CONTRACT LAW

Worksheet 5- Intention to create legal relations

Balfour v Balfour [1919] 2 KB 571
Facts
Plaintiff sued defendant, her husband, for money due under an alleged verbal agreement,
whereby he undertook to allow her £30 a month in consideration of her agreeing to support
herself without calling upon him for any further maintenance. The parties were married in
1900. The husband was resident in Ceylon. Plaintiff accompanied him to Ceylon, but in 1915
they returned to England, he being on leave. In 1916 he went back to Ceylon, leaving her in
England, where she had to remain temporarily under medical advice. Plaintiff alleged that
defendant before returning to Ceylon entered into the above agreement. The parties
remaining apart, plaintiff subsequently obtained a decree nisi for restitution of conjugal
rights, and an order for alimony.
Held
The alleged agreement did not constitute a legal contract, but was only an ordinary domestic
arrangement which could not be sued upon. Mutual promises made in the ordinary domestic
relationship of husband and wife do not of necessity give cause for action on a contract.

There are agreements between parties which do not result in contracts within the meaning of
that term in our law. The ordinary example is where two parties agree to take a walk together,
or where there is an offer and an acceptance of hospitality. Nobody would suggest in ordinary
circumstances that those agreements result in what we know as a contract, and one 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 (Atkins, LJ).

Carlill v Carbolic Smoke Ball Co [1893] QB

Coward v Motor Insurance Bureau [1963] 1 QB 359

Facts
Coward was killed whilst riding pillion on a motorcycle driven by a friend and work
colleague on the way to work. The collision was due to the negligence of the friend. Coward's
widow sought to claim damages from the Motor Insurance Bureau since the rider's insurance
did not cover pillion passengers. The Motor Insurance Bureau would only be obliged to pay if
insurance for the pillion was compulsory. Insurance was only compulsory for pillions if they
were carried for hire or reward. Coward paid the friend a small weekly sum to take him to
and from work each day. The widow therefore argued that this was a contract for hire or
reward. However, the MIB argued that to amount to a contract for hire or reward there had to
be an intention to create legal relations which was absent in agreements of this nature
between friends.
Held
There was no contract of hire or reward as it was a social and domestic agreement and
therefore no intention to create legal relations. The widow was therefore not entitled to
compensation.
 Judgment: UPJOHN LJ (delivering the judgment of the court) [The Lord Justice first
considered whether statements made by the two dead men could be heard in evidence, and it
was held that they could. He continued.] This, however, does not determine the question
whether this arrangement contemplated that the parties would enter into a legal relationship
enforceable in the courts of this country. Upon this point the fact that both parties are dead,
we believe, matters little, for if the question had been posed to Coward or Cole: "Did you
intend to enter into a legal relationship?" each would probably have answered "I never gave it
a thought."

The practice whereby workmen go to their place of business in the motor-car or on the motor-
cycle of a fellow-workman upon the terms of making a contribution to the costs of transport
is well known and widespread. In the absence of evidence that the parties intended to be
bound contractually, we should be reluctant to conclude that the daily carriage by one of
another to work upon payment of some weekly (or it may be daily) sum involved them in a
legal contractual relationship. 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 contemplated that the one was
legally bound to carry and the other to be carried to work. It is made all the more improbable
in this case by reason of the fact that alternative means of transport seem to have been
available to Coward.

Edwards v Skyways [1964] 1 WLR 349

Facts
Plaintiff was employed by defendant company as an aircraft pilot, and as such he was a
member of defendant company's contributory pension fund and entitled under its rules on
leaving defendant company's services in advance of retirement age to a choice between
two options, either to withdraw the sum of his own contributions to the fund or to take the
right to a paid-up pension at retirement age. In January 1962, defendant company wrote to
plaintiff, among others, informing him that it was necessary to declare a redundancy of
approximately fifteen per cent of defendant company's pilot strength and giving him three
months' notice terminating his employment. At a meeting on 8 February 1962, between
authorised representatives of defendant company and BALPA, plaintiff's trade
association, it was agreed (as recorded in the notes of the meeting) that ‘pilots declared
redundant and leaving [defendant company] would be given an ex gratia payment
equivalent to defendant company's contributions to the pension fund’. The representative
of defendant company actually said at the meeting that defendant company would make
 ex gratia payments ‘approximating to’ defendant company's contributions. Having been
informed of the recorded agreement, and having found other employment and left
defendant company's employment at the end of March 1962, plaintiff elected on 1 May
1962, to withdraw his contributions to the pension fund and to receive the ex gratia
payment that defendant company proposed to make. Defendant company paid to plaintiff
the amount of his contributions, but did not make the ex gratia payment, and rescinded
the decision to make ex gratia payments, having regard to defendant company's financial
difficulties and creditors. Plaintiff brought this action to recover a sum equal to the total
contributions made by defendant company in respect of him to the pension fund.
Defendant company contended that the recorded agreement was not intended to create
legal relations and was too vague, and thus was not legally binding. It was admitted at the
hearing that there was consideration moving from plaintiff and that at the time of the
meeting of 8 February 1962, defendant company intended to carry out the recorded
agreement
Held
(1) that where, as here, an agreement was reached in the course of business relations, and
there was an intention to agree, there was a heavy onus on the party alleging that it
was not intended to give rise to legal obligations.
(2) That the words “ex gratia” in a promise to make a payment, although indicating that
pre-existing legal liability was not admitted, did not carry a necessary or even
probable implication that the promise was intended to be without legal effect and,
there being no special circumstances whereby such an implication could be given to
the words, the company had failed to establish that the parties affirmatively intended
not to enter into legal relations in respect of the company's promise to pay. The
plaintiff, therefore, was entitled to recover the contributions paid by the company to
the fund for him.

