Contract Law

For a binding contract to exist, there must be an intention to create legal relations.  Domestic arrangements are assumed not to create a contract; in Balfour v Balfour (1919) 2 KB 571 Lord Justice Atkins said that a husband’s offer to pay money to his wife was “outside the realms of contracts altogether”

A similar assumption was made in Jones v Padvatton (1969) as the court of appeal found that there was no intention to create legal relations when a mother made an offer to her daughter in the US to study law in the UK and pay her expenses in return.

Agreements made by divorced or separated couples over the disposition of property are normally considered to be contracts as in Merritt v Merritt (1970) 1 WLR 1121.

The courts will, in a domestic situation, consider if there is an intention to create a legal relationship.

An arrangement that significantly affects the lives of any party is likely to be taken as a contract, in Parker v Clark (1960) Mr and Mrs Clark invited their niece and her husband to live with them rent free, in exchange for domestic support, so they sold there house and moved in. Following an argument Mr and Mrs Parker tried to evict their niece and her husband.  The court held that the severity of the situation allowed the agreement as a contract.

It is therefore possible to advise Peter that although no contract was signed prior to him and Alice moving in with his parents, their conduct was sufficient to confirm acceptance and that their was am implied contract between him and his father.  The fact that a contract was drawn up will also indicate an intention to create legal relations.

However the fact that the contract was not signed will leave the question open as to if James only intended a domestic situation and not to be bound legally.

There has to be consensus for a contract to exist.

For an agreement to be enforceable as a contract, there must be intention to make a contract, and consideration.  

Consideration is defined by Sir Fredrick Pollock as “An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable” Payment of money, the transfer of goods and the act of service all constitute consideration.

Consideration in Peter’s case is the act of selling his house, moving in with his parents and looking after their household needs for the promise of all the bills being paid by James.  

Both parties must provide consideration for the contract to come into existence.  James paid the bills and Peter looked after the household.  

The couple carried out the contract as agreed for one year, before Mary became ill.  

James offers Peter £80 per week extra to have Alice nurse Mary.  The party to the contract must provide consideration for a legally binding contract to exist.  James’ promise of £80 per week needs to be met by consideration from Peter.  Peter’s would say that his consideration is the provision of full time care to Mary, by Alice.  This has value for James, as the alternative may have been to pay for outside care or to pay for a nursing home.   A promise made in return for an act creates a legally binding contract.

However James could argue that a legally binding contract does not exist in this case as Peter had suffered no detriment and had not personally provided any consideration.  If James had promised Alice £80 in return for the nursing of Mary then this would be a legally binding contract, as Alice provided the consideration by way of an act.

Mary cannot enforce the contract as a promise can only be enforce by the person it was made to, as in the case of Tweedle v Atkinson (1861)

James is arguing that Alice nursing Mary was only what was already expected of her.  However it was decided in Williams v Roffey Bros [1990] 1 All ER 512 that “whereby if the performance of an existing contractual duty confers a practical benefit on the other party then this can constitute valid consideration” 

Although Alice wasn’t under a contractual duty to include caring for Mary under the household needs, it is fair to say that James benefited further from Alice taking care of Mary, as she saved him paying for external care or the detriment of caring for her himself.  

As the agreement was between James and Peter, and Peter has not provided any consideration to the agreement then no contract exists. It was decided in 1915 that only the person who is party to a contract can sue on it and only a person who has given consideration may force a contract not under seal.  The Contracts (Rights of Third Parties) Act 1999 now provides a condition where 2 people make a contract and a third is involved with the intention to have enforceable rights, then the courts will allow that enforcement.  For example had James and Peter made the contract for Alice to care for Mary and allowed her to be party to that contract and stipulate rights in the contract, such as £40 of the £80 to be paid to her, then she would be allowed to enforce that right.

However, as there was no intention for Mary to have any enforceable rights the traditional rule is reverted to that the consideration must move from the promisee.

Having cared for Mary and nursed her back to health over the period of one year, Mary promises to give Alice all her shares in Dixons Plc.  

Alice will not be able to enforce this as it is past consideration.  In Re McArdle (1951) CA, a woman carried out work on a family home and having completed it, was promised money by other family members.  It was held that she could not recover the money promise, as her consideration was past.

The only way Alice could enforce Mary’s promise would be if Mary had requested that Alice looked after her, without any promise of reward, then Alice having carried out the request Mary subsequently promises payment for the service.  This rule was first illustrated in Lampleigh v Brathwait (1615) and more recently in Pao On v Lau Yiu Long (1980).

As James arranged the care through Peter then Alice cannot enforce Mary’s promise of the shares.

I would advise Peter that he has a case against his farther in contract law, as it is possible to prove that their was an intention to create legal relations with consideration passing between the two.  Although the contract was never signed it further proves that the intention to be legally bound was present.  If successful with his case Peter would not be required to pay the food bills that James has sent him as these constitute household bills, which James stipulated he would pay.

I would not advise Peter to pursue a claim for recovering the £80 per week as promised to look after Mary.  Due to the lack of consideration on his part the court would decide that no contract could be bound when no consideration has been passed between the parties, especially as Alice was not party to that agreement.

I would not advise Alice to pursue a claim against Mary for the shares as her actions of nursing Mary to health were past consideration.

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