INTENTION

Offer/acceptance

consideration

Certainty/completeness

intention

Party will only be regarded as making an offer or an acceptance if that party manifests an intention to be bound

Whether the parties appeared to intent to create a binding agreement is relevant to the question whether a bargain has been struck and each party has paid for the promises made by the other

If the parties don’t deal with all essential matters, or the terms are vague or imprecise, then this may indicate that the agreement is not intended to be legally binding.

facts

issue

decision

authority

Shahid wanted to become a derm.

Shahid applied unsuccessfully between 2000-2004

Appealed the last 3 decisions in accordance with the colleges detailed training handbook and paid a significant fee - with no success

Shahid claimed the appeal process was not genuine and effective

Was a contract created each time, Shahid lodged an appeal and paid the appeal fee?

Did the College intent to be bound by its training handbook?

Trial judge held no intention

Appeal - applies the relevant objective test

Shahid won.

• Context was business like - involving weighty subject matter

• Payment of substantial fee for services

• Detail of the handbook appeal process

• The parties were at arms length.

Objective test should be applied for intention

PAYMENT OF SUBSTNATIAL FEES

Where one party makes, and the other party accepts, a money payment as consideration for a promise by the other to provide some services or to bestow some benefit, the proposition that each intended the promise to be taken seriously and to carry the conventional legal consequences does seem rather obvious that they intended to be bound'

TRADITIONAL APPROACH (PRE ERMOGENOUS)

POST ERMOGENOUS

Presumptions and onus of proof

Commercial transactions

Presumption of intention

There remains a strong presumption that the parties intend a legally binding contract (Shahid)

The courts presume that the parties intended the contract to be legally binding

A party denying there was an intention to create legal relations in a commercial transaction would bear the onus of establishing there was no such intention

Domestic and social arrangements

Presumption against intention

No presumption either way (take a neutral approach). Domestic or social aspect is one factor pointing against intention (Ashton v Pratt)

No presumption either way. A party asserting there was an intention to create legal relations in a domestic or social agreement would bear the onus of establishing that their agreement was intended to be legally binding

Other contexts

No presumption either way

^

No presumption either way - onus is same as domestic/social agreement

Onus is on the person asserting there is a contract to prove intention

Facts

Issue

Decision

Authority

Ermogenous, a minister, resigns after 23 years and claims unpaid annual and long service leave

The church claimed it was a spiritual relation not a legal one

Was there an intention to create legal relations

Industrial magistrate held there was intention (employee - employer)

Full court of Supreme court of SA - no intention to create legal relations, and there was a presumption against it in a relationship between a church and a minister of religion

HIGH COURT - objective test

The search for the intention requires an objective assessment of the state of affairs between the parties which may take account of:

• The subject matter of the agreement

• The status of the parties to the agreement

• The parties relationship with one another

• Other surrounding circumstances

There was intention -

The search for the intention requires an objective assessment of the state of affairs between the parties which may take account of:

• The subject matter of the agreement

• The status of the parties to the agreement

• The parties relationship with one another

• Other surrounding circumstances.

Facts

Issue

Decision

Authority

Richard Pratt told Madison Ashton that he would give her 2.5 mil for each of her two children, and 566,000 per annum in exchange for her being his mistress and not returning to the escort industry

Ashton made a claim on Pratt's estate alleging breach of contract and estoppel

Was there a binding contract between Ms Ashton and Mr Pratt?

No intention to create legal relations

• Intention was determined objectively

• Terms were uncertain, duties as a mistress are not specified, terms are not specified

• Ms Ashton also did not find estoppel, no detriment suffered

INTENTION

No presumption against intention post Ermogenous. Relationship and circumstances were considered.

Failed because she had accepted payments after their relationship ended of 250,000 total as settlement for her claim she had raised against him. Considered by a court as a release

• There is no presumption against an intention to create legal relations in family or social arrangements - applied ermogenous

• The relationship between the parties and the circumstances in which the arrangement was entered into form part of the surrounding circumstances from which it will be determined whether the contract was formed.

Facts

Issue

Decision

Authority

After Nicols husband dies, she offers to give her sister in law and daughter (tod) a life interest in her home in SA if they come live with her

Was the agreement intended to be legally binding

There was intention to create legal relations - no explicit references to the parties to create obligations however the following factors are relevant:

• Travel by 2 people to Aus from Scotland would be expensive. - not a visit, but a permanent thing

• Expectation that certain belongings of Todds would be sold and others contributed to the new home, indicated a combination of resources of an apparently permanent nature

• Provision of testamentary security - Nicol changed her will

Mrs Todd failed to behave in a reasonable and decent manner, causing Nicol being entitled to terminate

It is possible to find intention in a domestic or social agreement. Key factor is if there is a substantial reliance on agreement.

Facts

Issue

Decision

Authority

Mr and Mrs Brewster owned a motel at Coober Pedy, and also owned a truck

Son-in-law Roufus owned a store and semi-trick

Intermittent hostility between them

Roufus agreed to transport the Brewster truck to Adelaide for repairs and servicing, Roufus;

• Organised a driver to drive the truck

• Then Brewster's will permit Roufus to load up the truck with stuff for his store

Truck was damaged on return trip, Brewster's sought to recover damages for breach of contract

Was there intention to create legal relations.

