Issue

The issue in this case study is first regarding is there any legal contract that bind Justin and
Selena as Justin has promised Selena that he will transfer the house to her if she continue to
pay and finish the mortgage and the second issue is about who will get the house is it Justin
or Selena as the house is legally belongs to Justin but Selena is the one that finish paying off
the mortgage as what Justin promised to her.

Summary

The summary of the case is about Justin and Selena who is a married couple but in situation
of getting divorce. Justin has a girlfriend named Nora and 11 months ago he moved out from
their house and stay at Nora’s. He has promised to Selena that he will transfer the house to
her if she continues to pay the mortgage until finish and based on the promise that Justin gave
her, she paid off the house mortgage and stayed at the house after Justin left the house 11
months ago. Suddenly, after Selena paid off the house mortgage, Justin informed her that he
wanted to move into the house with Nora and asked Selena to vacate the house.

Applicable Law

To solve this case, Contract Law is the most suitable law that can be applied as we need to
determine whether if is there any contract formed between Justin and Selena and whether the
contract fulfill the elements of the Contract Law. Pursuant to the Contract Act 1950, a
contract take place when a person agrees to do something or refrain from doing something
with the intention or purpose of obtaining consent from the other party in relation to an act or
omission that he or she intends to make and once the other party to the proposal has agreed,
the proposal has been accepted and it will be a promise. According to Contract Act 1950,
Sect 2 (h), contract has been defined as an agreement enforceable by law, which happens
between two or more parties, and it is legally binding between the parties. In this case it is to
determine whether there is contract between Justin and Selena. There are seven essential
elements that need to be fulfilled in order to complete a contract and legally bind the
parties and the seven elements are offer, acceptance, consideration, intention to create
legal relation, certainty, legal capacity and free consent. To proof that there is contract
that arise between these two parties, we will examine the elements. First element is offer.
An offer means that one party agrees with the other to do something or refrain from doing
something or doing something or refraining from doing something. Offer must be clear,
complete, detailed, and final in order to avoid any doubt. Any statement that does not have
these features is not an offer. An offer is not valid unless it has been notified to the potential
beneficiary of the offer to give him the opportunity to accept it or not. According to Section
9 of the Contract Act 1950 an offer may be made either expressly or implicitly while
Section 3 states that the offer must be communicated to the recipient verbally, in
writing or implied from the action of the party concerned. In this case, Justin had made an
offer to Selena where if Selena continue and pay off the mortgage, he will transfer the house
to her. Even though there is no written contract that made between them, but he has expressed
the offer verbally which is clear and detailed and not vague and there is implied action from
Selena to continue paying the mortgage as requested by Justin. Second elements are
acceptance. Acceptance is a response to an offer which is a statement of willingness to
accept the offer in full without any additional terms. An offer that has been accepted cannot
be withdrawn once it has been accepted, and the retraction of an offer that has been legally
accepted is a breach of the offer. According to Section 2 (b) of the Contract Act 1950,
acceptance occurs when the person to whom the proposal is made expressly agrees with
the proposal, so it can be said that the proposal was accepted. Section 3 state acceptance
must be communicated to the proposer. The communication of acceptance may be made
either verbally, in writing, conduct or a combination of the above. In this case acceptance is
completed even though Selena never communicates to Justin that she will accept the offer,
but she did continue to pay and finish paying the mortgage which in term of conduct as can
be accepted as acceptance. Other than that, the contract also has fulfilled the certainty
elements which according to the Contract Act Sect 30, an agreement which is uncertain
or is not capable of being made certain is void. In this case the agreement is clear and
certain without any vague information where Justin promised to transfer the house to Selena
if she finishes pay off the mortgage which is clear and certain. Next is legal capacity. Sect
11, every person is competent to contract who is of the age of majority and who is of
sound mind and is not disqualified from contracting by any law. It can be considered that
both party Justin and Selena is competent to enter a contract where both are major and in
sound of mind. Last but no the least is free consent. Sect 13 of Contract Act, two or more
persons are said to consent when they agreed upon the same thing in the same sense and
Sect 14, consent is said to be free when it is not caused by coercion, undue influence,
fraud, misrepresentation, and mistake. Based on this case, it can be concluded that both
parties have given their consent to the same things and based on free consent.
Consideration

