby v Goldberg
Ambiguity and Uncertainty
Individual Terms
There can be no contract unless what the parties agreed can be determined objectively with a reasonable degree of certainty. A number of different terms have been used to describe clauses that are struck down for want of certainty. Whether the clause is said to be vague, ambiguous or uncertain matters little, the clause is void. Sometimes the court will label a term meaningless or illusory. A meaningless clause is one to which a meaning cannot be attributed and will be treated the same way as an uncertain clause. An illusory clause has an identifiable meaning but will be treated as uncertain as it promises an illusory term.
The modern approach appears to emphasise the courts willingness to uphold an agreement entered into by the parties, particularly where the circumstance indicate that the parties intended to be bound by the agreement.
Whitlock v Brew
The parties entered into a contract for the sale of land. On part of the land, a petrol service station business was being conducted. The contract required the purchaser to grant a lease of a portion of the land sold, ‘to the Shell Co of Australia Ltd upon terms that the said land leased as aforesaid be used by Shell or their sub-tenant or licensee for sale of products and upon such reasonable terms as commonly govern such a lease.’ The contract went on to provide for an arbitrator to resolve any disputes that arose in relation to the interpretation of the agreement.
The majority of the High Court held that the clause was uncertain, as it did no prescribe the term of the lease or the rent.
Hall v Busst
The parties entered into a contract for the sale of land. The seller was given an option to repurchase the property at a sum of 3, 157 4s 0d to which shall be added the value of all additions and improvements to the sum property since the date of purchase by the purchaser and from which shall be subtracted the value of all definciencies of chattel property and reasonable sum to cover depreciation of all buildings and other property on the land’.
A majority of the High court held that the option to purchase was void because the price was not stated with sufficient certainty.
G Scammel and Nephew Ltd v HC & JG Ouston
The parties agreed on the sale of a van, ‘ on the understandin that the balance of the purchase price can be had on hire-purchase terms over the period of two years’.
The house of lords held that the agreement was too uncertain to be
enforceable. As there were no common hire purchase terms, the agreement required further agreement of the parties.
Fitzgerald v Masters
The parties agreed to the sale of an interest in a farm. The final clause in the contract purported to embody a set of conditions of sale ‘so far as they are inconsistent’ with the terms of their agreement. In fact no such set of conditions exsisted.
The High court held that this clasuse was meangless and therefore void.
Biotechnology Australis v Pace
As part of an employment contract, a senior research scientist was given the option to partake in the Company’s senior staff equity sharing scheme. At the time of the contract was entered into and at the time of termination, no such scheme hd been established.
The NSW court of appeal held that the reference to the scheme did not give rise to an enforceable contractual obligation.
Lend Lease Financial Planning Ltd v Southcap Pty Ltd
The parties entered into an agreement for lease. In relation to ‘outgoings’, the tenant agreed to ‘pay a proportion based on the area of the tenancy to include airconditiong and electricity costs’.
The QLD Court of Appeal held that this clause was sufficiently certain and ordered specific performance of the lease agreement.
State of New South Wales v Banabelle Electrical
A clause in construction contract provided that disputes that arose between the parties would be resolved by an expert as agreed between the parties or, if they did not agree, an expert nominated by a person named in the Annexure. No such person was named.
Agreements to Agree
If parties do not reach final agreement on essential terms, instead agreeing to finalise such matters at a later time, the contract is an agreement to agree, therefore it is incomplete and will not be enforced.
Booker Industries Pty Ltd v Wilson Parking Qld Pty Ltd
If an agreement to negotiate is regarded as an agreement to agree, it to will be unenforceable
Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd
However, it was contemplated by Kirby P (in Coal Cliff Collieries Pty Ltd v
Sijehama Pty Ltd), that in appropriate circumstances, an agreement to negotiate could
be enforceable. He concluded that if the parties provided good consideration and the terms of the agreement to negotiate were sufficiently certain, such agreement might be enforceable. One mechanism to make an agreement to negotiate more certain, it was suggested, would be to include a provision referring matters in dispute to a third party.
Saving Ambiguous, uncertain or meaningless contracts
Link to External Standard
A clause in a contract, which, on its face, appears uncertain, may be enforceable if a meaning can be given to it by reference to an external standard. The parties may provide for “a standard, machinery or formula designed by the parties to take the place of their own agreement”.