Errington v Errington Woods [1952] 1 KB 290

Facts
In 1936 a father bought a house for his son and daughter-in-law. He paid £250 in cash and
borrowed £500 from a building society on the security of the house, the loan being repayable
with interest by instalments of 15s a week. The house was in the father’s name, and he was
responsible to the building society for the payment of the instalments. He told the daughter-
in-law that the £250 was a present to her and her husband, handed the building society book
to her, and said that if and when she and husband had paid all the instalments the house
would be their property. From that date onwards the daughter-in-law paid the instalments as
they fell due out of money given her by her husband. In 1945 the father died and by his will
left the house to his widow. Shortly afterwards the son left his wife. In an action by the
widow against the daughter-in-law for possession
Held
(1) the occupation of the house by the son and the daughter-in-law was not determinable by
the widow on demand, since they were entitled to remain in possession so long as they paid
the instalments to the building society, and, therefore, they were not tenants at will of the
premises;
(2) the payments of instalments could not be regarded as payments of rent made for
convenience to the building society and not to the father, since the daughter-in-law and her
husband were not bound under any agreement with the father to make those payments, and,
therefore, they were not weekly tenants or tenants for the period during which the instalments
fell to be paid;
(3) the daughter-in-law and her husband were licensees, having a permissive occupation short
of a tenancy, but with a contractual or equitable right to remain in possession so long as they
paid the instalments which would grow into a good equitable title to the house when all the
instalments were paid, and, therefore, the widow was not entitled to an order for possession.
Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117
Facts
In 1970 the taxpayers (‘Esso’) devised a petrol sales promotion scheme. The scheme involved
the distribution of millions of coins to petrol stations which sold Esso petrol. Each of the
coins bore the likeness of one of the members of the English soccer team which went to
Mexico in 1970 to play in the World Cup competition. The object of the scheme was that
petrol station proprietors should encourage motorists to buy Esso petrol by offering to give
away a coin for every four gallons of Esso petrol which the motorist bought. The coins were
of little intrinsic value, but it was hoped that motorists would persist in buying Esso petrol in
order to collect the full set of 30 coins. The scheme was extensively advertised by Esso in the
press and on television with phrases such as: ‘Going free, at your Esso Action Station now’,
and: ‘We are giving you a coin with every four gallons of Esso petrol you buy.’ Folders were
also circulated by Esso to petrol stations which stated, inter alia: ‘One coin should be given to
every motorist who buys four gallons of petrol—two coins for eight gallons and so on.’ 4,900
petrol stations joined the scheme. Large posters were delivered by Esso to those stations, the
most prominent lettering on the posters stating: ‘The World Cup coins’, ‘One coin given with
every four gallons of petrol’. The Customs and Excise Commissioners claimed that the coins
were chargeable to purchase tax under s 2(1) of the Purchase Tax Act 1963 on the ground
that they had been ‘produced in quantity for general sale’ and therefore fell within Group 25
of Sch 1 to the 1963 Act.
Held
(i) On the basis that the posters and other advertising material constituted an offer by
the garage proprietors to enter into a contract with each customer to supply a coin
with every four gallons of petrol sold, the contract envisaged was not a contract of
'sale', since the consideration for the transfer of the coins was not a money
payment but the undertaking by the customer to enter into a collateral contract to
purchase the appropriate quantity of Esso petrol.
(ii) (per Viscount Dilhorne and Lord Russell of Killowen, Lord Wilberforce and Lord
Simon of Glaisdale dissenting) Furthermore, in the circumstances, and in
particular in view of the fact that the coins were of little intrinsic value to
customers, it could not be inferred that either Esso or the petrol station proprietors
on the one hand, or the customers on the other, intended that there should be a
 legally binding contract to supply the coins to customers who bought the
appropriate quantity of petrol. It followed that the coins had been produced for
distribution by way of gift and not by way of sale.

