Keeping Contarct in Its Place

KEEPING CONTRACT IN ITS PLACE—
BALFOUR v BALFOUR AND THE

ENFORCEABILITY OF INFORMAL
AGREEMENTS
STEPHEN HEDLEY*
Downloaded from http://ojls.oxfordjournals.org/ at University of Michigan Law Library on June 25, 2015
A further line of attack on the apparent conflict and uncertainty among the decisions in
appellate courts has been to seek more understandable statement of them by grouping
the facts in new—and typically but not always narrower—categories. The search is for
correlations of fact-situation and outcome which (aided by common sense) may reveal
when courts seize on one rather than another of the competing premises. One may even
stumble on the trail of why they do . . . The process is in essence the orthodox
technique of making distinctions, and reformulating—but undertaken systematically;
exploited consciously, instead of being reserved until facts which refuse to be twisted
by 'interpretation' force action. The departure from orthodox procedure lies chiefly in
the distrust of, instead of search for, the widest sweep of generalization words permit
Not that such sweeping generalizations are not desired—if they can be made so as to
state what judges do. (Karl Llewellyn, 'Some Realism about Realism—Responding to
Dean Pound' 44 Harv L Rev 1222, 1240-1 (1931).)
Balfour v Balfour1 sounds a simple case. A civil servant posted to Ceylon

returned to England on leave with his wife. When his leave was up, his wife (who
suffered from arthritis) stayed behind on medical advice. The husband assessed
the sum she would need for maintenance at £30 per month, and promised to pay
that sum regularly until he returned. However, soon after his return to Ceylon he
wrote to say it would be better if their separation was permanent. The wife sued
on the promise of maintenance. Sargant J decided in her favour,2 but the Court of
Appeal (Warrington, Duke and Atkin LJJ) reversed his decision.
The significance of the case is perhaps not obvious from a bare statement of its
facts and result. The peculiar feature of the action was that Mrs Balfour was suing
in contract, claiming that Mr Balfour should maintain her not because he had
married her but because he had promised he would do so. This was a claim
without precedent; and even a brief reading of their lordships' judgments will
•Fellow in Law, Christ's College, Cambridge. I would like to thank all the friends who have helped
with earlier drafts of this article, and especially Ian Kirk, Paul Matthews, Ray Hedley and Ann
Smart.
1 [i9i9]2KBs7i.
2 (1919) 35 TLR 476. The argument against liability before Sargant J was a simple denial of
consideration. See n 5 infra.
391
Oxford Journal of Legal Stadia* Vol. 5, No. 3
392 STEPHEN HEDLEY
show how reluctant they were to extend the law of contract into the area of
matrimonial rights and duties, in which it had previously played very little part.3
Moreover, there was no danger that Mrs Balfour would be left without any remedy;
she had already obtained orders for restitution of conjugal rights and for alimony,4
and was claiming in contract at well.
The court was unanimous in refusing to find a contract. They had no real answer
to Sargant J's argument for the presence of consideration; and Duke and Atkin LJJ
at least were prepared to assume that if normal principles were applied, Mrs Balfour
must win.3 What was needed, then, was an excuse not to apply normal principle. All
three judges found it in the mere fact that the parties were husband and wife, saying
that this factor alone displaced the inference of a contract. Warrington and Duke
LJJ concentrated exclusively on this point: Parliament had established a scheme for
rights and duties between spouses, and if particular spouses intended to substitute a
different scheme they had to make this very clear.6
Atkin LJ held the same view, but was more discursive, laying down a general
requirement of 'intention to create legal relations' for all contracts.7 Why he did this
was unclear. Perhaps he simply liked broad generalizations. Or perhaps he had a
better grasp of contractual theory than his colleagues, and saw that they were taking
a larger step than they imagined. For while the courts had previously refused to
enforce agreements where the parties had deliberately excluded legal sanctions,' this
was the first time they had denied liability simply because the plaintiff could not
3 Husband and Wife could not contract at all before the Married Women's Property Act 1882; and
cases where such a contract was alleged (e.g. Hall v Michtlmore (1901) 18 TLR 33), let alone
proved (e.g. McGregor v McGregor (1888) 21 QBD 424) are very rare until the 1940s. See n 67
infra. The right to sue for maintenance was statutory, exercisable on application to the Justices
Summary Jurisdiction (Married Women) Act 1985, 8 4) or as ancillary to matrimonial proceedings
(Matrimonial Causes Act 1857, 8 32).
4 [1919] 2 KB 572. It is unclear what advantage Mrs Balfour was seeking by exercising both
contractual and matrimonial rights. The only plausible explanation seems to be that she wanted
alimony plus £30 per month; I am informed that maintenance awards at that date were not
generous. There would sometimes be jurisdictions! advantages which would leave a contractual
action in a better position than an action for alimony, but it ig hard to find one on the facts of
Balfour.
5 Some writers claim that one or other of the judges was denying consideration: Tuck 21 Canadian
Bar Rev 123, 125-6 (1943); Unger, 19 Mod L Rev 96, 98 (1956); Hepple [1970] Camb LJ 122,
128-9. But this is purely a matter of semantics. Sargant J ((1919) 35 TLR 476) found consideration
in Mrs Balfour's implicit undertaking not to pursue her common law remedy for failure to support
her, vix by pledging Mr Balfour's credit; and nothing said in the Court of Appeal was inconsistent
with that finding. The Court of Appeal's approach was not to admit agreement and deny
consideration, but to deny the existence of agreement itself.
6 [1919] 2 KB 575 per Warrington LJ; 577-8 per DukeLJ.
7 [1919] 2 KB 578-9.
8 e.g. Huisey v Home-Payne (1879) 4 App Cas 311. See infra n 125.
KEEPING CONTRACT IN ITS PLACE 393
prove that legal sanctions were intended. Balfour v Balfour introduced a new
obstacle for plaintiffs, which had not been there before.9
However, Atkin LJ's judgment attracted little attention at first. It was not until
the early 1940s10 that the requirement of 'intention to create legal relations'
achieved prominence in the case law. This new principle is the subject of this
paper, which falls into four parts. Firstly, it discusses the idea that the modern law
of contract requires an 'intention to create legal relations', and suggests that
whenever the courts try to determine whether such an intention exists in a
particular case, they are inevitably driven to impose their own view of whether the
agreement ought to be enforced. Secondly, it examines the case law usually treated
today under the heading 'intent to create legal relations' and shows that a
considerable amount of it is irrelevant; many of the cases would be decided in the
same way whether or not the law required such an intent. Thirdly, it suggests that
the principle's main use is to keep contract in its place; to keep it in the
commercial sphere and out of domestic cases, except where the judges think it has
a useful role to play. Finally, I will suggest that the modern law of 'intent to create
legal relations' essentially reduces to this: that where the parties were dealing at
arms' length, promises will generally be enforced; but in domestic contexts,
contractual liability will be imposed only if the party seeking enforcement has
already performed one side of the bargain and is simply seeking reciprocity. The
courts will not enforce an executory agreement. Beyond this, I argue, there is no
requirement of an 'intention to create legal relations'.
THE 'PURE' THEORY LIABILITY IS IMPOSED ONLY IF THE PARTIES

INTEND THIS
Firstly, I examine the idea that the courts are genuinely interested in whether the
parties intended legal consequences to flow from their agreement, and suggest that
the tests ostensibly aimed at discovering the parties' intentions almost invariably
lead the courts to impose their view of a fair solution to the dispute. By showing
that the law is not interested in 'intention' in the ordinary meaning of the word, I
acknowledge that I am running down a man of straw." Few people today would
support this 'intent' requirement in its pure form; most would talk of'objectively
9 The only other contender as the first case to introduce the concept is Lens v Devonshire Club,
Eastbourne before Scrutton J; and to read that Judge's reminiscences of the case in Wyatt v
Kreglinger fif Fernau [1933] 1 KB 793, 806, it sounds like a promising candidate. But the
(admittedly incomplete) Times Law Report of 4 December 1914 gives a very different impression.
Scrutton J did not mince his words over the pettiness of the. plaintiff or the incompetence of the
defendant; but as to the agreement, he simply said that no enforceable contract had been
established. It was not the occasion for an important statement of principle, and it does not appear
that Scrutton J gave one.
10 See n 66 infra.
11 Nor indeed do I claim any great originality for my arguments in this respect. See material
referred to in ns 76 and 77 infra.
394 STEPHEN HEDLEY
ascertained intention', or otherwise modify the 'pure' theory. But, as I will argue
below,12 the arguments fatal to the 'pure' theory are not met by the modifications
to it. All the theories leave the court with no alternative but to impose its own
view whether the agreement should be enforced.
The first point to note is that the 'pure' theory of intent makes no provision for
the case where the parties had no common view whether legal sanctions should be
available. It is irrebuttably presumed that the parties had some common intention
or other; evidence that they did not consider the matter at all is treated simply as
something that makes the court's enquiry more difficult.13 In cases where there
was no intention either way, this insistence that the parties must have had some
intention or other forces the courts to invent an intention. Not unnaturally, they
invent the one that leads to the most reasonable result, on the ground that the
parties must be taken to be 'reasonable people' unless the contrary is shown. In
Parker v Clark,14 for example, the Parkers sold their house and moved in with the
Clarks, Devlin J found that the Clarks' promise to leave the house to the Parkers in
their wills was intended to bind them legally: 'I cannot believe . . . that the
defendant really thought the law would leave him at liberty, if he so chose, to tell
the Parkers when they arrived that he had changed his mind, that they could take
their furniture away, and that he was indifferent whether they found anywhere
else to live or not'.13 The opposite happened in Coward v Motor Insurers'
Bureau,** where the Court of Appeal were considering an agreement between
construction workers that one should drive the other to work on his motor cycle in
return for a contribution to the cost of the petrol; they were not prepared to hold
this agreement enforceable. Upjohn LJ's judgment is another example of a judge
explaining precisely why he thinks liability inappropriate, but claiming that he is
only spelling out what the parties intended, not his own opinion: 'The hazards of
everyday life, such as temporary indisposition, the incidence of holidays, the
possibility of a change of shift or of different hours of overtime, or incompatibility
arising, make it most unlikely that either contemplated that the one was legally
bound to carry and the other to be carried to work.'17
Of course, there is always scope for judicial fictions whenever a question turns
on the 'intentions of the parties' and there is no dear indication of what the parties
actually had in mind. But 'legal relations' cases are particularly susceptible to this
sort of treatment, because cases where the parties do not consider the matter of
legal enforceability are the rule, not the exception. If the parties are not lawyers, it
is unlikely to occur to them that the law would be interested in their opinion
12 Infra 397 et seq.

