The leading case in this category is Balfour v Balfour. This involved an agreement between a husband and wife, resulting from her inability (due to illness) to return with him to his place of work, in Ceylon. He agreed to pay her £30 per month while they were apart. Later, the marriage broke up and the wife sued the husband for his failure to make the promised payments. The Court of Appeal held that her action must fail. Two members of the court centred their decision on the lack of any consideration supplied by the wife. Atkin JL, however, stressed that even if there were consideration, domestic arrangements of this kind are clearly not intended by the parties to be legally binding. He used the example of the husband who agrees to provide money for his wife in return for her ‘maintenance of the household and children.’ If this was a contract, then each would be able to sue the other for failure to fulfil the promised obligation. The onus was on the wife to establish a contract and she had failed to do so.
Lord Atkin’s judgment is the one which has received most attention in subsequent case law, and has been taken as establishing the position that in relation to domestic agreements there is a presumption that they are not intended to be legally binding.
Two key points
Point one – social arrangements
There are two key points to be noted. First, the notion of the ‘domestic’ agreement should probably be taken as relating more to the subject matter than to the relationship between the parties. If, for example, a woman agrees to sell her car to her brother for £1,500, there seems little reason to deny this agreement, the status of a contract, and it should be presumed to be binding unless there is evidence to the contrary.
A recent decision of the High Court, however, has cast some doubt on this. It suggests that there may be situations which fall into a sort of ‘halfway house’ between domestic and commercial, and that in this case the burden of overturning the presumption may be affected. In Sadler v Reynolds, the alleged contract was between a journalist and a businessman who were friends. The journalist wanted to ghost-write the autobiography of the businessman, who had had a ‘rags to riches’ life, involving more than one spell in prison. The judge, Elizabeth Slade QC, suggested that the agreement fell ‘somewhere between an obviously commercial transaction and a social exchange.’ The onus was on the journalist to prove that there was an intention to create legal relations, ‘albeit that the onus was a less heavy one than that which would be required to establish such an intent in the context of a purely social relationship.’ The judge held that it was up to the journalist to prove that it was binding. It follows that, social arrangements between friends who are not related, or household agreements between a couple living together, but not married, should come into the category of ‘domestic,’ and therefore be presumed not to be binding.
Point two – presumption
The second point is that, since the rule is simply based on a presumption, it will always be possible for that presumption to be rebutted. In Merritt v Merritt, for example, an arrangement between a husband and wife similar to that agreed in Balfour v Balfour, but here made in the context of the break-up of the marriage, was held to be legally binding. Lord Denning distinguished Balfour v Balfour in the following terms:
- ‘The parties there [that is, in Balfour v Balfour] were living together in amity. In such cases, their domestic arrangements are ordinarily not intended to create legal relations. It is altogether different when the parties are not living in amity but are separated, or are about to separate. They then bargain keenly. They do not rely on honourable understandings. It may safely be presumed that they intend to create legal relations.’
The context in which the agreement was made was such therefore that although it prima facie concerned a domestic matter, the support of a wife by her husband, the presumption that it was not intended to be binding was rebutted. What will be the position in relation to agreements other than between spouses? The same principles apply, as is shown by Simpkins v Pays.
This involved an agreement which is of relevance to the increasing numbers of people involved in national lottery ‘syndicates.’ The Claimant, the defendant and the defendant’s granddaughter lived in the same house and regularly entered a competition, which required the listing of eight items in order of merit. Each of the three women made a listing, and the three entries were submitted on one form. There was no fixed arrangement as to who paid the entry fee or the postage, but the form was submitted in the defendant’s name. When one of the lines won £750, which was paid to the defendant, the claimant sued to recover a third of this share. The judge held that there was, on the evidence, an agreement to ‘go shares’ if one of the lines won, and that this was intended to be legally binding.
Finally, it should be noted that the question of whether or not, if the agreement is broken, the innocent party would in practise go to the courts to enforce it should not be regarded as being conclusive as to whether there was an intention to create legal relations. There are many minor commercial agreements where the parties would be unlikely to consider it to be worth involving the courts to remedy a breach. Nevertheless, such agreements are clearly intended by the parties to affect their legal relations and to create binding obligations. Moreover, even in relation to substantial commercial transactions, research has shown that parties often prefer to settle disputes in ways which do not involve recourse to lawyers. This does not mean that they do not intend their agreements to be legally binding.