Hawthorn Football Club v Harding
The reference may be made in a direct way for example, incorporating standard hire purchase terms used by the particular hiring company. If such a set of standard hire purchase terms exists, the clause will be valid.
Recourse may also be made to external standards, even where the contract itself does not expressly provide such a link.
Hillas and Co Ltd v Arcos Ltd
Specifications agreed in the original contract could be regarded as an external standard.
Sometimes, the contract may provide for one or more terms to be inserted by a third party. (In a fashion, this is also a link to an external standard).
Hawthorn Football Club v Harding Godecki v Kirwan
Link to reasonableness standard
The court may be willing, in some circumstances, to adopt principles of reasonableness to make certain something that, on its face, is not.
‘The implication of what is just and reasonable to be ascertained by the court as a matter of machinery where the contractual intention is clear but the contract is silent on some detail’
Hillas and Co Ltd v Arcos Ltd
Severance
The invalidity of one term will not necessarily mean that the whole contract will be unenforceable. In some circumstances the invalid term can be severed and the remainder of the contract will be enforceable. Generally, if the parties would have intended to be bound in the absence of an uncertain clause, the clause can be severed and the remainder of the contract is enforceable
Fitzgerald v Masters
If the offending clause forms a pivotal part of the contract, so that without out it the parties could not have intended to be bound, severance of the particular clause is not possible.
Whitlock v Brew
Waiver or Removal of Uncertainty
If a clause is inserted in a contract for the benefit of one party only, but is drafted in such vague terms as to make it void, that party can choose to waive the benefit of the clause and have the remainder of the contract specifically enforced.
Whitlock v Brew
Incomplete agreement
The courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement for the parties to agree at some time in the future.
Booker Industries Pty Ltd v Wilson Parking Qld Pty Ltd
Agreement contains mechanism to complete
It may suit the needs of contracting parties not to finalise various aspects of their agreement, but rather to insert in a mechanism for determining one or more terms at a later date for example external standard or third party.
a) Reference to a third party
Parties to a contract may leave terms of the contract to be decided by a third party, even essential terms.
Godecke v Kirwan
Hawthorn Football Club Ltd v Harding
b) Discretion retained by a contracting party
It is uncertain that a contract that leaves minor terms to be determined by one of the contracting parties is enforceable.
A contract that leaves essential matter for later determination by one of the contracting parties will be unenforceable as it is either incomplete or uncertain or because the promises contained in the agreement are illusory.
Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd
However, if a subsidiary matter was left to the determination of one of the parties such as how the contractual obligations are carried out by that party, it may be enforceable.
Godecke v Kirwan
The parties entered into an agreement relating to the sale of land. Clause 6 of the agreement provided that ‘ if required by the vendor the purchaser shall execute a further agreement to be prepared... by the vendor, appointed solitors containing the foregoing and such other convents and conditions as they may reasonably require’. The vendor refused to complete the sale and claimed on a number of grounds that the contract was unenforceable.
The high court held that the contract was binding. The clause 6 expressed the view that there was ‘no reson in principal for holding that there cannot be any binding contract of some matter is left to be determined by one of the
contracting parties.
Breakdown of Mechanism to Complete
If the parties a mechanism for determining a term and that mechanism fails, the court will not substitute it’s own view and complete the agreement.
Milnes v Gery
If the disputed issue is one of something such as the “price” of something (eg. Rent), a court may be prepared to determine a fair and reasonable price, and not to regard that determination as completing the agreement for the parties.
The parties entered into a lease of agreement under which the lease was given an option to take a further term. The rental for that further term was ‘to be agreed with the lessor or failing agreement to be determined by an arbitrator’. The high court held that the option constituted a valid agreement. Ion his
judgment Brennan J, drew a distinction between a clause for deterininmg price or rent where the manner of calculation as set out in the clause was essential to the parties, and a clasue where the mechanism was simply one by which the parties could ascertain a reasonable price or rent.
While in the former case, completion of the contract would be conditional ipon determination of ther price or rent in the manner specified, the same could not be said of the later case. F the parties simply wish to establish a reasonable price or rent and the mechanism stated failed Brennan j, suggested that a court would be more inclined to substitute its own objecteice
determination of a reasonable price or rent and uphold the agreement.
