10/22/23

1 Capacity
2 Capacity
• As per section 10 of the Contract Act. 'All agreements are
contracts if they are, made by the free consent of parties
competent to contract, for a lawful consideration and with a lawful
object, and are not hereby expressly declared to be void'
(emphasis added).
• The Act specifies that parties competent to contract are
• (1) of the age of majority
• (2) of sound mind, and
• (3) bot otherwise disqualified from contracting.
• The purpose of the first two provisions, that minors and lunatics
are incompetent to contract is to protect individuals considered
incapable of 'understanding an agreement and of forming a
rational judgment as to its effect upon his interests' (as the
Contract Act notes in relation to lunatics)
•
3 Minors
4 Disqualification by minority

• In order to be competent to contract, a person must be of the age

of majority according to the law to which he is subject. 'The law to
which he is subject' refers to the domicile of the person..
• Section 3 of the Majority Act [1875] stipulates that for every person
domiciled in Pakistan, the age of majority is 18 years;
• unless a guardian or a ward is appointed by the court for that
person, in which case, the age of majority is 21 years.
•
5 Sec 10: conundrum?
• Pollock argues that section 10 is capable of two constructions:
• 1. 'either that a minor is absolutely incompetent to contract, in
which case his agreement is void, or
• 2. that he is incompetent to contract only in the sense that he is
not liable on the contract though the other party is, in Which case
there is a voidable contract.’
• The, distinction is significant because :
• If the agreement is void, the obligations cannot be contractually
enforced either by the minor or the other party and it' cannot be

1
 • If the agreement is void, the obligations cannot be contractually
enforced either by the minor or the other party and it' cannot be
ratified upon the minor's majority.
• If the agreement is voidable; the minor may sue upon it, though he
may not be sued and he may ratify the agreement upon majority.
• The Contract Act was intended to consolidate the English law of
contract at the time, except where it expressly differed.
• As a result, the Indian courts initially applied sections 10 and 11 in
conformity with the English principle that an agreement with a
minor is a voidable contract.
• But that changed later and Now all Contracts with Minor are Void (
ab Initio)
•
•
6 Sec 10 and its application: Void contracts
• In,Mohori Bibee v Dhurmodas Ghose, the Privy Council settled
that the correct position is that an agreement by a minor is void
and this position has been affirmed by the Supreme Court in
Pakistan.
• In Mohori Bibee, the plaintiff, while a minor,' mortgaged· property
in favour· of one Brahmo Dutt as security for a loan of Rs. 20,0007
• On the facts, the court determined that Brahmo Dutt knew that the
plaintiff was a minor at the time.
• The plaintiff subsequently sued for the declaration that the '
mortgage was void and should be cancelled on the basis that he
lacked the capacity to contract.
• The court held that the mortgage was void and stated:
• 'Looking at [sections 2, 10, and 11 of the Indian Contract Act],
their Lordships are satisfied that the Act makes it essential that all
contracting parties should be "competent to contract", and
expressly provides that a person who by reason of infancy is
incompetent to contract cannot make a contract within the
meaning of the Act....
• The question whether a contract is void or voidable presupposes
the existence of a contract' within· the meaning of the' Act and
cannot arise in the case' of an infant.
7 Ratification, Capacity and Consideration: Minors
• So can a contract be ratified once they gain majority?
• This is in turn discussed in context of whether there was good
consideration??
• As an agreement with a minor is void, it cannot, upon his majority,
7