Hardwick v Johnson (1978) 1 WLR 683

Facts
When her son became engaged to marry the daughter-in-law, the mother promised to buy the
couple a house to live in and when the couple found a suitable house told them that she would
buy it and that they could pay her rent. On 30 March 1973, four days before the couple were
married, the mother paid the purchase price of £12,000 for the house and it was conveyed
into her name. After the marriage the couple occupied the house. The arrangement between
the parties was that from 1 April 1973 the couple were to pay the mother £7 a week. It was
not, however, made clear whether that sum was for rent or was towards payment of the
purchase price, and nothing was said about conveying the house to the couple if they paid off
the purchase price.
The couple made some payments to the mother but after May 1974 ceased to pay her
anything. The mother did not insist on any payments because she knew the couple were short
of money. After about a year the marriage broke down. In January 1975 the mother, through
her solicitors, wrote to the daughter-in-law stating that she had purchased the house on the
understanding that the son would pay ‘rent’ of £7 a week but only about two month’s rent
had been paid, and that as the marriage had broken down she wished to sell the house and
therefore required possession. On receiving the letter the daughter-in-law offered to pay the
mother £7 a week. In March the son left the house. In May the mother’s solicitors served
notice on the son determining her right, whether it was a tenancy or a licence, to occupy the
house.
In May or June a child was born to the couple and the daughter-in-law and the child remained
in the house. Divorce proceedings were not pending. In June the mother brought proceedings
against the son and daughter-in-law claiming possession of the house and arrears of the
monthly instalments for the period 1 April 1973 to 28 April 1975, which amounted to £700.
The judge refused to make a possession order on the grounds that the arrangement between
the parties amounted to the grant of a licence to the son and daughter-in-law jointly, and not
to the son alone, on terms that they would pay the mother £28 per month whilst either of
them was in occupation, that after May 1974 the mother had waived the monthly payments
by postponing the time when they were to recommence, and that as from January 1975 £7 a
week had become payable in respect of the occupation but as the daughter-in-law had offered
to pay that sum from January 1975 she, being the only person now in possession, was not in
breach of the terms of the licence.
The judge ordered the daughter-in-law to pay £112 as arrears of the monthly payments of £28
due for the four months January to April 1975. The mother appealed.
Held
Dismissing the appeal, that where the house had been occupied under an informal family
arrangement at a time when none of the parties had contemplated what was to happen if the
marriage broke up, the court itself had to spell out the resulting legal relationship by imputing
to the parties a common intention which in fact they never formed, that on the evidence and
in all the circumstances the most fitting legal relationship to impute was a grant by the mother
as owner of the house to her son and his wife of (per Roskill and Browne L.JJ.) a joint
contractual licence (per Lord Denning M.R.) a joint equitable licence, to live in the house on
payment of £28 per month; that the mother had by her conduct shown that she was willing to
postpone though not to waive or discharge the payments; that the deserted wife and her child
were by virtue of that joint licence entitled to remain in the house after the husband had left
it, on payment of £7 a week; and that the mother could not revoke or determine that licence
until some event occurred which would justify bringing it to an end.
Headley v Clarke Carilaw BB 1965 DC 1
Facts
In Headley v Clarke (Carilaw BB 1965 DC 1), the plaintiff had agreed to sell the defendants
house in return for a 5% commission. However, the plaintiff was not a registered or
professional real estate agent and the defendant therefore claimed that there was no intention
to create legal relations.
Held
The Divisional Court overruled the magistrate’s decision and found that the parties did have
the intention to create legal relations.
Heilbut Symons & C v Buckleton [1913] AC 30
Facts
The plaintiff asked the local manager of a firm of rubber merchants, who had underwritten a
large number of shares in a rubber and produce company then in the course of formation,
whether his firm were bringing out a rubber company. He replied that they were. The plaintiff
then asked him whether the company was all right. The manager replied that his firm were
bringing it out, to which the plaintiff re-joined that that was good enough for him. In answer
to further inquiries the manager told the plaintiff that he could let him have 5000 shares at a
certain premium. The plaintiff agreed to take the shares, which were subsequently allotted to
him. The shares having fallen in value, the plaintiff brought an action against the firm for
fraudulent misrepresentation and for breach of warranty, the alleged warranty being that the
company was a rubber company. The jury negatived fraudulent misrepresentation but found
that the company could not be properly described as a rubber company and that the manager
had given a warranty as alleged.
Held
That there was no evidence proper to be submitted to the jury upon the question of warranty.
Decision of the Court of Appeal reversed
Per Lord Moulton (with the concurrence of Viscount Haldane L.C.) The question whether an
affirmation made by the vendor at the time of sale constitutes a warranty depends on the
intention of the parties to be deduced from the whole of the evidence, and the circumstance
that the vendor assumes to assert a fact of which the purchaser is ignorant, though valuable as
evidence of intention, is not conclusive of the question.