Sudbrook Trading Estate Ltd v Eggleton
Court was prepared to enforce its own machinery if the contractraul machinery broke down, to establish an appropriate value of the house.
Saving Incomplete Agreements
Implication of Terms
There is a willingness of the courts to imply terms into an agreement. It is not for the court to make the contract for the parties, or to go outside the words they have used, except insofar as there are appropriate implications of law, as for instance, the implication of what is just and reasonable to be ascertained by the court as matter of machinery where the contractual intention is clear but the contract is silent on some details.
Hillas v Arcos
This is a case involving the enforcablity of an option to sell Russian softwood timber. The contract did not specify quality or price of the timber nor the dates of delivery.
However, the court may not rewrite the agreement for parties where the parties themselves have failed to agree on essential terms. The greater the number of terms not finally agreed upon by the parties, the less inclined the court will be to exercise its discretion to imply a term. A contract could only be regarded as concluded if the parties agreed on the three essential elements: “the parties”, “the subject matter” and “the price” and if these elements have been agreed upon with sufficient certainty the court will provide the rest.
Hall v Busst
In addition, there are two other factors that may be relevant in the courts determination.
First, if it is clear that the parties have gone beyond the state of negotiation and intend to be contractually bound, the court will be more minded to imply a term and enforce the agreement.
Hillas v Arcos
Secondly, and related to the first, if the contract has between partly executed, for example in a contract for the sale of goods, property has been delivered and title has passed, the court will seek to imply a term necessary for the validity of the agreement
Hall v Busst
Failure to specify price
a) Contract silent on priceThe general principle is that a contract will only be regarded as valid if the parties to it agree on price (as this is one of the essential terms), this means that if there is no agreement on price stipulated in the contract, then the contract is not complete, and would not be upheld by the court.
Hall v Busst
However, there are exceptions.
There is a distinction between the sale of land and sale of goods with respect to the implication of terms by a court. For the sale of goods, the court is sometimes prepared to imply a term that the purchaser will pay a reasonable price for the goods. This intention is demonstrated for example, where the contract is partly executed and property in the goods has passed.
A court will not imply a term for payment at a reasonable price into a contract for the sale of land
Hall v Busst
b) Contract provides for parties to agree in future
An agreement to agree in the future also offends against the general principle of completeness. However, in some instances, in contracts for the sale of goods the court may imply a reasonable price and the contract will be upheld.
Foley v Classique Coaches Ltd
However, if the contract is to sell land, or on rental in an option to renew a lease, it is unlikely to be upheld) and will be treated as such matters which are silent on price.
c) Contract makes provision for mechanism to complete
A contract that contains a mechanism for setting a term at a later time is likely to be valid. It is not uncommon for such a mechanism to be used in relation to setting a price.
Godecke v Kirwan
d) Contract provides for payment of a reasonable price
Whether the agreement is upheld as being sufficiently certain may turn on the nature of the subject matter in dispute. A contract for the sale of goods at a reasonable price is likely to be valid.
Sale of Goods Act 1896 (Qld)
Reasonable price is an objective standard that can be determined without further agreement between the parties. If one party breaches the agreement, the court can assess the price to be attributed to the goods, and damages can be awarded
accordingly.
British bank of Foreign Trade Ltd v Novinex Ltd
However, clauses to attribute reasonable price to the sale of land will generally be uncertain or for the sale of goods if they are unique or of very special character eg original painiting
Hall v Busst
Subject to agreements:
Sometimes parties may be ready to sign a contract but not able or not prepared to commit to one or more aspects of the agreement. In these circumstances parties may decide to enter into agreements subject to the happening of a particular event.
Subject to finance agreements
Contracts for sale may contain a clause stating that the contract is subject to the purchaser receiving approval for finance on satisfactory terms and conditions. The contract is immediately binding on the parties but will come to an end if the purchaser is unable to obtain finance and terminates the contract pursuant to its terms.
Meehan v Jones
Sale of land that included a clause “subject to…the purchaser or his nominee receiving approval for finance on satisfactory terms and conditions in an amount sufficient to complete the purchase.”