13 E.g. Ford Motor Co v Amalgamated Union of Engineers and Foundry Workers [1969] 1 WLR
339; and Connell v Motor Insurers' Bureau [1969] 2 QB 494, 5050b per Sachs LJ.
14 [1960] 1 WLR 286.
15 Ibid 293—4.
16 [1963] 1 QB 259.
17 Per curiam ibid, 271.
whether the agreement should be enforced. It will be a rare case in which their
minds are brought to bear on the point at all; if they think of it at all, it does not
follow that they developed a clear intent either way; if they did, there is no reason
to suppose their intents coincided. When the court purports to find an intention as
to legal relations, it can only be because the court thinks that legal liability should
be present, and imposes it on the parties.
Moreover, when there are indications whether the parties intended liability, it is
all too easy for the courts to ignore them. Two main techniques are used to ignore
these indications where they conflict with the view the court wishes to come to.
Firstly, the court can arbitrarily narrow the issue, to make the indications appear
irrelevant. Thus where the court wishes to hold an agreement unenforceable, it
will eagerly point to indications that the parties did not envisage legal action.18
But where the court wishes to enforce, these indications are dismissed, on the
(logically impeccable) ground that a lack of intention to sue is different from an
intention that, if action was brought, it should fail: "The fact that a contracting
party is in some circumstances unlikely to extract his pound of flesh does not
mean that he has no right to it'.19
The second technique for ignoring actual manifestations of intention is the
'principle of objectivity', which states that if the parties have 'to all outward
appearances' contracted, then neither can escape by proving a subjective lack of
intention.20 This is a useful device for a court that wishes to exclude evidence of
an intention inconsistent with the one it wishes to find.21 But this, too, is a rule the
judge can ignore when it proves inconvenient.22
I do not deny for a moment that the parties can settle for themselves the
question whether legal sanctions will be present. My point is that if they wish to
do so they must do it dearly,23 and if they do not the court is forced to impose its
own view of what is fair in the place of the non-existent 'intentions of the parties'.
The usual response to arguments such as mine is to deny that the law ever
purported to concern itself with the actual intentions of the parties—a point I will
return to.24 But an argument which I suspect has strong intuitive appeal to
18 e.g. Jonet v Padavatton [1969] 1 WLR 328, 337cd (Fenton Atkinson LJ); Horrocks v Forray
[1976] 1 All ER 737, 74 6ef (Scarman LJ).
19 Jones v Padavatton [1969] 1 WLR 328, 334bc per Salmon LJ; Albert v Motor Insurers' Bureau
[1972] AC 301, 34oab per Lord Cross.
20 See infra, text at n 34.
21 e.g. Smith v Mansi [1963] 1 WLR 26, 30 (Sellers LJ) and 37 (Russell LJ); Storer v Manchester
City Council[ 1974] 1 WLR 1403, I4o8gh (Lord Denning MR).
22 e.g. Bahamas Oil Refining Co v Kristiansands Tankrederie A/S [1978] 1 Lloyd's Rep 211, where
Kerr J held that the signer of a document was entitled to introduce evidence that he did not know
he was signing a contractual document; his failure to do so was one reason his daim failed: 215,
col 2. See also Ford Motor Co v Amalgamated Union of Engineering and Foundry Workers
[1969] 1 WLR 339, 355cd, where Geoffrey Lane J thought 'impossible and indeed unreal' the
attempt to ignore what the parties were actually thinking. On this case see infra p 413 et seq.
23 See infra n 125.
24 See infra PP398 et seq.
396 STEPHEN HEDLEY
lawyers, and which tries to support the notion that the law is concerned with real
intentions, may be,styled the 'background awareness' argument: that the parties
to business arrangements do not, it is true, have any intention as to legal
sanctions, but none the less everyone will know that the sanctions are available;
whereas in domestic contexts'there is no such awareness; that in the latter, but
not the former, as Atkin LJ said in Balfour v Balfour, 'The terms may be
repudiated, varied or renewed as performance proceeds or as disagreements
develop, and the principles of the common law as to exoneration and discharge
and accord and satisfaction are such as to find no place in the domestic code.'23
And indeed this argument leads me on to the important question whether, in
drawing this distinction, Atkin LJ was talking about actual intentions or about
what the law should regard those intentions as being. Was he talking, in other
words, about facts or about policy?
In my view, he was plainly talking of policy. If his dictum is taken as a
statement of fact, then the obvious answer is that he was not comparing like with
like. His dictum contrasts the actual flexibility of informal agreements with the
inflexibility contractual theory inflicts on business arrangements. Certainly, legal
remedies are the last thing the parties to a family arrangement think of as a way of
dealing with breaches of the arrangement; in most cases literally the last thing,
for few relationships could survive a legal action brought by one party against the
other. And some parties would never consider legal remedies at all, even as a last
resort. But the situation is not very different in business. Studies of business
practice26 show that many business executives are indifferent whether their
agreements constitute binding contracts;27 that business dealings are regulated
more by mutual trust and shared conventions on what constitutes civilized
behaviour than by what parties are legally entitled to;2* that resort to legal
remedies is relatively infrequent, and is used only when the business relationship
is at an end;29 and that when formal contracts are drawn up, this is frequently for
purposes quite unconnected with the possibility of legal sanctions.30 A marriage
run on the common law principles designed for businesses would indeed be a sorry
affair, but so would a business run on those same principles. Willing co-operation
without reference to legal entitlements is normal (and indeed, essential) in both
spheres.
I do not wish to push this fanciful comparison between business and marital
relationships too far. Still less do I wish to argue that the two are basically similar.
My point is rather the reverse—that since there are such obvious differences
25
26 Macaulay, 'Non-contractual Relations in Business' 28 Am Social Rev 45 (1963), abridged in
Sociology of Law (ed. Aubert, 1969) 195; page numbers in references below are to this abridged
version; Beale & Dugdale, 'Contracts between Businessmen' iBritJofL &f Soc 45 (1975).
27 Macaulay loc cit 196-9; Beale & Dugdale loc cit, 50.
28 Macaulay loc cit, 200, 204—05; Beale & Dugdale loc cit, 47.
29 Macaulay loc cit, 199—204; Beale & Dugdale loc cit, 51, 59.
30 Mapaulay loc cit, 206-09; Beale !t Douglas loc cit do not comment on this issue.
between the two, there must be something very wrong with a theoretical
approach that claims to distinguish them only by reference to a presumed,
unquantifiable and highly questionable difference in willingness to sue. Of
course most business executives are aware that legal remedies may be available
if the other side proves uncooperative; but so are most married couples. It is
more realistic to admit that the law pursues different policies in the two areas,
and accordingly applies different rules. It might be thought that I am viewing
business relationships through rose-tinted spectacles. But it is no part of my
argument how frequently businesses quarrel, any more than Atkin LJ was
making any statement on the frequency of marital arguments. The question is,
how are such disputes resolved? And the usual answer in both appears to be
that 'you can solve any dispute if you keep the lawyers and accountants out of
it. They just do not understand the give-and-take needed in business.'31
If lawyers reading this have difficulty in believing that the business
community has such a lax attitude to the legal enforceability of their
agreements, they may be consoled by observing that business lawyers, too,
have difficulty in believing it.32 As a result of their training, lawyers have
selectively morbid imaginations. Professionally, they are concerned with
agreements only when they are broken; with marriages only when they have
collapsed; with medical treatment only when it has gone disasterously wrong;
with factories only when the machinery has injured someone. Their perception
of when people do or do not contemplate litigation is distorted by their own
knowledge of when litigation actually occurs. 'To offer a friend a meal is not
to invite litigation', say Cheshire and Fifoot33—as if anyone who agrees to
anything 'invites litigation' I This is one indication of the conservative character
of the 'legal relations' test: if the context is one where lawyers know contract
litigation has taken place in the past, it is easy to infer that legal relations
were 'within the contemplation of the parties'; but if it has not, it will be
much more difficult. The rule begins to emerge as something which keeps
contract in its place, making expansion difficult.
ATTEMPTS TO SALVAGE THE 'INTENTIONS OF THE PARTIES*
Few people, either today or at any date, would care to defend the 'pure' theory
I have been attacking. But none of the suggested modifications make good the
basic flaw of the 'pure' theory—that in most cases the parties have no
intention at all, and the only possible source for such an intention is the court
itself. There are three main theories.
31 Quoted by Macaulay loc cit, 200 from an American purchasing agent