Consideration as according to Sect 2 (d) of Contract Act is when at the desire of the
promisor, the promisee or any third party has done or abstained from doing something,
such abstinence or promise is called consideration. A contract will not be enforceable if it
is not supported by consideration. Consideration literally means any bargain or promise given
by the parties upon entering a contract. Both parties are expected to contribute a bargain or
promise. According to Sect 26 (a) of Contract Act, an agreement will be considered void
unless the agreement in writing and registered. For example, in this case the agreement is
just made verbally between them and not registered. Next, Sect 26 (b), the must have
something in return or compensate. In this case, in return for Selena paying off the
mortgage, Justin has promised to return by transferring to house to Selena which is
acceptable. Lastly the Sect 26 (c) state that any promise that made in writing and signed
by the person to be charged with either to pay full or half of the amount is considered
legal contract. However, in this case Selena did not made in writing and sign about paying of
the debt for Justin so it can be considered as not a contract.

Types of Consideration

There are three types of consideration which are first executory which refer to the contract
that made between two parties or more which promise to make in return of another. This
means that one person needs to return a good for a good. For example, contract of buying car
is car for money which good for a good. Next is executed consideration which refer to a
promise made in return for the performance of an act. For example, is commission is one
contract between the employer and employee where the amount of commission is based on
the performance of the sales of the staff. Lastly is past consideration which refer to promise
that has in return to an act performance that has been already executed. For example, A done
work for B few years ago and in return for the work the A has done, B offer RM1000 for the
past work. In Justin and Selena’s case study, the type of consideration that suitable to be
applied is executory. This is because when Justin first offer Selena the house in return of
paying off the mortgage in future, even though at the said time nothing has happened, but the
contract is considered valid as it is the return for an act that done in future.
Example of Consideration Cases

Example of consideration case is between Collin vs Godefroy (1831). In this case the
plaintiff has filed a case against Godefroy the defendant as failure to pay six guineas as per
the agreement with him. The defendant has promised the plaintiff that he will pay the plaintiff
one guinea per day if he attends to the court to help him win a case against an attorney for
negligence. However, the plaintiff was subpoenaed to attend and give evidence. The plaintiff
attended the court for six days and claimed for six guineas from the defendant as he
promised. But the defendant did not want to pay him as he did attend the court but never
called to give evidence. So, the plaintiff takes a legal action toward the defendant for the sun
owing. It was held by the court that the agreement is unenforceable as the plaintiff is
under public duty to attend the court as he has been subpoenaed and the defendant is
not liable to pay to the plaintiff and there is no consideration in the agreement and
considered void.

Proof of Exchange/Promise

There is promise and exchange that happens between Justin and Selena as I mentioned earlier
in offer and promise. Where Justin offers to transfer the house to Selena if Selena continues
to pay the mortgage and finish paying it off. Even though there is no acceptance
communicated verbally but Selena did by act where she continues to pay the mortgage and
finishes to pay it off. Example of cases refer to case between Carlil vs Carbolic Smoke Ball
Co Ltd Defendants are manufacturers of a drug called 'The Carbolic Smoke Ball'. For the
purpose of promoting the drug, they ran an ad offering £ 100 to anyone who bought and
consumed the drug three times a day for two weeks, but still had the flu. To show their
sincerity, they say that a sum of £ 1000 has been deposited with Alliance Bank. The plaintiff,
who had purchased and consumed the drug according to the instructions given but did not
recover, demanded £ 100 as promised in the ad. The defendant denies liability by stating that
there is no offer made to any party because the offer is uncertain of who it is intended to be.
The court decision state that an offer can be made worldwide. The real intention is not to
contract with the whole world but to anyone who appears to be doing whatever the offer or
condition demands. The plaintiff is said to have received the offer when he purchased and
consumed the drug according to the instructions. A legal contract exists between him and the
defendant.
Judgement on Consideration

My judgement based on the points elaborated above can be concluded that there is existence
of legal contract between Justin and Selena as Justin at first has made an offer to Selena about
transferring the house if in return Selena pay off the mortgage of the house. In acceptance of
the offer Selena in act as paid the mortgage of the house until finish. Both has done the with
free consent, certainty, and legal capacity to enter a contract. In term of consideration, there is
executory consideration when this happens as Justin ask Selena to pay the mortgage as in
return for the house which a good for a good. Selena might not pay the mortgage of the house
if she knows in the first place that she will not get the house.