The dicta of Bayley J. in Cave v. Coleman (1828) 3 Man. & Ry. 2, and of A. L. Smith M.R.,
delivering the judgment of the Court of Appeal, in De Lassalle v. Guildford [1901] 2 K. B.
215, at p. 221, cannot be supported.
Heslop v Burns [1974] 1 WLR 1241
Facts
In 1951 the defendants, a married couple, were living in an attic. The wife was expecting a
baby. The deceased met the defendants and expressed concern at the conditions in which they
were living. He bought a cottage for the family to live in. Thereafter, until his death in 1970,
the deceased provided the defendants with a home. In 1954 they moved to a house owned by
the deceased which they occupied at the time of his death.
Throughout the period from 1951 to his death the deceased remained a close friend of the
defendants, visiting them frequently, sometimes twice a day; he became the godfather of one
of the defendants' daughters and paid for her education. He paid the rates on the properties
which he obtained for the defendants and never required any payment in respect of their
occupation.
Following the deceased's death the defendants claimed that at the outset they had occupied
the house as tenants at will of the deceased, that, by virtue of s 9 of the Limitation Act 1939,
the tenancy at will was deemed to have determined at the expiration of one year from the
commencement thereof, that thereupon a right of action had accrued to the deceased, that that
right of action had become barred at the expiration, in 1967, of the period of 12 years, under s
4(3) of the 1939 Act, and that, accordingly, they had a good defence to a claim for possession
by the deceased's executors.
Held
The executors were entitled to possession. The proper inference from all the evidence was
that from the outset the defendants had entered into occupation of the premises, not as tenants
at will, but as mere licensees with no right to exclude the deceased from possession.
Per Curiam. Where it is established that an occupier has the exclusive occupation of
premises, in the sense that he has the right to exclude the owner from those premises, that
raises a presumption, though it does not constitute conclusive evidence, that the intention of
the parties was that the occupier should occupy the premises as a tenant at will rather than as
a licensee.
Per Roskill and Scarman LJJ. Where the occupier is granted exclusive occupation of
premises, a licence will be more readily inferred than a tenancy at will if the advantage given
to the occupier is obviously intended to be personal to him or if there has been something in
the circumstances, such as a family arrangement, an act of friendship or generosity etc, to
negative any intention to create a tenancy dictum of Denning LJ in Facchini v Bryson [1952]
1 TLR at 1389 applied.
Per Scarman LJ. Occupation under a licence to occupy is itself a legal relationship and,
accordingly, proof that the owner and the occupier of premises intended to create a legal
relationship is no more indicative of an intention to create a tenancy at will than it is of an
intention to create a licence to occupy.
Jones v Padavatton [1969] 2 All ER 616
Facts
The daughter of a resident in Trinidad was employed at a satisfactory salary with pension
rights at the Indian embassy in Washington in the United States. Although she said she was
unwilling to leave, she accepted an offer made by her mother in August 1962 that if she
would go to England and read for the Bar with a view to practising as a lawyer in Trindad,
the mother would provide maintenance for her at the rate of $200 a month (West Indian
dollars meant, equivalent to £42 a month, the daughter expected United States dollars
equivalent to £70, but she in fact accepted the £42).
The daughter went to England in November 1962 and entered on her studies at the Bar, her
fees and maintenance at the offered rate being paid by her mother. But no terms of the
arrangements were recorded in writing and no statement of the parties' respective obligations
and in particular nothing as to the duration of the arrangement. Following discomfort of the
daughter in her accommodation, a proposal was made by the mother in 1964 that she should
buy a house of some size in London in a room or rooms of which the daughter could reside
with her son (she was divorced from her husband) the rents from letting other rooms
furnished to provide maintenance in place of the £42 a month.
A house was bought for £6,000 and conveyed to the mother, who provided the money in
several sums though not all that for incidental expenses and furniture. The daughter was
given a power of attorney by the mother and she moved in during January 1965, tenants
beginning to arrive in the next month. Again, there was no written arrangement and incidental
matters remained unsettled such as the application of the rents received and what rooms the
daughter should occupy.
No money from the rents was received by the mother, nor was she supplied with any
accounts. In 1967 the mother issued a summons claiming possession of the house from the
daughter, who counterclaimed for £1,655 18s 9d said to have been paid in respect of the
house. At the hearing some of Part 1 of the Bar examination remained to be taken by the
daughter and also the whole of Part 2 (the final).
Held
The mother was entitled to possession of the house as the owner as against the daughter who
had no legal interest in it, on the following grounds
(1) because the arrangement between mother and daughter was throughout a family
arrangement depending on the good faith of the parties in keeping the promises made and not
intended to be a rigid binding agreement, and was far too vague and uncertain to be itself
enforceable as a contract;
(2) although the true inference from the facts was that neither the mother nor the daughter
could have intended that the daughter should have no legal right to receive, and the mother no
legal obligation to pay, the original allowance of $200 a month (the terms being sufficiently
stated and duration for a reasonable time being implied) because a reasonable time for the
completion of the daughter's Bar studies could not possibly exceed five years, and therefore
on no view could the daughter be entitled to anything further under the contract in November
1968; and also because the new arrangement in 1964 was neither a variation of the original
contract nor a new contract entitling the daughter to stay on in the mother's house
indefinitely, there being no evidence that the mother bargained away her right to dispose of
her house or evict her daughter, all the evidence showing that the arrangements in relation to
the house were very vague and made without any contractual intent.
Jones v Vernon Pools [1938] 2 All ER 626
Facts
The plaintiff alleged that he had duly filled in a coupon in respect of a pool on football
matches organised by the defendants, and the defendants alleged that they had never received
that particular coupon. The conditions of the pool, which the plaintiff admitted were well
known to him, stated that it was a basic condition of the relationship between the parties that
the sending in of the coupon or any transaction entered into in respect of the pool should not
be attended by or give rise to any legal relationship, rights, duties or consequences
whatsoever, or be legally enforceable or the subject of litigation, but that all such
arrangements, agreements and transactions should be binding in honour only
Held
The conditions of the pool prevented the plaintiff from bringing any action to enforce
payment or otherwise.
Kleinwort Benson Ltd v Malaysia Mining Corporation (1989) 1 WLR 379
Facts
The plaintiff bank agreed with the defendants to make a loan facility of up to £10m available
to the defendants' wholly-owned subsidiary, M, which traded in tin on the London Metal
Exchange. As part of the facility arrangement the defendants furnished to the plaintiffs two
'letters of comfort', each of which stated in para 3 that 'It is our policy to ensure that the
business of [M] is at all times in a position to meet its liabilities to you under the [loan
facility] arrangements'. In 1985 the tin market collapsed at a time when M owed the plaintiffs
the whole amount of the facility. M went into liquidation and the plaintiffs sought payment of
the amount owing from the defendants. When the defendants refused to pay the plaintiffs
brought an action against them to recover the amount owing. The judge held that the
plaintiffs were entitled to recover. The defendants appealed to the Court of Appeal.
Held
A letter of comfort from a parent company to a lender stating that it was the policy of the
parent company to ensure that its subsidiary was 'at all times in a position to meet its
liabilities' in respect of a loan made by the lender to the subsidiary did not have contractual
effect if it was merely a statement of present fact regarding the parent company's intentions
and was not a contractual promise as to the parent company's future conduct. On the facts,
para 3 of the letters of comfort was in terms a statement of present fact and not a promise as
to future conduct and in the context in which the letters were written was not intended to be
anything other than a representation of fact giving rise to no more than a moral responsibility
on the part of the defendants to meet M's debt. The appeal would therefore be allowed.