32 Macaulay loc cit, 200; Beale and Dugdale loc cit, 59.
33 Late ofContract (10th edn, 1981)97.
398 STEPHEN HEDLEY
Firstly, there is the notion of 'objective ascertainment of intention'.34 This

theory asserts that the law of contract is not concerned with what parties actually
intend but with what the 'reasonable fly on the wall' would conclude their
intention was. This is quite clearly a rule which (rightly or wrongly) excludes
certain forms of evidence as to intention. Thus it cannot be a defence to the charge
that there will usually be no evidence at all from which an intention can be
deduced; indeed, it makes matters worse.
Secondly, there is the notion of 'presumptions of intent': that there is no need to
prove 'intent to create legal relations' in business contexts because it can be
presumed, whereas no such presumption exists in other contexts.33 But a
presumption is a matter of evidence; and, the exceptional case of the 'conclusive
presumption' aside, it will always yield to other evidence. The presumption of
innocence in criminal matters will yield to proof of guilt, the presumption that a
document is properly executed will yield to proof that it is not.36 Not so with the
'presumption* of 'intention to create legal relations'. As I have noted above,37 the
court is bound by the very nature of the exercise to ignore proof that the parties
have no intention either way. The truth is that, while such things as 'common
intents' sometimes exist, the insistence of contractual theory that the parties must
have had some common intent ensures that we are dealing not with facts but with
legal fictions. The 'common intent' is not, generally speaking, a real thing in the
real world, but a legal construct—a figment of the contract lawyer's imagination.
The third modification of the 'intent' test is to say that we are not concerned
with whether the parties intended liability, but with whether 'the reasonable man'
in their places would have intended it 3 8 This approach is an improvement. At
least it admits that we are in the field of values, not facts; that when liability is
imposed it is because the 'reasonable man' intends it, not the parties. But two
further steps are needed before we have a workable theory. First, we must
carefully remind ourselves of Lord Raddiffe's dictum that 'the spokesman of the
fair and reasonable man . . . is and must be the the court itself.'39 When the court
considers what is 'reasonable', it is consulting its own values, not some ideal
values and not those of the community at large. It does not have the material with
which to do otherwise. Secondly, we must rid ourselves of any reluctance to
subject judicial values to objective study. Law is the study of what judges do, and
if that study involves us in statements about judicial values, then that is the
34 This notion is as old as textbooks on contract themselves. But its first use to reconcile a supposed
requirement of 'intention to create legal relations' with the absence of evidence of this intention is
by Cheshire & Fifoot (ist edn, 1945), unless Winfield's dismissive comments at 55 Law Q Rev
501-02 (1939) can be read this way.
35 e.g. Anson (25th edn, 1979) 58.
36 On presumptions, see generally Cross on Evidence (5th edn, 1979) Chap 6.
37 Supra pp 394-6.
38 e.g. Merritt v Merritt [1970] 1 WLR 1211 at 1213c per Lord Denning; Albert v Motor Insurers'
Bureau [1972] AC 301 at 339 ef per Lord Cross.
39 Davis Contractors v Fareham UDC [1956] AC 696, 728.
KEEPING CONTRACT IN IT8 PLACE 399
direction we must go in. Of course, it would not be surprising if, given the vast
scope 'intention to create legal relations' gives to individual judges, they produced
widely differing results, utterly irreconcilable with each other. But in my
contention this simply has not happened. The results can be reduced to the form
of a reasonably precise set of rules; and I will attempt below to state those rules.40
CLASSIFICATION OF 'LEGAL RELATIONS* CASES WHAT WAS

BALFOUR ABOUT?
Accordingly, I do not think that the concept of 'intention to create legal relations'
is a useful one in a case where the parties make no specific declarations on the
matter. But because it has become so widely accepted that 'intent to create legal
relations' is a necessary element of contract, various cases have been rationalized
in those terms even though they have no necessary connection with the doctrine.
The results in these cases would, however be no different if the law lacked the
'legal relations' requirement; and examples of them occur both before and after
Atkin LJ introduced the requirement in Balfour v Balfour.41
To explain the point, I must immediately draw a distinction between 'intent to
create legal relations' and 'contractual intent'. When the courts ask whether
'contractual intent' is present in a particular case, they mean 'Does what the
parties intended qualify as a contract?' Thus by implication they refer to all the
requirements of the law of contract and ask whether the intentions of the parties
comply with them. 'Intent to create legal relations', by contrast, is only one such
requirement—namely, the suggested requirement that the parties must intend to
create not only actual expectations but legal obligations as well. Thus 'intent to
create legal relations' is simply one sub-division of 'contractual intent',42 and to
treat the two concepts as interchangeable43 can only lead to confusion. Where the
question is whether a free bus pass creates a conditional licence or a contract,44 the
issue is whether what the parties intended constitutes a 'bargain'; the legal issues
involved relate to the doctrine of consideration, not 'legal relations', and it is only
the court's misleading statement that it is discussing whether a 'contractual
animus' was present43 that makes the issue appear to have anything in common
40 See infra pp 405 et ttq.
41 Most of what I say in this section has already been said, perhaps more lucidly, by Hepple Camb
LJ 122, 130-4 [1970]. However, he tries to explain too much in these terms, and is often reduced
to accusing the judges of distorting the underlying concepts. With respect, if the results do not
tally with the concepts, then it is the concept! we must discard, and quickly.
42 So long as we are only concerned with contract, that is. On non-contractual property interests tee
in/rapp4ii-2.
43 As does Treitel (6th edn, 1983) Chap 4, 124 and panim.
44 As in Gorev Van der Lamt [iqby] 2 QB 31.
45 ['967] 2 QB 41 f (Willmer LJ); 45de (Salmon LJ). Treitel talks of whether the pass was 'couched
in contractual language' (130), which to me seems the same fallacy expressed another way: the
argument that the pass was not 'couched in contractual language' was essentially a denial of
consideration.
4OO STEPHEN HEDLEY
with 'legal relations' cases. Bus passes are plainly intended to produce legal
consequences of some sort; the problem is what sort. Again, in asking whether a
statement is a warranty, the relevant test does indeed turn on 'the intention with
which the statement was made';46 but again, 'legal relations' are not in issue. The
question is whether the person making the statement is to be treated as promising
that it is true; if yes, no one doubts that the promise will he held binding. Further
examples could be given; but to sum the matter up in a sentence, 'contractual
intention' tries to classify an expression of intention to see if it is contractual, but
'intent to create legal relations' examines the question whether there was any
expression of intention to affect the legal position at all.'-
On these definitions (which I do not put forward as being 'right' or superior to
anyone else's, but simply to make clear what Balfour v Balfour*1 was concerned
with and what it was not),41 it is clear that many cases discussed today under the
heading of'intent to create legal relations' do not properly belong there: the results
of the cases would be no different whether or not the law possessed such a
requirement. This can be said, in particular, of all the cases decided before
Balfour v Balfour. Writers differ in which cases they include in the 'legal
relations' category;49 but there is a hard core of three classes of case which all
writers include, and which would mesh perfectly with a test of 'intention to create
legal relations', if that test represented a genuine enquiry into what the parties
intended. As it is, I argue that they are better kept distinct.
Firstly, there are those cases where the alleged 'promise' was plainly not
seriously meant.50 'Legal relations' have little to do with this: the defendant's
argument is not that there was a promise which the law will not enforce, but that
there was no promise at all. The problem which the courts are struggling with in
these cases is that litigation is based on written pleadings, and so it is all too easy
for the plaintiff to concentrate on the precise words used, as opposed to what they
meant to the person to whom they were directed. This emerges clearly from White
v Bluett,51 where a son alleged that his father had released him from liability on a
promissory note, in consideration for the son's ceasing to bother him with
46 Trcitd (6th edn, 1983) 124. Of course, the 'intent' here is usually no more real that it is in cases
of'intent to create legal relations'. My point is simply that the two issues are distinct.
47 [191912 KB 57i;iu/>rap39i.
48 It is this terminological difficulty that seems to be at the heart of the argument over Trend's
statement that 'one cannot tell whether mutual promises constitute a bargain or an 'exchange of
gifts' without regard to the intention of the parties' (6th edn, 1983) 132. Whether this statement
is regarded as obviously correct or (as Hepple Camb LJ 130 [1970] seems to think, and is
certainly my view) as a mere tautology, seems to be a purely semantic dispute. On neither view
does it tell us anything about 'intention to create legal relations'.
49 Treitel includes the most material (6th edn, 1983, Chap 4); the writer who includes the least
seems to be Anson (25th edn, 1979) 66—9. The amount of material included seems to increase
with the date of the last effective revision (as opposed to the last up-dating).
50 e.g. Weeks v Tybald (1604) Noy 11, 74 ER 982; Guthing v Lynn (1831) 2 B & Ad 232, 109
ER 1130.
51 (1853) 23 LJ Ex 36.
KEEPING CONTRACT IN ITS PLACE 4OI
complaints of unfair treatment. Something of Pollock CB's irritation with having to