Intention to Create Legal Relation

Intention to create legal relations is an element of a contract. The intention to create legal
relationship are defined as the intention to enter into a legally binding agreement or contract.
There is no provision in Contract Act 1950 regarding legal intention. The intention to
create legal relationship is one of the necessary elements to conclude a contract. It is because
intention to create legal relations is a mindset when both parties intended to be legally
binding agreement by whatever they agreed. To create legal relationship, the parties involved
are bound by the agreement reached by them and can be prosecuted if they violate any of the
terms of the agreement. In addition, mindset is mind when the court cannot read or
understand other people ideas. The behaviour of parties may be expressly or implied. When
the court faced the problem of mindset their will use the presumption it is the idea that is
taken to be true.

Rule of Intention to Create Relation & Cases

The presumption they have two types, which is Social & Domestic Agreements and
Business or Commercial Agreement. In the case of general rules Social & Domestic
Agreements, including friend and family, it is the presumption here is that these agreements
are not meant to be legally binding. The example of the case, which are not relative by the
Intention to Create Legal Relations, is Balfour v Balfour (1919). In this case, the plaintiff
and the defendant were a married couple. The wife is live with her husband in Ceylon where
the husband worked. During the husband vacation, the couple returned to home at England.
When they want to return from England to Ceylon, the wife feels unhealthy. Hence, only the
husband went back. However, when he was about to go back, he promised a monthly
allowance of £30 as maintenance for his wife. However, the relationship between the two
parties deteriorated and the two parties began to separate. The wife sued her husband as he
did not fulfil his promise. At last, the sued of the wife could not succeed because there are
did not consideration for the promise to pay £30 agreements between husbands and wife
are not contracts because both parties did not intend them to be legally binding. The
other cases can be used in Social & Domestic Agreements is the case between Merrit vs
Merrit. In this case, the husband promised to transfer co-joint property to wife when she
repaid the remaining balance of the mortgage and the agreement between them is in written
and both signed the agreement. Both are the verge of divorce. Later when Mrs. Merrit paid
off the mortgage the property was transferred to her name and Mr. Merrit appealed and
contended the agreement was a domestic arrangement between husband and wife and there
was no intention to create legal relations and, as such, there was no enforceable contract. It
was held that the agreement is valid as both signed the agreement and there is intention
to create legal relation when making the agreement. When parties are in the process of
separating, or are separated, the presumption of there being no intention to create legal
relations does not apply. The arrangement was sufficiently certain to be enforceable,
and the paying of the mortgage was ample consideration for Mr Merritt’s promise. Mrs
Merritt was entitled to the matrimonial home entirely.

Judgement on Intention to Create Relation

Based on the details and the cases above regarding intention to create relationship there are
certain circumstances that can be accepted by the court of law when come to the Sosial &
Domestic relationship such as case between Mr. Merrit and Mrs. Merrit considering they are
at the verge of divorce and the act that Mrs. Merrit has taken by paying off the mortgage as
an return for the sole owner of the house. Considering the case as a precedence it can be
stated that there is legal intention between Justin and Selena, and the act of Selena paying off
the mortgage is considered as an act to build a legal relationship between them. She continues
to pay as Justin promised to her that he will transfer the property to her.

Conclusion

Overall based on two elements which are consideration and legal intention to create
relationship, it can be concluded that there is a legal contract between Justin and
Selena. First there is executory consideration when this happens as Justin ask Selena to pay
the mortgage as in return for the house which a good for a good. Selena might not pay the
mortgage of the house if she knows in the first place that she will not get the house. She only
does as so as an act to get the property for herself. Even though there are no precedent cases
that can be used as a support to this element but considering the act of Selena as
consideration. This is because when Justin first offer Selena the house in return of paying off
the mortgage in future, even though at the said time nothing has happened, but the contract is
considered valid as it is the return for an act that done in future. Second elements which is
intention to create legal relation is exist between two of them taking the Merrit vs Merrit
case, where Mrs. Merrit won the case because the court held that when parties are in the
process of separating, or are separated, the presumption of there being no intention to create
legal relations does not apply. The arrangement was sufficiently certain to be enforceable,
and the paying of the mortgage was ample consideration for Mr Merritt’s promise. Mrs
Merritt was entitled to the matrimonial home entirely. Applying this case to Justin and
Selena situation, it can be concluded that the act of Selena is ample consideration for
Justin promise and both are going to be separated and they did not fall under the Sosial
& Domestic relationship and there is legal relationship between them. In conclusion, it
can be stated that Selena would win the case if she brought the case to the court as all
the elements of contract has been fulfilled accordingly even though there is no written
agreement between them. While to Justin, he should transfer the property to Selena as
he at the first place make an offer to create agreement with her by offering the transfer
of the house to Selena if she is paying off the mortgage and Selena did accept the offer
by continue paying the mortgage which has created a legal relationship between them.