Intention to create legal relations existed because the whole setting was commercial rather than domestic or social.

Australian Woollen Mills

No intention to create legal relations - the scheme was administrative (policy) and not contractual

• No statutory authority sought

• Scheme announced by persons with no authority; re government expenditure

• Commonwealth had no commercial interest in the purchase of wool but was dealing with a problem created by war

• Commonwealth had discretion to determine the amount of subsidy.

Applying the objective test.

Facts

Issue

Decision

Authority

In pursuance of its tick eradication policy, the department of agriculture arranged to spray cattle at Leahy's property

Spraying was done poorly and cattle became more infected with ticks

Leahy sued the Department with breach of contract

Had the department intended to enter into legal relations

No intention and therefore no contract.

They undertook to do no more than carry out their governmental or departmental function.

An administrative arrangement by which the administration pursued its agricultural police - was a social service

Pursuing a policy - no contract

Pursuing policy and gifting assistance to Leahy was not meant to be binding

Facts

Issue

Decision

Authority

Placer and the C entered into a formal written agreement to establish a joint venture product, making timber products in PNG and imported to Aus.

If customs duty had to be paid on the imported timber products, the commonwealth would pay to the new company a subsidy 'at a rate determined by the commonwealth' to offset such duty

Placer sued Cth for breach of contract when Cth refused to pay subsidy

Said it was expressly not binding until approved by parliament, and parliamentary approval was subsequently given. Company paid full customs duty across the 4 years.

Was the joint venture agreement intended to be legally binding

Held the promise was illusory.

Subsidy could be determined by the commonwealth, there was no actual promise there.

Menzies and Windeyer J considered intention - and found that there was.

Language used in the formal agreement, and referring to parliament approval, indicating that it would be binding.

Moved it beyond a political arrangement and is now a commercial matter, and now binding.

facts

Issue

Decision

Authority

Was the letter of comfort from MMC intended to be legally binding

Benson successful 1st but failed in the court of appeal

• No intention to be legally bound.

Focused on the language and the letters contained a statement of policy which was merely a statement of present fact regarding MMC intention - and was not a promise to future conduct.

'our policy to ensure' - not actually ensuring

A representation of present fact does not give promise. A moral responsibility is given, but not a legal one.

Facts

Issue

Decision

Authority

Hovertravel Aus had overdrawn its account with the CBA. TLI was negotiating and expecting to take over Hovertravel

CBA was not prepared to honour cheques made out by Hovertravel without additional security

After discussion, TLI made a letter confirming the takeover would proceed as soon as legally possible - an injection of capital into Hovertravel would then occur allowing CBA to be repaid

CBA honoured the overdrawn checks. TLI did not inject capital, and CBA was not repaid

Was the letter of comfort from TLI intended to be legally binding

The wording of the letter:

'acknowledgement that CBA  has made credit available …'

'conform that the company will takeover' '

Letter was not intended to be legally binding. No more than stating the TLI intention to proceed, did not amount to a promissory obligation

Didn’t use promissory language 'we agree' 'we undertake' …

TLI not in a position to commit to takeover as it was subject to shareholder approval

No more than stating the TLI intention to proceed, did not amount to a promissory obligation

Facts

Issue

Decision

Authority

ANI gave letter of comfort to BB - will give 90 days notice before disposing of shares in Spedley and it 'is our practice to ensure that Spedley Securities will at all times be in a position to meet its financial obligations'

BB provides $5 mil loan to spedley.

Was the letter of comfort intended to be contractually binding

Wording of the letter

If the statements are promissory in character, courts should enforce them when uttered in the course of business and when there is no clear indication that they are not intended to be legally enforceable.

Made clear that to Spedley and Ani that the loan facility was subject to BBL obtaining a suitable letter of comfort or commitment from ANI

Binding

Each case turns on its own facts

Wording and reliance are important?

facts

issue

decision

authority

Cameron and Mr and Mrs Masters signed a document for the sale of property to he Masters for $17,500. Document stated : this agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my (Camerons) solicitors on the above terms and conditions

The agreement was signed by the parties and the Masters paid a 10% deposit to the real estate agent

Before the formal agreement was prepared and executed, Masters encountered financial difficulties and refused to go through with the transaction; said there was no binding agreement, and sought to recover the deposit from Cameron

Was the document intended to be legally binding

Where parties agree and negotiate terms of a contractual nature and also agree that the agreement shall be dealt with by a formal contract, the case may belong to any of 3 classes

Expression 'subject to contract' and similar prima facie signify an intention not to be bound.

No binding contract. Cat 3 - not binding.

below

facts

issue

decision

authority

Parties negotiated for the sale of a private hospital for 4.3 mil.

3 letters where exchanged

Containing an offer

Containing a counter offer

Containing an agreement

From the purchaser accepting the counter offer and stating 'we have instructed our solicitors … accordingly and they will be in contact with you concerning the formal contract

Was there a binding contract? Did parties intend to be legally bound

There was a binding contract. Clearly expressed intention to enter into an immediately binding contract. - legally binding were used clearly.

Fell into the 4th class - court ordered a specific performance of the sale.

A 4th category has now been found - one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for this first contract, containing by consent additional terms. Binding but the subsequent contract will consensually include additional term.