find a formal reason why the promise was unenforceable comes over in his
extempore judgment: 'The plea is clearly bad. By the argument a principle is pressed
to an absurdity, as a bubble is blown until it bursts. Looking at the words merely,
there is some foundation for the argument, and following the words only, the
conclusion may be arrived at . . . It is ridiculous to suppose that such promises
could be binding.'52
A second class of cases which are treated today as part of 'intent to create legal
relations' are those where the alleged promise was in fact a mere statement of
intention, to which the 'promisor' plainly made no commitment." But again, we do
not have to explain this in 'legal relations' terms. If nothing was said from which the
'reasonable man' could infer a promise, then there is nothing for the law of contract
to get to work on in the first place.34
The last class of cases is where the parties have quite deliberately excluded all
legal effect from their agreement." It may seem perverse (or at any rate, wrong) for
me to argue that these cases have no necessary connection with 'intent to create
legal relations'.'6 Indeed, if I thought that the 'legal relations' test was a genuine
enquiry into the intentions of the parties, I would agree that these cases mesh
perfectly with such enquiry. But the fact that a rule of law may be excluded by the
intentions of the parties does not show that the rule itself is based on those
intentions. Contract law frequency assumes that rules which can be excluded by the
intentions of the parties are themselves based on those intentions; but this should be
recognized for the fiction it is.
The cases I have been discussing thus have no necessary connection with the
rule in Balfour v Balfour; examples occurred both before and after that case; and
for clarity of thought they are best kept distinct. The Balfour rule had no
counterpart in the earlier law. Its function is to deal with fact-situations which
had not been before the courts until that time.
52 (1853) 23 LJ Ex at 37.
53 e.g. Maddison v AIderton (1883) 8 App C M 420; Grainger v Gough [1896] AC 325.
54 Several writers have felt the need to 'rationalize' the first two classes of case on 'legal relations'
grounds—e.g. Treitel (6th edn, 1983) 132-3. But if the 'promisor" said nothing that could
reasonably be regarded as a promise, why the need for refined reasoning to rationalize the refusal
of liability? See also G. MacCormack Juridical Rev 70, 80 et seq (1976), who has immense
difficulties in seeing the distinction between a lack of intention to impose moral sanctions and a
lack of intention to impose legal sanctions, and supposes that laypeople too suffer from this
disability.
55 e-g. Tivertonv Wearacll[i<)7s] Ch 146.
56 Interestingly, textbook writers in the 1920s seized on Rose & Frank v Crompton [1925] AC 445
(legal effect removed by parties from formal business agreement) as clinching proof of a
requirement of intent to create legal relations, consigning Balfour to the oblivion of the law on
married women's contracts.
402 STEPHEN HEDLEY
THE REDEFINITION OF THE ROLE OF CONTRACT LAW IN THE

TWENTIETH CENTURY
Speaking in broad terms, the Victorians invented the idea that the law will enforce
contracts as such. They were given a law of contracts, but turned it into a law of
contract, with general principles applicable to all agreements.37 The responsibility
for this development is largely that of Leake, Pollock and Anson, who each
produced major textbooks expounding a law of contract and not merely collecting
together rules on different types of contracts.58 The subject-matter of contract was
overwhelmingly business and consumer transactions;39 the general principles of
contract were thus largely designed for commercial work.
There was, however, no formal rule restricting contract to commercial contexts.
The major limit on which promises the law would enforce was provided by the
reformed doctrine of consideration, which was taken to imply the need for a
two-sided arrangement or 'bargain'. The word 'bargain' naturally suggests a
commercial transaction. But while it may well be that the commercial flavour of
the cases naturally suggested the concept of 'bargain' to the theorists, there was
nothing in the concept to keep contract to commercial areas. The contrary
argument60 is to my mind simply a play on words: people in domestic contexts do
indeed rarely engage in protracted negotiations or 'bargaining', but the
requirement of 'bargain' was never meant to be restricted to those who did so. All
it meant was that each side of the arrangement must be given in exchange for the
other, or even simply that they were both given as part of the same arrangement.61
The reason why contract was rarely applied outside the commercial sphere seems
to be simply that few people in other spheres sought to invoke it.62
By the beginning of this century, consideration had acquired a somewhat
mystical aura amongst academic writers. Its High Priests debated points which,
to an outsider, were not simply trivial but utterly without practical import. No one
who had not been brought up to view the requirement of 'benefit' or 'detriment' as
an eleventh commandment, and the rule that mutual promises could be good
consideration for each other as a twelfth, could possibly be interested in an
argument on how to 'reconcile' the two rules.63 The doctrine had become an
57 See generally P.S. Atiyah, The Rite and Fall of Freedom ofContract (1979) 681-93.
58 See Leake (1st edn, 1867); Pollock (1st edn, 1876); Anson (ist edn, 1879). Previous works (e.g.
Addison, ist edn, 1847) spent little time on general principles, for the most part dealing with
individual classes of contracts.
59 The only major exception to this was the action for breach of promise of marriage. My assertion
in the text ia based on my own impressions of the case law, and so is unashamedly subjective.
60 Advanced by Unger 19 Mod L Rev 96, 98 (1956); Hepple Camb LJ 122, 130 [1970]. See n 138
infra.
61 As in New Zealand Shipping Co v A M Satterthwaite and Co [1975] AC 154; Clarke v Earl
Dunraven [1897] AC 59. See pp 405—6 infra for the assumptions I will be making as to the
meaning of 'Consideration' when I come to consider the modern law.
' 62 See n 59 supra.
63 For a brief account of this and other debates, see Atiyah op cit 687—8.
academic plaything; and the judges, it seems, had no wish to get involved.
When change came, it was not by open modifications to the doctrine but by
more devious means. Tort began to take bigger and bigger bites out of
contractual territory.64 New forms of promissory liability sprang up,63 on the
excuse that consideration only limited contractual enforcement—ignoring the
point that the Victorians had used the words 'contract' to denote all forms of
promissory liability.6* Great care was taken not to fracture the form of
contract, while entirely changing its substance to making it only one of the
means by which agreements could be enforced.
But contract could not simply be left to regulate the commercial cases while
equity regulated the domestic ones. From the early 1940s onward, plaintiffs
were increasingly seeking to apply contract outside its usual context.67 What
had happened once in Balfour v Balfour6* was now happening again and
again: contract was attempting to invade the preserves of other bodies of law.
Moreover, the results of letting it do so would not all be bad. The judges
wanted contract let into domestic contexts, but only on their terms; and they
found the perfect device for achieving this in the solution Atkin LJ had
adopted, of postulating a doctrine of 'intent to create legal relations'. If liability
were thought appropriate on certain facts, it could plausibly be made out as
'intended'; if not, it would be easy to deny the existence of the requisite
intention. I am not saying that the judges consciously thought along these
lines, though some of them may well have done. But this was the effect. The
'legal relations' doctrine gave the judges carte blanche to impose or refuse
contractual liability in unfamiliar contexts—with results I will go on to
describe.
This judicial activism, then, was simply forced by events; it was not the
result of any sudden conversion to the academic view that all contracts
required an intention to create legal relations. Leake had insisted on this
64 The biggest bites were Donoghue v Stevenson [1932] AC 562; Hcdley Byrne & Co v Heller &
Partners [1964] AC 465; Anns v London Borough of Merton [1978] AC 728; Junior Books v
VieUhi[\qii\ 1 AC 520.
65 Principally the promissory estoppels and various varieties of implied and constructive trusts.
Most of these existed in the Victorian law, but the modem version is scarcely recognixable from
these prototypes.
66 See e.g. per Lord Cranworth LC mjorden v Money (1854) [ 1843-1860] All ER 350, 3560, where
what the defendant was contending for would now be described as a promissory estoppel. See
generally R. M. Jackson, The Scope of the term "Contract"' 53 Law Q Rev 525 (1937).
67 The first of these cases, so far as I am aware, were Peters v IRC [1941] 2 All ER 620 (written
maintenance agreement held enforceable and hence tax-deductible) and Bramwell v Bramwell
[1942] 1 KB 370 (oral agreement by husband to let wife occupy the former matrimonial home in
return for a diminution of alimony held unenforceable). An unusually perceptive writer at 170
Law Times 317 (1930) saw that contract could be expanded into the domestic sphere at any time
the courts wished it; he/she can be forgiven for not guessing the precise circumstances in which
they would do so, or that Balfour would be uted to keep this incursion under control.
68 [1919] 2 KB 571; see 391 supra.
404 STEPHEN HEDLEY
requirement since 1867,69 and Pollock70 and Anson71 had followed suit. But this
requirement was effectively meaningless until plaintiffs in domestic contexts
sought to enforce their agreements as contracts. Indeed, Leake's insistence was
based on Civilian writers;72 and he was deterred neither by the absence of
authority nor by the thought that a legal system with a Statute of Frauds and a
tolerably precise doctrine of consideration would not necessarily need a further
limiting doctrine.73 At a superficial level, this can be seen as triumph of
academic thought over precedent—the introduction of the 'legal relations'
requirement for no better reason than that eminent academics had consistently
argued that it should be there. But to see the matter this way requires us to
pretend that the courts take the requirement seriously, genuinely searching for
the intentions of the parties and refusing to give up what will usually be a
quite hopeless search. And this is essentially what modern textbooks expect us
to believe. Modern treatments of 'intention to create legal relations' might
almost be described as formalistic, if this were not too grand a word for what
amounts to a refusal to examine what the judges are doing even when what
they are saying makes no sense at all. Some writers retreat into the fiction that
the judges are assessing (or 'objectively assessing') the intentions of the
parties;74 others simply state the rule and immediately proceed to
'illustrations', leaving their (no doubt puzzled) readers to guess the connection
between the two, with nothing to encourage them but the observation that 'In
the last resort, the question is one of fact'.75
Of course, I am by no means the first writer to criticize this formalistic
tendency. Williston pointed out in 1914 that the 'legal relations' doctrine not
only gives a confusing picture of the case law, but is actually meaningless
unless the courts seriously mean to take the drastic step of refusing liability
unless the parties had legal consequences in mind.76 And within our own legal
system, various writers have made these and other criticisms with equal
69 (1st edn, 1867) 9. Some earlier writers had done so too; the earliest I know of is Fox, Treatise on
Simple Contracts (1842) 62-3.
70 (istedn, 1876)2.
71 (1st edn, 1879) 14. Other writers would have none of it Addison (1st edn, 1847, nth and last
edn, 1911) never mentioned it; and Chitty (1st edn, 1828) avoids all reference to the doctrine
until the 18th edn (ed. MacFarlane and Wrangham, 1930) 10. See P. S. Atiyah, op cit, 690.
72 Specifically Pothier, though he also cites Austin, Maine and the Code Civil. Pollock based himself
on the writings of the civilian Savigny. For a review of what different systems have made of the
requirement, see A. G. Chloros 33 Tulane L Rev 607 (1959).
73 It has often been suggested that the common law requirement of consideration is a sufficient
substitute for the Civilian requirement of writing; whether the matter is really as simple as this is
open to doubt, given our own (at some periods quite extensive) requirements of writing.
74 Anson (25th edn, 1979) 66-8; Cheshire & Fifoot (10th edn, 1981) 98.
75 Treitel (6th edn, 1983) 130; and very similar is Chitty (25th edn, 1983)33 123-33 (*d- Treitel).
76 In 'Consideration in Bilateral Contracts' 27 Harvard L Rev 503, 506-07 (1914). He discusses the
matter at greater length in Law of Contract (1st edn, 1921) s 21. His view is
criticized—ineffectually, in my view—by G. MacCormack Juridical Rev 70, 78-84 [1976].
KEEPING CONTRACT IN IT8 PLACE 405
force.77 But while Atiyah at least has begun the task of describing what the judges
are actually doing, other writers on the English law have been reluctant to go
beyond a demonstration that what they are saying is meaningless. It is in some
ways rather odd that so many other writers should have exposed the inadequacies
of the concept, and yet failed to study what the courts have actually made of the
requirement in practical terms. But, while this is odd, it is not particularly
unusual. One does not have to subscribe to any particular legal philosophy to be
able to 'trash' legal concepts; but a willingness to go beyond this point, to make
use of the fact that the concept has been trashed, is apparently regarded by many
as either beyond their abilities, deeply uninteresting, 'unlawyerly', or all three.
Accordingly, for the remainder of this paper I will be attempting a sketch of the
modern law of 'intention to create legal relations'. I will be considering only the
case where the parties cannot realistically be said to have any intention as to legal
consequences; I acknowledge that if they have one, the courts will usually give
effect to it. I also acknowledge that some of the cases I refer to could be regarded
as ones where the parties had legal consequences in mind, without a shadow of
artificiality.7'
THE MODERN LAW ( i ) PARTIES WHO ARE NOT AT ARMS' LENGTH