High Court held clause to be sufficiently certain, subject to cautionary remark Gibbs CJ (at 578) “that every case must depend on the particular words of the
contract in question, and that it is not profitable to compare with each other cases decided under different contractual provisions”.
The High Court is essentially imposing some obligations as to reasonable conduct on the parties when construing the words “subject to”.
“The fact that opinions may differ as to which of two meanings is given to the clause does not mean that the clause is uncertain. If the court, in construing the contract, can decide which of the two possible meanings is that which the parties intended (emphasis added), there will be no uncertainty” at 578 per Gibbs CJ
Comment This case resolved a gulf between New South Wales and
Queensland Courts in their attitudes during the 60s and 70s with respect to “subject to finance” contracts for the sale of land.
Until this case, New South Wales generally struck these down whereas Queensland Courts preferred to uphold their validity where possible. a) Satisfactory Finance
It has been argued that a clause that provided for finance to be obtained on
‘satisfactory terms’ is either to uncertain to be valid or gave the purchaser such a wide discretion that it was illusory. The High Court disagreed, and stated that as the clause was inserted for the benefit of the purchaser, the determination of whether the finance was satisfactory was left to the purchaser
Meehan v Jones
b) Steps to be taken to obtain finance
The finance clause in most standard land contracts imposes an obligation on the purchaser to take all steps reasonably necessary to obtain finance approval.
Meehan v Jones
Subject to Contract
For agreements that are formed subject to contract, the case could fall into one of three categories:
Masters v Cameron
1. The parties have reached finality in arranging all terms and intend to be immediately bound to perform those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. The parties intend to be bound immediately thus a binding contract is formed.
Branca v Corbarro
The parties agreed to the sale of a mushroom farm, the buyer paying a deposit
to the seller. The agreement contained a clause stating that the agreement ‘was a provisional agreement until a fully legalized agreement, drawn up by a
solicitor and embodying all the conditions herewith stated, is signed’.
The English Court of Appeal held that the parties intended to be bound immediately. Relevant to this determination was the use of the words ‘provisional’ and ‘until’. Also relevant was payment by the purchaser to be made by a date before the formal agreement was to be executed
2. The parties have completely agreed upon all terms and intend no departure from or addition to those terms, but have made performance of one or more of those terms conditional upon the execution of a formal document. An offer in such a case is not expressed to be subject to or conditional upon a formal execution of a contract and all essential terms have been agreed upon thus a binding contract is formed.
Masters v Cameron Niesmann v Collingridge
Page 110
3. The intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. Parties in such a case do not intend to be bound until they entered into a formal document thus no binding contract is formed.
Masters v Cameron
The parties agreed to the sale of a farm. The agreement was stated to be
‘subject to the preparation of a formal contract of sale which shall be acceptable to the vendor’s solicitors on the above terms and conditions’. The purchaser agreed to the purchase in these terms, paid a deposit to the vendor’s agent and, among other things, made some minor structural alterations to the property. The purchaser subsequently claimed that a binding contract had not been entered into
The high Court agreed, and held that a binding agreement had not been
entered into. The parties had not intended to be bound until they signed a formal document. The payment of the deposit to the seller was made on the basis that if a formal contract should be executed, that amount should be treated as a deposit and, if such an agreement were not entered into, should be returned to the purchaser.
The category a particular case falls into turns on the intention of the parties. If the parties intend the agreement to be binding on them even before entry into the final contract, the contract will fall into one of the first two categories.
Masters v Cameron.
Note: Fourth Catagory of Masters v Cameron talks about heads of agreement can be found on 109-110 Case book.
Intention to create legal relations
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Statement of the Rule
To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly.
Rose and Frank Co v JR Crompton & Bros Ltd
The courts use an objective test in making a determination about the intention of the parties. In making an objective determination of the parties intention, the court looks at the surrounding circumstances and asks if a reasonable person would regard the agreement as intended to be binding.
Merritt v Merritt
Domestic and social relationships
Presumption
The presumption is that domestic and social agreements are not intended to have legal force.