Lens v Devonshire Golf Club (1914) Times, 4 December

Facts

Held
It was held that the winner of a competition held by a golf club could not sue for his prize
where "no one concerned with that competition ever intended that there should be any legal
results flowing from the conditions posted and the acceptance by the competitor of those
conditions". However, if it can be shown that the transaction had the opposite intention, the
court may be prepared to rebut the presumption and to find the necessary intention for a
contract. The cases show it is a difficult task to rebut such a presumption. Agreements
between a husband and wife living together as one household are presumed not to be
intended to be legally binding, unless the agreement states to the contrary
Masters v Cameron (1954) 91 CLR 353
This case considered the issue of the intention to enter into a contract and whether or not a
statement by a vendor regarding the upcoming sale of her property was sufficient to prove her
intention to enter into a binding contract or whether it was a mere agreement to enter into a
binding contract at some later date.
Merritt v Merritt [1970] 1 WLR 1211
Facts
The husband and wife were married in 1941 and had three children. In 1966, the husband
became attached to another woman and left the matrimonial home to live with her. At that
time, the matrimonial home, a freehold house, was in the joint names of the husband and
wife, and was subject to an outstanding mortgage of some £180. The wife pressed the
husband to make arrangements for the future, and on 25 May 1966, they met and talked the
matter over in the husband's car.
The husband said that he would pay the wife £40 a month out of which she must make the
outstanding mortgage payments on the house and he gave her the building society mortgage
book. Before leaving the car the wife insisted that the husband should put down in writing a
further agreement, and on a piece of paper he wrote: 'In consideration of the fact that you will
pay all charges in connection with the house … until such time as the mortgage repayment
has been completed, when the mortgage has been completed I will agree to transfer the
property in to your sole ownership.' The husband signed and dated that agreement, and the
wife took the piece of paper away with her. In the following months she paid off the
mortgage, partly out of the husband's monthly payment to her and partly out of her own
earnings. When the mortgage was paid off the husband refused to transfer the house to the
wife.
Held
The written agreement of 25 May 1966, was intended to create legal relations between the
parties because the presumption of fact against such an intention where arrangements were
made by a husband and wife living in amity did not apply to arrangements made when they
were not living in amity but were separated or about to separate, when (per Lord Denning
MR at p 762 a, post) it might safely be presumed that they intended to create legal relations;
the surrounding circumstances in the present case showed that the parties did so intend;
accordingly, the wife was entitled to sue on the agreement, and it being sufficiently certain
and there being good consideration by the wife paying off the mortgage, she was entitled to a
declaration that she was the sole owner of the house and to an order that the husband joining
in transferring it to her
Parker v Clark [1960] 1 WLR 286
Facts
Defendants, Mr and Mrs C, were an elderly couple (seventy-seven and seventy-eight years
old) who lived alone in a commodious house of their own at Torquay. They were on very
friendly terms with plaintiffs, Cmdr and Mrs P, who were some twenty years younger, and
who lived in their own cottage in Sussex. Mrs P was a niece of Mrs C. On 18 September
1955, after plaintiffs had been visiting defendants in Torquay, C proposed to P that plaintiffs
should come to live with defendants.
P said that he would consider the matter, and a few days later he wrote to C saying that, if
plaintiffs came to live with defendants, they would have to get rid of their own cottage. On 25
September 1955, C wrote to P saying: ‘The major difficulty re what is to happen to [plaintiffs'
cottage] can be solved by our leaving [defendants' house] and its major contents . . . to [Mrs
P, her sister and her daughter] when we both pass away and if you cannot maintain it they can
sell out’.
The letter went on to give details of (a) the cost of maintaining defendants' house (which
amounted to £203 4s 8d annually), and (b) defendants' income and assets, and continued: ‘If
we go fifty-fifty on maintenance of house it would cost you half of the £200 odd as set out
and half the running expense of food, drinks, etc but I think it would be fair if your share of
the £200 was the same as you now pay at [plaintiffs' cottage] if it is less than £200. I would
pay for a daily woman four mornings a week, have a TV and a new car. You could sell out
and pay off your mortgage and invest proceeds to increase your income.
I hope your family vote for or against this will be unanimous’. On 30 September P wrote