consideration??
• As an agreement with a minor is void, it cannot, upon his majority,
be ratified by him.
• He can, of course, enter into a new agreement upon turning
majority,' but each party will' need' to provide fresh consideration.
• Consideration provided during minority should not be good
consideration for a subsequent 'promise, even where the
consideration was provided at the request of the promisor.
8 Suraj Narain Dube v Sukhu Aheer
• So, in Suraj Narain Dube v Sukhu Aheer, the 'Allahabad High
Court considered a promissory note issued by a minor, ratified
upon majority.
• The minor had taken a loan; issued a promissory note, and then,
upon majority, reissued the promissory note.
• Was the Note valid?
• The first note was void as one of the parties was incompetent to
contract.
• Was the second note valid? Was there consideration?
• The court referred to Mohor; Bibee and stated at. the outset:
'Under section a minor is not competent to contract. He is
disqualified from contracting.
• He can, therefore, neither make a valid proposal, nor make a valid
acceptance as defined in section 2, clauses (a) and (b).
• He cannot, therefore, for the purposes of the Act, be strictly called
a promisor within the meaning of clause (c):
• Nor can, therefore, anything done by the promisee be strictly
called a consideration at the desire of a promisor as contemplated
by clause (d).'
•
9 Courts Final Opinion in Suraj Narain?
• The court held that the loan to the defendant while a minor could
not be good consideration for his subsequent promise to pay.
• On this basis, there was no consideration for the subsequent
promise to pay and it was not enforceable unless it fell within one
of the exceptions in section 25.
• Furthermore, section 25(2) did not apply on the facts as the loan
was not given voluntarily. The minor was not obligated to repay the
loan and could keep his property.
• So, on this basis, consideration provided to a minor at his request
will not be good for a promise, given upon majority to compensate
him.
 will not be good for a promise, given upon majority to compensate
him.
• However, a promise, upon majority to compensate someone for a
voluntary act done while the promisor was a minor will be
enforceable under section 25(2).
• Section 70 which stipulates that someone enjoying the benefit of
an act not intended to be done gratuitously must compensate the
actor, does not apply to a minor.
•
•
10 Burden of proof??
Aamir Masood v Khurshid Begum
• A person seeking to avoid an agreement on the basis, of his
minority must prove, his minority to the court.
• As per the Lahore High Court in Aamir Masood v Khurshid Begum,
• 'when a person challenges a transaction on the ground that it is
void because he was a minor at the relevant time, he has a very
heavy burden on him to prove that he was as minor at the relevant
time and to prove the said fact without any shadow of doubt.'
• In that case, the, plaintiff sought to avoid· a sale deed he had
entered into with the defendant alleging that he was a minor at the
time of execution. He relied on the birth register of his area and
the testimonies of the government official who made the entry and'
the chowkidar on the basis of whose representation the entry was
made.
• The court found that there was overwriting on the entry and that
none of his siblings' births were registered. A copy of the entries
was supposed to be sent to the District Health Officer but no such
copy of that entry had been sent.
• The chowkidar stated he knew the plaintiff's date of birth because
he was the son of his lumbardar but could not, on cross
examination, recall the dates of birth of any of his siblings.
• The court held that the plaintiff had not proved without a shadow of
doubt that he was a minor at the time he entered into the
agreement and was therefore bound by it.
•
11 False representation by the Minor?
• Ordinarily, an agreement will be' void where a party is not
competent to contract whether or not the other party knows of his
minority.
• However, where A party enters into a contract with a minor
11