A preliminary note on 'consideration': I will be using the word to refer to the
notion that there must be an act or promise in return for an act or promise before
contractual remedies are available. To reconcile this notion with the cases, I must
give 'exchange' a somewhat extended meaning: it covers not merely everything
the expression covers in everyday speech (except perhaps an 'exchange of gifts',
which is in this connection a contradiction in terms) but also three further
situations: (i) where one party makes a promise with the intention of encouraging
a specified act from the other;79 (2) where promises are made or acts done as part
of a wider arrangement to which both parties contribute;80 and (3) where one
party makes a precise promise to the other in respect of an unliquidated claim the
other has, and that other accepts—I am thinking primarily of maintenance
agreements.81 Some might think this an unnecessarily wide definition; and indeed
some have argued that most cases where liability was refused on 'legal relations'
77 e.g. N. M. Selwyn, 'Collective Agreements and the Law' 32 Mod L Rev 377 esp pagea 378-80
(1969); P. S. Atiyah, Introduction to Contract (3rd edn, 1981) Chap 7 passim, see also material
referred to in n 82.
78 e.g. Mcrritt v Merritt infra, 406.
79 e -8- Jo*** v PadavatUm infra, 410; Tanner v Tanner infra, 409. A commercial parallel is Carlill
v Carbolic Smoke Ball Co [1893] 1 QB 256.
80 e.g. Simpkins v Payt infra, 407; Parker v Clark infra, 407. A commercial parallel is New
Zealand Shipping Co v Sa'tterthwaite Sf Co [1975] AC 154.
81 Peters v IRC infra n 93; Gould v Gould infra n 92. A commercial parallel is Rt Casey's Patent
[1892] 1 Ch 104.
406 STEPHEN HEDLEY
grounds are examples of absence of bargain.82 But this theory is useless unless or
until its proponents produce some narrower and more precise criterion that
corresponds at least roughly with the results in 'legal relations' cases.
In domestic cases, the rule is that agreements will be enforced only at the
instance of a party who has performed one side of the bargain; but there is no
need to prove any intention that sanctions be available. In other words, the courts'
concern is to prevent one side taking the benefits of the arrangement and refusing
the burdens, but they are unconcerned at the prospect of breach of a purely
executory arrangement. The cases where the greatest liabilities are imposed are
those where the plaintiff has supplied some substantial and once-for-all considera-
tion, and will get nothing in return unless contractual liability is imposed. Thus in
Merritt v Merritt,*3 where on the breakdown of their marriage the husband agreed
to transfer the freehold of the house to the wife in return for her promise to
assume responsibility for the mortgage payments, he was held bound by this pro-
mise in an action brought by the wife after she had paid off the mortgage
completely. But if performance is non-existent or a travesty of what was promised,
enforcement is not available. Thus in White v BlackmoreP* the estate of a jalopy
racer sued the organisers of the race in which he had met his death, for negligence;
one defence was an alleged contract under which the rider surrendered any right
to sue in return for being allowed to compete. But their fatally negligent perform-
ance could not constitute a sufficient consideration to allow them to enforce.
These once-off transactions appear only rarely in reported cases. The more usual
situation is a proposed series of exchanges of benefits over a period. The general rule
is that each individual exchange is viewed in isolation, and enforced only where
consideration is actually supplied, and not just promised. In practical terms, the
executed part of the agreement is severed from the purely executory, and enforced
on its own. Thus, where there is an agreement that one will drive another to work in
return for a contribution to the cost of the petrol, an action for payment for journeys
already completed will succeed,85 but no action lies for failure to carry;86 and if on
one journey the driver negligently injures the passenger, he cannot use this defective
performance to justify enforcing an agreement by the passenger not to sue.87 There
82 Unger 19 ModL Rev 96 (1956); Hepple Camb LJ 122 [1970].
83 [1970] 1 WLR 1211.
84 [1972] 2 QB 651. Lord Denning MR dissented on this point; my theory cannot be reconciled
with his reasoning. Curiously, in both this case and in the very similar case of Buckpitt v Oatts
(infra n 87) a plea of Volenti non fit Injuria succeeded on the same facts. I share the doubts of
IGF Karsten 32 Mod L Rev 88 (1969) on this point. See now Road Traffic Act 1972, s 148 (3);
Transport Act 1980, s 61.
85 McGoonan v Motor liuurert' Bureau [1969] 2 Lloyd's Rep 34 QBD; Lord Cross in Albert v
Motor Insurer? Bureau [1972] AC 301, 34Oab.
86 Coward v Motor Insurers' Bureau [1963] 1 QB 259.
87 Buckpitt v Oates [1968] 1 All ER 1145, Devon Assizes. My theory cannot be reconciled with
John Stephenson J's dictum (11470!) that no action would have been available for the agreed
amount if the journey had been completed without incident—unless of course he was simply
saying that no amount had been agreed at all.
are several examples in the cases where liability was imposed in respect of the
executed parts of a transaction, where liability on the whole of the agreement
would have been unthinkable. In Simpkins v Pays,8* the plaintiff, the defendant
and a third party agreed to enter a newspaper competition every week, splitting
the job of completing the application form and the costs of applying and agreeing
to share the prize if they won. When they did, the plaintiff was held entitled to sue
the defendant (to whom the prize-money had been paid) for her third share. And
in R v Cullen,19 where a man gave the woman he was living with money for
housekeeping but she lost it all at bingo, the Court of Appeal were prepared to
assume that she had undertaken a legal obligation and so was liable for theft.90
Maintenance agreements are in a special position: the wife cannot legally
surrender her right to an order for maintenance," and accordingly for present
purposes can never execute her side of the bargain. Contractual liability has thus
been refused92 except in one case, where the husband was dead, the payments had
all been made and the wife had never applied to the court; it was held that the
payments had been made under an enforceable contract, and were therefore
tax-deductible.93
There is one class of cases, however, where the courts have consistently refused
to sever the agreement into executed and executory parts, but have instead
enforced the whole.94 These are cases where one party has allowed another to
occupy premises in return for some periodical payment or service; and so long as
the occupier is prepared to go on with the bargain, the courts will either forbid
eviction or (if more appropriate) give compensation for it.93 Sometimes the reason
seems to be that there is some underlying bargain, which the court will enforce as
a whole. For example, in Parker v Clark96 the plaintiff and defendant couples
agreed to share the defendants' house and split the running costs; when arguments
broke out after a year and the plaintiffs left, they were held able to sue for damages
on the underlying bargain that they would sell their former house and the
88
89 Unreported (1974) no 968/C/74; referred to in Smith and Hogan's Criminal Law: Cases and
Materials (2nd edn, 1980) 486.
90 See Theft Act 1968, s 5 (3). There was no conclusive authority that 'obligation' meant 'legal
obligation', but this seems the only reasonable view. A similar case is Davidge v Burnett [1984]
Crim LR 297, where the defendant spent on presents money her flatmates had given her to pay
the gas bill. The Magistrates and the Divisional Court were prepared to assume that this was
theft, relying on s 5 (3).
91 See Hyman \ Hyman [1929] AC 601.
92 e.g. Gould v Gould [1970] 1 QB 275. See now Matrimonial Causes Act 1973 s 34 (1); quaere
whether this alters the position.
93 Peters v IRC [1941] 2 All ER 620.
94 Bramwell v Bramwell [1942] 1 KB 370 seems inconsistent with modern practice; I ignore it in
what follows.
95 Refusing eviction is the normal remedy, but is not considered appropriate if the claimant has
already left the premises—Parker v Clark infra, Tanner v Tanner infra, 409.
96 [1960)1 WLR 286. Another such case is Errington v Erring ton and Woods[ 1952] 1 KB 290.
408 STEPHEN HEDLEY
defendants would leave theirs to the plaintiffs by will. But there does not seem to be
any necessity for an underlying bargain. In Hardwick v Johnson91 the plaintiff let
her son and daughter-in-law occupy a house she owned for £7 per week; it was
unclear whether this was rent or to pay off the mortgage. After the marriage broke
down, the daughter-in-law was held contractually entitled to remain, at least while
she continued to pay."
The fallacy to be avoided here consists of asking the question 'Is there a
contract?', but forgetting that a court is almost invariably faced with a particular
claim based on an alleged contract. The perspective given by the claim made alters
everything. Take a variation of the classic academic conundrum in this area:" Jack
and Jill agree to go out to dinner and to split the bill. By asking the academic
question 'Is there a contract?' we are immediately in the realm of the abstract. If,
however, we approach the matter from a practical standpoint, we must know what
claim is being made. If Jill is suing Jack because Jack has refused to go to dinner at
all, the arguments against liability are compelling. Surely Jack cannot be taken as
giving an outright commitment to go to dinner—what if he is ill, or they cannot
agree on a suitable restaurant ? But imagine that the two already had their dinner,
for convenience Jill pays the bill in full, but Jack subsequently refuses to pay his half.
The perspective changes. It is no longer so obvious that the contract cannot be
enforced. If it is the 'reasonable man' we are consulting, then the 'reasonable man's'
opinion may change in the course of the transaction. Jack's contention that there
was no intention to form a binding contract is likely to receive little sympathy.
Blanket statements in cases that there is no 'intention to contract' on the facts before
