Some problems of intention to create legal relations have risen in the area of ‘collective agreements.’ By this is meant agreements between trade unions and employers, or employers’ organisations, as to the terms and conditions of work of particular groups of employees. Each employee will have a binding contract of employment with the employer, but some of the terms of this agreement (for example, as to rates of pay) may specifically be stated to be subject to the current collective agreement between employer and trade union. What is the status of the collective agreement itself? It is clearly made in a commercial or business context, and therefore it would seem that there should be a presumption of legal enforceability.
Ford Motor Co Ltd v AEF
The issue was considered by the High Court in Ford Motor Co Ltd v AEF. Ford was seeking an injunction restraining the trade union from calling strike action by its members. Part of Ford’s argument depended on establishing that the collective agreements which it had reached with the AEF were legally binding. In deciding this issue, Geoffrey Lane J took the view that it was necessary to look at the general context in which such agreements were made. An objective view of whether they were intended to be enforceable should take account of not the wording of the agreements themselves and their nature, but also ‘the climate of opinion voiced and evidence by the extra-judicial authorities.’
Taking these matters into account:
- Agreements such as these, composed largely of optimistic aspirations, presenting grave practical problems of enforcement and reached against a background of opinion adverse to enforceability, are, in my judgment, not contracts in the legal sense and are not enforceable at law.
- To make them legally binding would require ‘clear and express provisions’ to that effect. This judgment seems to draw on a much wider range of factors than the other causes in this area in order to determine the issue. It is probably the case, however, that such an approach was a result of the particular sensitive context rather than being indicative of the way in which the issue should be dealt with more generally.
The Ford decision should not, therefore be regarded as indicating any general departure from the presumption of legal enforceability which attaches to agreements in the commercial area. As far as collective agreements themselves are concerned, the matter is now dealt with by statute. Section 179 of the Trade Union and Labour Relations (Consolidation) Act 1992 provides that collective agreements are ‘conclusively presumed not to have been intended by the parties to be’ legally enforceable. The only exception is where the agreement is in writing, and expressly stated to be legally enforceable. We thus have here a presumption against legal enforceability which is even stronger than that which operates in relation to domestic agreements. It cannot be rebutted by taking account of verbal statements, or by looking at the context, but only by a clear intention committed to writing. This is therefore one of the only few occasions in which English law requires formality in the making of an agreement if it is to be legally enforceable.