accepting C's offer and said that he would dispose of his own cottage. Plaintiffs then
proceeded to act on the arrangement. On selling their cottage, they used part of the proceeds
to pay off a secured advance and lent part to their daughter to buy a flat; and P told C what
they had done. On 1 March 1956, plaintiffs moved to defendants' house, taking some of their
furniture with them. C had in the meanwhile engaged a daily woman and bought a television
set, as promised in the letter of 25 September 1955, and he bought a car some time later. He
also made a will leaving the house to the beneficiaries named in the letter. All the household
expenses, except the rates, were shared. Mrs P did the greater part of the household work; P
did most of the gardening; and both plaintiffs did the shopping. By the autumn of 1957, C
apparently began to regret the arrangement and told plaintiffs that they would have to find
some other place to live in. P protested to C. Eventually, on 9 Dec 1957, after continued
unpleasantness on the part of C, plaintiffs left defendants' house, as an alternative, in their
view, to being evicted. In an action against defendants for damages for breach of contract
Held
(1) there was a legal contract between the parties because in the circumstances it was shown
that an arrangement binding in law was intended on both sides, the letter of 25 September
1955, was an offer and it indicated sufficiently that the duration of the agreement that
plaintiffs should live with defendants should be the duration of defendants' lives;
(2) the letter of 25 September 1955, was a sufficient memorandum or note of the contract for
the purposes of Law of Property Act 1925 (c 20) s 40(1), because a written offer was capable
of being a good memorandum, within the meaning of s 40(1), although the agreement could
not come into existence until after the offer had been accepted;
(3) plaintiffs were, therefore, entitled to damages against defendants for breach of contract;
these damages were of two categories, viz, (a) damages in favour of plaintiffs' jointly in
respect of the value to them of living, rent-free, in part of defendants' house, with the use of a
car and a television set, and (b) damages in favour of Mrs P separately in respect of the value
to her of her prospects of inheriting defendants' house at their death (ie, a third of the present
value of the house, less certain deductions).
Pettitt v Pettitt [1970] AC 777
Facts
In proceedings under section 17 of the Married Women's Property Act, 1882,1 following a
divorce, a husband claimed to be beneficially entitled to a share in the proceeds of sale of the
former matrimonial home. The house in question had been purchased out of the proceeds of
sale of a previous house belonging to the wife, and had been conveyed into her name alone.
The husband's claim was based on his having done work on the house by way of redecoration
and improvement which he said had enhanced its value by £1,000. The registrar held that he
was entitled to share in the proceeds to the extent of £300. The Court of Appeal affirmed that
decision.
Held
(1) that section 17 of the Act of 1882 was a procedural provision only, and did not entitle
the court to vary the existing proprietary rights of the parties.
(2) That upon the facts disclosed by the evidence it was not possible to infer any common
intention of the parties that the husband by doing work and expending money on
materials for the house should acquire any beneficial proprietary interest therein; and
that, accordingly, in the circumstances the husband's claim failed and the appeal must
be allowed.
 Rose & Frank Co v JR Crompton & Bros Ltd [1924] AC 445
Facts
By successive arrangements made before 1913 between an American firm and an English
company the American firm were constituted sole agents for the sale in the United States
and Canada of tissues for car-bonising paper supplied by the English company. The
greater part of these tissues was manufactured for this English company by another
English company.
By an arrangement made between the American firm and both English companies in 1913
the English companies expressed their willingness that the existing arrangements with the
American firm, which were then for one year only, should be continued on the same lines
for three years and so on for further periods of three years, subject to six months' notice.
This document, after setting out the understanding between the parties, including several
modifications of the previous arrangements, proceeded as follows: "This arrangement is
not entered into, nor is this memorandum written, as a formal or legal agreement, and
shall not be subject to legal jurisdiction in the Law Courts either of the United States or
England, but it is only a definite expression and record of the purpose and intention of the
three parties concerned, to which they each honourably pledge themselves, with the
fullest confidence - based on past business with each other - that it will be carried through
by each of the three parties with mutual loyalty and friendly co-operation. This is
hereinafter referred to as the 'honourable pledge' clause."

