JD/LLM demonstration class

3rd February 2024

Intention in
Contract Formation

STEPHEN HALL

I. Teaching and Learning Contract

Law at CUHK
II. Three Pillars of Contract
Formation
III. Contractual Intention – Two
Presumptions
IV. Family and Social Agreements -
Six Factors
V. Tutorial (?)
Typical structure of a class in Principles of Contract

Tutorial
~ 45-60 minutes

Lecture/Seminar
~ 120 minutes
 THREE PILLARS OF
CONTRACT FORMATION

Consensus ad Idem
(Agreement: Offer, Acceptance, &
Certainty)

Animus Contrahendi
(Contractual Intention)

Consideration (Price of
the Bargain)
Presumptions

Presumption of Fact
An inference that must be drawn
in light of certain facts, unless
evidence is adduced rebutting
the inference.

Presumption of Law
An inference that must be drawn
in light of certain facts, and
which (generally) cannot be
rebutted.
Balfour v Balfour
(1919)
 Balfour v Balfour
The matter really reduces itself to an
absurdity when one considers it,
because if we were to hold that there
was a contract in this case we should
have to hold that with regard to all the
more or less trivial concerns of life
where a wife, at the request of her
husband, makes a promise to him, that
is a promise which can be enforced in
law. All I can say is that there is no such
contract here. These two people never
Thomas Warrington LJ intended to make a bargain which could
(later, Lord Warrington)
(1851-1937) be enforced in law.
 Balfour v Balfour
[O]ne of the most usual forms of agreement
which does not constitute a contract appears
to me to be the arrangements which are made
between husband and wife. …

… they are not contracts because the parties

did not intend that they should be attended by
legal consequences. ... They are not sued
upon, and the reason they are not sued upon
is not because the parties are reluctant to
enforce their legal rights when the agreement
is broken, but they are not sued upon because
the parties in the inception of the
arrangement never intended that they should Richard (‘Dick’) Atkin LJ
(later, Lord Atkin)
be sued upon. (1867-1944)
 Balfour v Balfour
Agreements such as these … are outside the realm
of contracts altogether. The common law does not
regulate the form of agreements between spouses.
Their promises are not sealed with seals and sealing
wax. The consideration that really obtains for them
is that natural love and affection which counts for so
little in these cold courts. The terms may be
repudiated, varied, or renewed as performance
proceeds, or as the disagreements develop, and the
principles of the common law as to exoneration and
discharge and accord and satisfaction are such as
find no place in the domestic code. The parties
themselves are advocates, judges, courts, sheriff ’s
officer and reporter. In respect of these promises
Atkin LJ
(later, Lord Atkin) each house is a domain into which the King’s writ
does not seek to run, and to which his officers do
not seek to be admitted.
 Six Factors
in Rebutting Absence of
Contractual Intention in Domestic and Social
agreements

1. the agreement’s express terms;

2. the subject matter of the agreement;

3. the precision of the agreement’s terms;

4. The quality of the parties' relationship at the time the agreement was made,

and in particular whether they were in amity or estranged;

5. the parties’ subsequent conduct; and,

6. the consequences of the agreement for the parties, or in other words the

extent to which parties have relied on the agreement.

 Snelling
v
John G Snelling Ltd
(1972)

____________
While they did not consider
in terms whether they
intended to be legally bound,
it is difficult to suppose that
they would have gone to
such trouble to record so
obvious a debt of honour or
to phrase the agreement in
terms of 'forfeit' unless they
intended legal consequences Roger Ormrod J
(later, Ormrod LJ)
to flow from the agreement. (1911-1992)
 Jones v
Padavatton
(1969)
 Jones v Padavatton
[T]he present case is 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 agreements.
Balfour v Balfour was a case of husband and wife, but there
is no doubt that the same principles apply to dealings
between other relations, such as father and son and
daughter and mother. … The mother and the daughter
seem to have been on very good terms before 1967. The
mother was arranging for a career for the daughter which
she hoped would lead to success. … What was required
was an arrangement which was to be financed by the
mother and was such as would be adaptable to Harold Danckwerts LJ
circumstances, as it in fact was. The operation about the (1888-1978)
house was, in my view, not a completely fresh arrangement,
but an adaptation of the mother’s financial assistance to the
daughter due to the situation which was found to exist in
England. It was not a stiff contractual operation any more
than the original arrangement.
 Jones v Padavatton
Salmon LJ: … There is no evidence that the mother bargained away her right to
dispose of her house, or to evict her daughter (who was a mere licensee) whenever
she wished to do so. The evidence shows that all the arrangements in relation to the
house were very vague and made without any contractual intent. By this
arrangement the mother was trying primarily to help her daughter, and also perhaps
to make a reasonable investment for herself.

Fenton Atkinson LJ: … If the test were the giving of consideration by the
daughter, the answer would be simple. She gave up well-paid work and good living Cyril Salmon LJ
(later, Lord Salmon)
accommodation, and removed herself and her son to England, where she began her (1903-1991)
studies in November 1962. But the giving of consideration by the daughter cannot
decide the question whether the parties intended to make a binding contract. …

… [I]t is the subsequent history which gives the best guide to the parties’ intention
at the material time. … The whole arrangement was, in my view, far too vague and
uncertain to be itself enforceable as a contract …

At the time when the first arrangement was made, mother and daughter were, and
always had been, to use the daughter's own words, “very close.” I am satisfied that
neither party at that time intended to enter into a legally binding contract, either Fenton Atkinson LJ
then or later when the house was bought … (1906-1980)
Parker
v
Clark
(1959)
 Parker v Clark
The question must, of course, depend on the intention
of the parties to be inferred from the language which
they use and from the circumstances in which they
use it. On the plaintiff ’s side … he considered that he
was making a binding contract. An important factor
in this was that he disposed of his own residence …

… If [the defendant] had thought that all that his

letter involved was an amicable arrangement
terminable at will, I cannot believe that he would not
have enlightened the plaintiff and … have warned
him of the folly of what he was doing. I cannot
believe either that the defendant really thought that
the law would leave him at liberty, if he so chose, to
tell the plaintiffs when they arrived that he had
Patrick Devlin J changed his mind, that they take their furniture away
(later, Lord Devlin) and that he was indifferent whether they found
(1905-1992) anywhere else to live or not. Yet this is what the
defence means. …
 Tutorial outline
Sam v Ursula
IRAC technique

Six Factors
1.Express terms
2.Subject matter
3.Precision of terms
4.Quality of relationship
5.Subsequent conduct
6.Consequences and reliance