Balfour v Balfour Jones v Padavatton
$200 per month if divorced daughter (34 years of age) came from Washington to London to read for Bar (mother in Trinidad so, Trinidad or US dollars?). Later offer to buy house and let rooms in place of the $200. No rent sent to mother but used for mortgage.
Mother sought possession and daughter counter-claimed for money spent. County Court judgment for daughter. Appeal
Held - majority not intended to be enforceable binding agreement. “family arrangements which depend on good faith..promises..not intended to be rigid, binding agreements”per Danckwerts LJ
(Balfour v Balfour)
But Salmon LJ special circumstances, neither could have intended that
Heslopv Burns
Rebutting the presumption
The presumption can be easily rebutted for example if parties who are in a familial relationship are contracting in a business context or if a husband and wife enter into an agreement in circumstances in which they are no longer living in harmony.
Similarly, if the words used in the contract indicate a legal intention, the presumption that may otherwise have arisen may be rebutted.
Case Examples:
a) Husband and Wife
Parties involved in a domestic relationship, will generally not have intended legal consequences to follow their arrangement thus a contract will not be enforceable. Given many couples now choose to cohabit without marrying, the same presumption should apply where an agreement is entered into between a couple living in a de facto relationship.
Balfour v Balfour
After the parties were married in England in 1900 they moved to and lived in Ceylon where the husband had a government posting. They returned to England in 1915 for a holiday. Although the husband went back to Ceylon in 1916, his wife remained in England for health reasonas. Before the husband left for Ceylon, they entered an agreement that if the wife supported herself and sis not call on the husband for any further maintence, the husband would pay the wife 30 per month.
When the wife late sued on the agreement, an issue before the court was wherher the parties intended the agreement to have legal consequences. All of the Lord Justices considered the agreement to be unenforceable on the basis that the parties were in a domestic relationship and did not intend legal consequences to flow from their arrangement. As Atkin LJ put it, ‘ one of the most usal forms of agreement which does not constitute a contract appears to me to be the arrangements which are made between husband and wife. b) Separated husband and wife
Where parties are divorced, separated, or in the process of separating, the negotiation do not take place in the context of natural love and affection therefore there is no room left for the application of such a presumption and the court will generally find that the requisite contract intent existed.
Merrit v Merrit
After the parties to the marriage separated ( but before their divorce) they agreed that the wife would contune to pay off the morgage over the former
matrimonial home (in which she still lived), and when that had been fully paid, the husband would transfer his interest in the house to her. The husband also signed a document to that effect. The wife paid off the mortgage, but the husband refused to transfer his interest to the wife.
In finding for the wife, the English court of appeal held that the parties possessed the requiste legal intention when agreeing on the arrangements for the house. In the words of Widgery LJ, ‘once that natural love and affection has gone, as it normally has when the marriage has broken up, there is no room at all for the application of such a presumption’.
c) Other familial relationships
Parties in other familial relationships are considered the same as married or de facto couples, and it is presumed that they do not intend to cerate legal relationships as the agreements made in this context are based on natural love and affection. The bond of natural love and affection is likely to weaken according to the remoteness of the tie and will subsequently be easier to rebut.
Jones v Padavatton
In fact, those cases where the court finds that the presumption has been rebutted, one or more of the following factors are often relevant
• The seriousness of the conduct involved (such as moving countries or giving up full time employment)
• The expense involved, especially if the relevant party is not wealthy
• Whether there is or has been a degree of hostility in the relationship
• The closeness of the family ties
• Whether the subject matter of the agreement is business or commercial in nature
Examples
Jones v Padavatton
A mother, redident in England invited her daughter, who lived and worked in the United States, to move to England to study for the Bar. The Mother promised to procide her with maintence of $200 a month to do so. The daughter agreed. Subsequently, the mother and daughter altered their
arragmnets so that, instead of being paid, the daughter was able to live in her mother’s house. A dispute arose, and the mother brought an action to evict the daughter from the house.
The English Court of Appeal found for the mother on the basis that there was no leggaly binding agreement between the parties regarding the provison of maintence (and later the offer to live in the mother’s house). Relyiong on the presumption that family members do not intend to enter legal relations, it was held that it was merly one of those family arrangements which depend on the good faith of the promises which are made and are not intended to be rigid, binding arragmnets. Thiswas the case notwithstanding the seriousness of the