Disputes having arisen between the parties; the English companies determined this
arrangement without notice. Before the relations between the parties were broken off the
American firm had given, and the first mentioned English company had accepted certain
orders for goods. In an action by the American firm for breach of contract and for non-
delivery of goods.
Held
(1.) That the arrangement of 1913 was not a legally binding contract.
(2.) That at the date of the arrangement of 1913 all previous agreements were determined
by mutual consent, but
(3.) That the orders given and accepted constituted enforceable contracts of sale.

Simpkins v Pays [1955] 1 WLR 975

Facts
Since 1950 the plaintiff had been living as a lodger in the house of the defendant, an elderly
woman, in circumstances which had some element of a family circle. Each of the parties used
to compete separately in newspaper competitions. From about the beginning of May, 1954,
for a period of seven or eight weeks, the plaintiff, the defendant and the defendant's grand-
daughter each sent in, each week, a separate entry on one coupon to the fashion competition
of a Sunday newspaper.
Each of the three contributed one forecast, and the coupon was filled in by the plaintiff but
was made out in the defendant's name. The costs of postage and entry were informally
shared, being sometimes paid by one and sometimes by another. When the question of
sharing winnings first came to be considered between the plaintiff and defendant, the latter
said that they would go shares.
The grand-daughter was not present on that occasion but the plaintiff and the defendant both
knew that she would join in the arrangement. The coupon sent in for 27 June 1954, was
successful, the correct forecast being that of the defendant's grand-daughter, and a prize of
£750 was paid to the defendant. The defendant refused to pay a third of the prize money to
the plaintiff, claiming, among other things, that the arrangement to share the winnings was
arrived at in a family association and was not intended to give rise to legal consequences, and
that, accordingly, there was no contract.
Held
There was an enforceable contract, because there was a mutuality in the arrangement between
the parties, and, therefore, the plaintiff was entitled to payment of a third share of the prize
money.
Semble: the grand-daughter also would be entitled to a one-third share
Snelling v John G Snelling Ltd [1973] QB 87
Facts
The plaintiff and his brothers, the second and third defendants, were directors of a family
company which owed them considerable sums of money. At a time when there was a serious
quarrel between the brothers, the company needed more capital and negotiations were entered
into with a finance company for a mortgage. Efforts were made to overcome the dissension
between the brothers with the result that, on March 22, 1968, the three of them entered into a
written agreement which provided that in the event of a director voluntarily resigning, he
would immediately forfeit all moneys due to him from the company which the remaining
directors might use in furtherance of their intention to repay the mortgage.
The mortgage agreement was signed on the same day. About three months later, the plaintiff
voluntarily resigned as a director. On May 22, 1969, the company passed a resolution
cancelling the plaintiff's loan account and carrying it to a separate account by way of
provision for repaying the mortgage. The plaintiff issued a writ against the company claiming
the moneys due to him as at the date of his resignation. The company in their defence denied
that the plaintiff was entitled to the relief claimed or any other relief, by virtue of the formal
agreement between the plaintiff and his brothers in March 1968. Subsequently the plaintiff's
brothers, on their application, were joined as second and third defendants to the action.
They delivered a defence and counterclaim, adopting the defence of the company, and
counterclaimed for a declaration that the sum due to the plaintiff on the loan account had
been forfeited and was now applicable in accordance with the resolution of the first
defendants.
On the questions whether the written agreement between the brothers was intended to create
legal relations and, if so whether the company, for whose benefit it was made, could rely on it
Held
(1) that the agreement between the plaintiff and the second and third defendants,
considering the background against which it was entered into, was intended to give
rise to legal relations; accordingly the second and third defendants were entitled to the
declaration that the plaintiff was bound by the terms of the contract.
(2) that the company being a stranger to the contract, was not entitled to rely on the terms
thereof in their defence to an action against them by the plaintiff; nevertheless where
all the parties to the contract, including the company, the party to be benefited, were
before the court, the proper order to make in the action by the plaintiff against the
company in the light of the declaration granted to the second and third defendants,
was not to stay the plaintiff's proceedings against the company, in the exercise of the
court's discretionary powers under section 41 of the Supreme Court of Judicature
(Consolidation) Act 1925, but to dismiss his claim, for the reality of the matter was
that the plaintiff's claim had failed and the order of the court ought to reflect that fact.