the court should therefore be treated with suspicion; it is vital to note whether this
was being said in relation to an executed or an executory contract.
This is even more so because the court is sometimes trapped into asking simply
'whether there is a contract', and which way the court decides this class of case
seems to depend simply on how their minds are directed by counsel. This seems to
be what happened in the Motor Insurers' Bureau cases, where the courts had to
consider whether there was a contract between workers who agreed that one should
carry the others to work in return for a contribution to the cost of the petrol.100 In
97 [I978]IWLR683.
98 In fact, the court went even further, allowing the daughter-in-law to remain even though she had
not paid a substantial amount. At to one period, the mother-in-law had waived payment at the
time, and all seemed to assume this entitled the daughter-in-law to be treated as if she had paid;
for the rest, the daughter-in-law paid the arrears on judgment in her favour.
99 The example of two people agreeing to go to dinner is a commonplace of textbooks in this area,
usually as a stock example of a situation that cannot possibly give rise to legal liability; the
earliest example I know of is Anson (2nd edn, 1882) 22. I know no case where our legal system
has been asked to decide the issue, but see (1930) 170 LT 317 for a reference to a French case
where apparently liability was found to exist.
100 The House of Lords eventually held in Albert v Motor Inturers' Bureau [1972] AC 301 that
determining whether the passengers were 'carried for hire or reward' and so within the MIB
agreement did not, after all, require them to determine whether or not there was a contract
between the driver and the passengers.
the cases where it was held that there was no contract, it is plain that the court
was asking itself the question 'Could the driver be compelled to carry the others in
the future?', and so refused to find a contract: 'The hazards of everyday life, such
as temporary indisposition, the incidence of holidays, the possibility of a change of
shift or different hours of overtime, or incompatibility arising, make it most
unlikely that either party contemplated that the one was legally bound to carry
and the other to be carried to work.'101 But if the court is thinking of a contract
simply to pay for the service once it is rendered, 'a plea on the part of the
passenger that he never meant to enter into a contract would [receive] short shrift
. . .'102 The difficulty for my theory is that it renders meaningless the question
'whether there was a contract'. But this is the price that must be paid for a theory
which works.
Various points of detail need to be considered. Firstly, the effect of vagueness in
the agreement. It occasionally happens that the evidence of an agreement is so
unsatisfactory that the court cannot hold that there was an agreement at all, unless
there is some relevant presumption of agreement to fall back on.103 But in cases of
executed arrangements, where there was plainly an agreement of some sort, the
courts will cure the uncertainty with implied terms. It is difficult to state precisely
which terms the courts will imply in any given situation; all that can be said is
that they will provide what they think is a fair recompense for the consideration
supplied. In Tanner v Tanner10* the arrangement was that the defendant should
come to live in the flat provided by the plaintiff—in doing so she provided
consideration by giving up her own Rent-Act-protected flat. The relationship
subsequently broke down; but the defendant relied on the agreement as a defence
to the plaintiffs action for possession of his flat. The Court of Appeal held the
arrangement enforceable, but were in a quandary as to the length of time she was
entitled to remain there. Naturally, this had been left quite vague by the parties
themselves. In the end the court held she had the right to remain for as long as her
children were of school age, subject to any relevant change in her circumstances.
The court in Tanner seems to have been heavily influenced by their view that
the plaintiff was under a moral obligation to provide for the defendant and her
children: Lord Denning MR said so expressly,105 and his fellow judges suggested
no other ground to justify the link between the duration of the licence and the
education of the children. But the concept of recompense for consideration
supplied seems central; in Horrocks v Forray,106 which is superficially similar but
the woman's side of the arrangement was thought to involve her in no detriment,
101 Upjohn LJ per curiam in Coward v Motor Inrurtrt' Bureau [1967] 1 QB 259, 271.
102 Per Lord Crossing/ACT* V Motor Insurert' Bureau [ 1972] AC 301, 34011b.
103 e.g. Hoddinott v Hoddinott [1949] 2 KB 406. Denning LJ's dissent argued that there was such a
presumption: 415—16.
10
4 [1975] 3 A11 ER 776-
105 [1975] 3 AH ER 779h. See also Chandler v Kerley [1978] 1 WLR 699, where again the reasoning
had distinctly moral overtones.
106 [1976] 1 AUER 737.
4IO STEPHEN HEDLEY
107
no contract was found. It is important to note that the Court's difficulties in
Tanner were not in holding there was an enforceable contract, but in determining
what that contract was; she had plainly relied on the arrangement, and mere
difficulty in quantifying precisely what she had been promised was no bar to her
claim. The uncertainty did not destroy the contract, it merely made the court's job
in spelling out its terms more difficult.
Perhaps part of the reason why there is so little indication of which terms will be
implied is that the courts rarely say precisely what term they are implying. It will
usually be sufficient for them to say that whatever the precise content of the term, it
is clear which party wins and which loses.108 And when one member of the court is
prepared to be precise and the others are not, it looks as if that judge is taking a
different view of the facts. In Jones v Padavatton,109 a woman gave up her job in
New York and studied in England for the Bar, living in a house provided by her
mother, who promised to keep it available until she had passed the Bar Finals. Their
agreement did not expressly cover the events that happened, namely that she made
several attempts at the exams, failed, but kept on trying. After many unsuccessful
attempts to pass, her mother sought an order for possession. The Court of Appeal
held that there was no defence. Each member of the court stressed the open-ended
nature of the agreement.110 But this factor entered the theoretical reasoning of the
various judges in different ways. The daughter could only win if the arrangement
enforced included an indefinite right to retake. Danckwerts and Fenton Atkinson
LJJ argued that this was the arrangement and refused to enforce it—such an
arrangement could not possibly have been meant to be legally binding. Salmon LJ
approached the matter from the other direction: how much would the arrangement
have to be cut down before the truncated version could be enforced ? He accordingly
found that there was a legally enforceable arrangement, but that after a few
unsuccessful attempts at the exams it became determinable by the mother on notice.
Both lines of reasoning start with the idea that the daughter was claiming more than
her detrimental reliance reasonably entitled her to; both end with denying her claim.
It is only the theoretical steps along the way that distinguish them.
Jones v Padavatton also illustrates the proposition that, as in other areas of
contract, vagueness and inequality in the exchange are symbiotic. Vagueness gives
the court the excuse to imply terms equalizing the exchange; but it is frequently the
inequality flowing from a literal interpretation of the contract that convinces the
107 TTie defendant alleged various matters as constituting consideration—see extract from her
defence [1976] 1 All ER 7411c—but the reasoning of the court was simply that there was no
agreement to the effect she claimed: [1976] 1 All ER 7+4gh (Megaw LJ); 745I1J (Scarman LJ).
108 e.g. Hardtvick v Johmon [ig-jS] 1 WLR 683; Chandler \ Kerley [1978] 1 WLR 699.
109 [196911 WLR 328.
110 [1969]! WLR 332cd (Danckwerts LJ);334Cg (Salmon LJ); 337ac (Fenton Atkinson LJ).
KEEPING CONTRACT IN ITS PLACE 4II
court it could not have been meant literally and was thus in need of
'clarification' by implied terms.111
Is it possible to argue that a particular arrangement is too trivial to merit
contractual remedies? It seems not, unless the parties themselves saw the
matter as so utterly trivial that no serious expectations were created on either
side.112 The point was not argued in Ferris v Weaven,113 where a husband
promised his wife when their marriage broke down that she could have the
house provided she did not pester him any more. After ten years, in which
time she presumably did not pester him, she was held to have a contractual
right to the house. The 'triviality' point can only succeed if the court is
considering the matter in the abstract, for some reason other than that one
party to the arrangement has sued. Such a case is Esso Petroleum Co v
Customs and Excise Commissioners,114 where the House of Lords considered
the enforceability of a 'gift' offer of medallions with petrol; individually, the
sums involved were trivial, but in aggregate they amounted to a sufficiently
large amount for the tax to be worth fighting over.113 The result on this point
is distinctly ambivalent: a bare majority thought the triviality irrelevant.116 The
point can only arise in a case very similar to Esso; again we see the difficulties
caused when the courts are forced to answer the question 'Is there a contract?'
without a reference to a particular claim under it.117
A final matter is the application of all I have said to the creation of
non-contractual property interests. Reference to Balfour v Balfour in this area
is spasmodic, but the analysis I supply above can, mutatis mutandis, be used to
explain the application of this requirement to property rights as well. Where
the right claimed is purely a matter of gift, legal relations will not be
affected11* except where this is very plainly intended. But where the right is
based on contract or something analogous, such as the contributions in Pettit v
i n A commercial example is Staffordshire Area Health Authority v South Staffordshire