Sousa v Marketing Board [1962] 5 WIR 152

Facts
Up to the year 1952 the appellant was associated with a corporation which had entered into a
contract to purchase bananas from the respondent for the purpose of exporting them to the
USA. In that year the appellant parted from the corporation whose contract continued on foot
until in March 1955, the respondent, the Marketing Board, offered the appellant personally
the opportunity to resume the export of bananas to the USA.
After two trial shipments which proved successful the appellant on 24 March 1955, thanked
the Board for the opportunity extended to him and expressed the hope that the Board would
allow him to continue the shipments until such time as they should interfere with the Board's
existing commitments with a company which was then shipping bananas abroad under an
agreement with the Board. The Board on 25 March 1955, informed the appellant that it had
decided to continue to sell him bananas until 31 December 1955, and set out the terms and
conditions under which it was prepared to do so.
The appellant replied on 14 April 1955, stating that he was agreeable to the conditions put
forward by the Board but as the period proposed by it for these shipments was very short, he
wanted it extended into 1956. Before the Board was able to reply, the appellant wrote the
Board accepting its offer to continue to sell him bananas for export on the terms and
conditions stipulated, and went on to ask the Board if it would grant an extension of their
contract. The Board replied on 2 May 1955, stating that it had decided to extend the
agreement to sell him bananas to 30 April 1956, but that it was to be construed purely as a
gentleman's agreement. The Board thereafter supplied the appellant with bananas as and
when he ordered them, and on 10 October 1955, it gave the appellant one month's notice of
its decision to terminate the agreement. All bananas exported by the appellant to the USA
were done under licence granted to him by the Board, as it was an offence to do so without
previously obtaining such a licence. The appellant used the Board for damages for breach of
contract and the revocation of his licence to export bananas to the USA, but his action was
dismissed, on the ground that the Board's agreement to sell bananas to the appellant was
tantamount to a standing offer which it was entitled to revoke at any time except in respect of
orders already accepted. On appeal-
Held
(i) the Board by its promise of 25 March did not intend to enter into legal relations with the
appellant, rather it intended thereby to express no more than its readiness to continue selling
bananas to the appellant subject to the conditions stated therein as and when he ordered them
during the stated period;

(ii) if the Board's promise was intended to create legal relations, it did not extend in law
beyond a standing offer which could be revoked at any time save in respect of orders
previously given by the appellant. Great Northern Railway Co v Witham ((1873), LR 9 CP
16, 43 LJCP 1, 29 LT 471, 22 WR 48, 12 Digest (Repl) 231, 1729) and Percival Ltd v
London County Council Asylums and Mental Deficiency Committee ((1918), 87 LJKB 677,
82 JP 157, 16 LGR 367, 12 Digest (Repl) 703, 5367) applied;

(iii) assuming that the Board's promise of 25 March constituted an offer effectual in law, the
appellant's letter of 14 April 1955, introduced a new term and fell to be construed as a
counter-offer which had the effect of destroying the original offer. Hyde v Wrench ((1840), 3
Beav 334, 4 Jur 1106, 49 ER 132, 12 Digest (Repl) 63, 341) applied;

(iv) following the destruction of the original offer the relationship between the parties was
founded upon a “gentleman's agreement” from which no legal consequences ensued. Rose
and Frank Co v Crompton (J R) and Brothers Ltd ([1923] 2 KB 261, on appeal, [1925] AC
445, 94 LJQB 120, 132 LT 641, 30 Com Cas 163, 12 Digest (Repl) 22, 4) applied;

(v) the licence granted by the Board to the appellant to ship bananas to the USA was a mere
privilege attached to the concluded arrangements between the parties, and could not be
construed as an irrevocable licence.

Appeal dismissed.