Waterworks Co [1979] 1 WLR 1387. Perhaps the greatest triumph for this approach was
Wickham Machine Tool Sales v L SchulerAG [1974] AC 235, where a majority of the House of
Lords decided that an agreement could not be taken literally when it provided that performance
of certain terms was to be a 'condition of this agreement'. Whether the House would do the
same in the wake of Photo Production v Securicor Transport [1980] AC 827 is open to question.
112 See supra 400—01.
113 [1952] 2 All ER 233.
114 [1976] 1 WLR 1.
115 The issue was whether the medallions were 'produced in quantity for general sale'; the House
held that they were, and accordingly Esso were liable to pay some £200,000 purchase tax.
116 The majority was 3:2. Taking into account the judgements of the lower courts at [1975] 1 WLR
406 and [1973] 1 WLR 1240, the overall figure was 514 the other way.
117 See supra 408-9. Accordingly, I think P. S. Atiyah's alarm at the thought that triviality could be
relevant to 'legal relations' 39 Mod L Rev 335 (1976) is misplaced; the Esso case is no real
indication as to what the courts would do if a motorist had sued for a failure to get a medallion.
1
'8 e.g. Spellman v Spellman [1961] 1 WLR 921; and note the refusal to imply terms in Heslop v
fl[] 1 WLR 1241.
412 STEPHEN HEDLEY
1 9
Pettit * or the detrimental reliance in proprietary estoppel, again we find that the
arrangement is enforced to the extent that it has been acted on by the plaintiff,
and that when it has been so acted on the court will cure any vagueness by the
implication of reasonable terms.120 In some areas, indeed, it seems to make no
difference whether the claim is treated as based on contract or on some property
doctrine. If my view is accepted, the unresolved question whether Balfour is
restricted to contract121 can safely remain unresolved, for in practical terms it
makes no difference. Lord Denning MR consistently argued that Balfour v
Balfour111 should be used to sweep contract entirely out of the field of domestic
relations, leaving the way clear for broad equitable principles;123 but since these
principles generally have the effect of enforcing an agreement that has been relied
upon, it makes little difference whether we call this 'equity' or 'contract'. There is
plainly a need, if not for fusion of contract, equity and property into one body of
rules in this area, then at least for a common terminology between them to stop
senseless theoretical battles on which no practical issues turn.124
THE MODERN LAW (2) PARTIES AT ARMS' LENGTH
Where the parties are dealing at arms' length, the rule is simple: there is no
requirement of intention to create legal relations. It is open to one party to show
that legal liability was excluded, though it will take strong words to do this.125
Where there is an apparently workable agreement by which the parties intended
to abide, the court will approach a clause appearing to exclude legal sanctions by
asking not so much 'What does this clause mean ?' as 'Can this clause possibly be
construed as permitting legal sanctions, or are we forced to hold them
unavailable?'.126 It is no doubt possible for one party to escape liability by
119 [1979] AC 777. In the contort of contributions to the purchase of houses, the Court of Appeal
has recently affirmed the importance of agreement: Burnt v Burns [1984] 1 All ER 244.
Whatever may be the position on agreement-in-fact, however, their reference to Balfour v
Balfour is, as ever, mere lip-service.
120 e.g. Crabb v Arun District Council[1976] Ch 179; Eves v Eves [1975] 1 WLR 1338.
121 Raised but not settled in PeUitt v Pcttitt [1970] AC 777; and see Cowcher v Cowcher [1972] 1
WLR 425, 436d per Bagnall J.
122 [1919] 2 KB 571; supra 391.
123 e.g. Hardtcick v Johnson [197&] 1 WLR 688h.
124 See more generally H. Lesser, T h e Acquisition of inter vivos Matrimonial Property in English
Law: A Doctrinal Melting Pot' 23 U Toronto LJ 148 esp at 162-7 ( I 973): J- D. Davies,
'Informal Arrangements affecting Land' 8 Sydney L Rev 578 esp at 582—3 (1979).
125 e.g. Rose & Frank v Cromptcm [1925] AC 445. Note that despite the unequivocal wording of the
clause, the case was fought all the way to the Lords on construction. This may however simply
be a result of the novelty of such a clause.
126 e.g. Edwards v Skyways [1964] 1 WLR 349. And note Michael Richards Properties v St.
Saviour's Parish, Southwark [1975] 3 All ER 416, where Goff J held the words 'subject to
contract' to be, in his particular context, meaningless. There was an excellent practical reason
for this—the phrase had only been included by clerical error—but this could not come out in
forma] legal theory, and hence the need for 'interpretation' of what would otherwise be
unambiguous words.
showing that the alleged 'promise' was no promise at all but merely a statement of
intent, though I know of no clear modern example.127 But these cases aside, there
is no requirement of 'intention to create legal relations'. The attitude taken by the
courts was summed up by Ormrod J when he enforced an agreement between the
directors of a company, who were all brothers: '. . . I . . . am satisfied that this
agreement was intended by all . . . to be binding on them, both in honour and in
law. I do not think it occurred to any of them that there was any difference
between these two concepts.'12* Yet again, the judge forms his own view of the
realities of the situation, and pretends that it belongs to the parties.
I know of only three cases which cast doubt on this analysis.129 In all, contract
was being invoked in unusual circumstances; and in all the attempted invocation
was a failure. But the use of 'legal relations' theory to explain the issue was not
nearly so successful as in domestic contexts. I will review the cases briefly, but
they really show little more than that entirely the wrong kind of test is being
applied.
Ford Motor Co v Amalgamated Union of Engineering and Foundry Workers130
is a neat example of the way unthinking application of the 'legal relations' test will
make the court paint itself into a corner. The issue was whether a collective
agreement between the Ford motor company and nineteen unions was enforceable
at Ford's instance. It is hard not to admire the audacious way in which Geoffrey
Lane J dismissed all the easy ways out of this legal conundrum. There was to be
no appeal to previous authority; for all of them had assumed (not unnaturally) that
serious promises in the business sphere were enforceable, and so from Geoffrey
Lane J's point of view had 'ignored' the 'requirement' of intention to create legal
relations.131 Nor could he retreat behind the mask of the 'reasonable man'—one
need only read the length of his disclaimer that he was deciding any political
issue132 to know that using the 'reasonable man' test would virtually commit this
hypothetical figure to sympathy with one or other of the major political parties.
Eventually he reached what is usually a safe haven for first-instance judges.
Intention, he said, is a question of fact; and as arbiter of the facts he determined
127 See ns 53—4 supra.
128 Stalling v Snelling [1972] 1 All ER 79, 84J.
129 I have already explained my reasons for refusing to regard Lent v Devonshire Club as involving
any serious proposition of law—supra n 9. One situation which may give rise to such problems
in future is suggested by Canon v University of Aston in Birmingham [1983] 1 All ER 88,
where the plaintiff sought damage* for the withdrawal of an offer of a place to read Human
Communications. Lord Hailaham LC (acting for the Visitor) held that he had no jurisdiction,
and that the plaintiffs remedy (if she had one at all) was in contract.
130 [1969] 2 All ER 481.
131 [1969] 2 All ER 488df, 4god. Both Geoffrey Lane J and Clark 33 Mod L Rev 117 (1970) miss the
basic point that there is no requirement of 'intention to create legal relations' in any particular
business context until the courts introduce it—and this was precisely what Geoffrey Lane J was
doing, whether he realized it or not. Naturally, this misconception plays havoc with their
assessment of earlier case law.
132 [196912 All ER
414 STEPHEN HEDLEY
that there was a general climate adverse to enforceability.133 But this usually
dependable technique fails when the facts in question are public property; far from
receiving the immunity from criticism a 'judgment on the facts' can usually
expect, the case has been vigorously criticized.134 For present purposes the case is
perhaps unimportant: in the political climate of the time, it was inevitable that the
matter should become a political football, and the decision taken away from the
courts by statute. 13 ' The point, I think, is simply this: that the Ford case is merely
an extreme example of the absurdities which follow from the fiction that 'intention
to create legal relations' is a question of fact. It is too much to expect the courts to
approach such a highly political matter on an overt policy basis; but travesties
such as the Ford case should not be treated as the normal and proper reaction
when it is questioned whether contract is appropriate in some other context.
In the other two cases, the Court of Appeal had no such excuse. These are
Rogers v Booth136 and President of the Methodist Conference v Parfitt;131 they are
very similar, so for convenience I will discuss only the second. Reverend Parfitt
was dismissed by his church after disciplinary proceedings. He contended that he
had been unfairly dismissed, but the Court of Appeal held that there was no
contract between him and his church, so that his claim failed in limine.
The court seemed mesmerized by the prospect of a conflict between two bodies
of law, one human and one divine. Anyone who imagines that religious natural law
theories are a relic of past ages should note their resurgence in the Court of Appeal
in 1983:
. . . the spiritual nature of the functions of the minister, the spiritual nature of the act of
ordination by the imposition of hands and the doctrinal standards of the Methodist
Church which are so fundamental to that Church and to the position of every minister in it
make it impossible to conclude that any contract, let alone a contract of service, came into
being between the newly ordained minister and the Methodist Church when the minister
133 [1969] 2 All ER 494!.

134 Selwyn 32 Mod L Rev 377 (1969) ably demonstrate* the difficulties in the way of accepting
Geoffrey Lane J's view, and indeed in the very notion of arguing from any 'climate of opinion'
at all. I find his arguments for enforcement unconvincing; but at least he had the honesty to put
them forward as his own, and not pretend they belonged to 'the reasonable man'.
135 See Industrial Relations Act 1971 s 334; Trade Union and Labour Relations Act 1974 s 18.
136 [1937] 2 All ER 751. The question was whether the plaintiff, a Salvation Army officer, was a
'workman' within the Workmen's Compensation Act 1925. The Court of Appeal held she was
not, refusing liability on much the same grounds as in Parfitt infra. There are several other
cases raising similar issues—-e.g. Re Employment of Methodist Minitters (1912) 107 LTR 143,
Joyce J—but these assume the existence of legal relations in some form or other, and seek to
classify them as 'contract of service' or not.
137 [1983] 3 All ER 747.
138
was received into full connection. The nature of the stipend supports this view. In the
spiritual sense, the minister sets out to serve God as his master; I do not think that it is
right to say that in the legal sense he is at the point of ordination undertaking by contract
to serve the Church or the Conference as his master throughout the years of his
ministry.139
The spirit of St. Thomas Aquinas was no doubt looking on with approval at this
delicate sensibility for the claims of divine law; as he said a mere seven centuries
ago, 'All humanly enacted laws are in accord with reason to the extent that they
derive from the natural law. And if a human law is at variance in any particular
with the natural law, it is no longer legal, but rather a corruption of law.'140
A concluding thought: the Reverend Parfitt lost his case because he was judged
by lawyers. All the lay members of the tribunals below decided in his favour; all the
lawyers (applying the same test) were against him.141 It takes a lawyer's training
to convince anyone that the law of contract is not merely a statement of certain
practical results that sometimes follow from human conduct, but a mystical body
of semi-divine lore. For those without such training, the answer to the Methodist
Conference's argument is obvious: 'The circumstances of the appointment of a
minister, the conditions attached to the appointment and the degree of control
exercised by the Church lead the majority of us to the conclusion that a
contractual arrangement existed; . . . the spiritual nature of a minister's work is
not incompatible with such a legal relationship."42 It is not enough to point out
simply that contract is not a branch of theology, for no lawyer consciously believes
that it is. It is precisely because the notion is buried so deep in the legal psyche
that it is so hard to weed out.
138 Viz that a Minister's stipend was seen not as payment for services rendered but simply as the
means to support himself while he did God's work: see [1983] 3 All ER 751O1. Seen as a legal
argument, this is similar to Unger's claim (see n 82 supra) that spouses do not 'bargain'. Both
arguments derive their force, as it seems to me, from the commercial connotations of the word
'bargain'—connotations which are irrelevant to the contractual concept. A bargain does not
cease to be a bargain simply because the parties would find this label odd or even offensive.
139 [1983] 3 All ER 7528b per Dillon LJ; and per May LJ at 7S4h—755d.
140 Of course, Aquinas was not a Methodist, but the point holds none the less. The quotation is
from Summa Theologica, q 95 (trans. J. G. Dawson).
141 Both Industrial Tribunals and the Employment Appeal Tribunal generally sit with a legally
qualified chairman and two lay members with knowledge of Industrial Relations. Reverend
Parfitt won by a bare majority at both levels; in each case it was the chairman who dissented:
Ke
['983] 3 All ER 748ef, 750a. The Court of Appeal were unanimous in allowing the appeal.
142 Waterhouse J (dissenting) delivering the judgement of the Employment Appeal Tribunal (The
Times, 18 November 1982, EAT 143/82).

Keeping Contarct in Its Place

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Keeping Contarct in Its Place

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KEEPING CONTRACT IN ITS PLACE—

BALFOUR v BALFOUR AND THE

Balfour v Balfour1 sounds a simple case. A civil servant posted to Ceylon

THE 'PURE' THEORY LIABILITY IS IMPOSED ONLY IF THE PARTIES

12 Infra 397 et seq.

ATTEMPTS TO SALVAGE THE 'INTENTIONS OF THE PARTIES*

31 Quoted by Macaulay loc cit, 200 from an American purchasing agent

Firstly, there is the notion of 'objective ascertainment of intention'.34 This

CLASSIFICATION OF 'LEGAL RELATIONS* CASES WHAT WAS

complaints of unfair treatment. Something of Pollock CB's irritation with having to

THE REDEFINITION OF THE ROLE OF CONTRACT LAW IN THE

THE MODERN LAW ( i ) PARTIES WHO ARE NOT AT ARMS' LENGTH

i n A commercial example is Staffordshire Area Health Authority v South Staffordshire

THE MODERN LAW (2) PARTIES AT ARMS' LENGTH

133 [1969] 2 All ER 494!.

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