minority.
• However, where A party enters into a contract with a minor
believing that he is of majority on the basis of the minor's
fraudulent representation to him, the courts have sometimes been
reluctant to allow the minor to rely on his minority to avoid the
obligation.
• In Khan Gul v Lakha Singh,
• the plaintiff sought to enforce an agreement made by the
defendant for the sale of a piece of land to him while a minor. The
court established that the defendant had falsely represented
himself to be of the age of majority to the plaintiff in order to induce
him to contract.
• The court refused to accept the minor’s plea that the contract
wasn’t enforceable because at the time of making the contract he
was a minor, because of the operation of sec 115 of the Evidence
act, which states that no party can benefit from their
misrepresentation
12 Promissory estoppel to the rescue?
• However, the courts also acknowledged the fact that the
promissory estoppel doctrine could be used to enforce such
contracts against the minor, which would be detrimental to the
whole law of Minors lacking capacity.
• So, the question arose that with the operation of sec 115 and the
promissory Estoppel doctrine, we would reach a situation where
the Minors are held to be liable on many of their contracts.
• Sec 115 : “When one person has, by his declaration, act or
omission, intentionally caused or permitted another person to
believe a thing to be true and to act upon such belief, neither he
nor his representative shall be allowed, in any suit or proceeding
between himself and such person or his representative, to deny
the truth of that thing.”
• The court accordingly held that
• 'where an infant has induced a person to contract with him by
means of a false representation that he was of full age, he is not
estopped from pleading his infancy in avoidance of the contract.’
• And at the same time, would allow cases such as the present case
to be unfair to the innocent part who was induced into the contract
through a misrep by the minor on their age.
• So what was the solution??
•
13
 •
13 Restitution as a remedy?
• The court held however, that under the Specific Relief Act and
pursuant to its inherent jurisdiction it could order relief against
fraud practiced by a minor. The court stated:
• The exact form which the relief should take must depend upon the
peculiar circumstances of each case, but the contract or any
stipulation therein should never be enforced.
• The remedy by way of restitution may sometimes involve the
payment of a sum of money equal to that borrowed under the void
contract.
•
14 Restitution as relief
• The grant of such relief is not, however, an enforcement of the
contract, but a restoration of the state of affairs as they existed
before the formation of the contract-
• The court, while giving this relief, has not to look at the contract or
to give effect to any of the stipulations contained therein.
• Indeed, the relief is granted, not because there is a contract which
should be enforced, but because the transaction being void does
not exist and the parties should revert to the condition in which
they were before the transaction.
• This is not a performance of the contract but a negation of it.
•
15 Final say on this matter?
• Therefore, a minor who has induced a party to enter into an
agreement by fraudulently representing that he is of the age of
majority, is not precluded from pleading his minority to avoid the
agreement.
• The Court cannot provide a contractual remedy as the contract is
void and neither sections 64 nor 65 of the Contract Act apply
• However, the court may, at its discretion, provide a remedy under
section 41 of the Specific Relief Act 1877, where the minor is the
plaintiff, by requiring the minor to make such compensation to the
other. party 'as justice requires’,
16 Void contracts and its remedies?
• Where the plaintiff seeks to recover from a minor defendant on
the basis of the defendant's contractual liability, that claim will
necessarily fail, as the defendant cannot be liable on a void
contract.
16

necessarily fail, as the defendant cannot be liable on a void

contract.
• In Municipal Committee, Jhang Maghiana v Muhammad Mehtab,
• the plaintiff sued the defendant to recover moneys due under a
contract void on the basis of the defendant's minority.
• The plaintiff had invited tenders for chabba-rehri at the General
Bus Stand in Jhang.
• The defendant's tender was the highest and the contract was
awarded to him.
• At the end of the contract period, an amount of approximately Rs.
90,000 was outstanding from the ·defendant.
• The plaintiff sued and the defendant pleaded his minority.
•
17 Held?
• The court held that the contract was void on that basis.
• Were the minor is seeking a declaration that the contract was void,
the court considered that it could have required him to put the
other party in the position it would have been in had the
transaction not been entered into.
• But here the defendant was the Minor, the P could not recover
their money as this was a void contract.
•
18 Summary of the law on Minors and Void contracts
• So, in summary, if there is No Fraudulent representation, a minor
who has received a Benefit, is not required to restore the benefit
and Not required to perform the contract….since the Contract is
Void.
• But where there is Fraudulent Misrep by the Minor as to his age
and the minor is the petitioner ( either to enforce the contract or
rescind it due to lack of capacity), the court may invoke their
restitutionary jurisdiction under sec 41 of the specific relief Act, and
may restore the parties to their original position.
19 Guardians of the Minor
• A guardian can enter into a transaction on behalf of the Minor, as
long as the Transaction was for the Benefit of the Minor.
• A natural Guardian is the Father, or his executors
• Or it may also be a Court appointed Guardian.
• The contract is enforceable if the Guardian is acting with their
authority.
20

21
 authority.
20 Contracts for necessaries
21 Necessities and Guardians of Minors.
• The contract is voidable if entered into by the Guardian at the
option of the Minor once they reach majority…unless it is for
necesseries !!
• For necesseries, the Contract will be enforceable, even against a
Minor
• Confirmed by the cases:
• Yamin Khan v Rais Jhangli Khan and Caltex oil ltd v Yasmin
22 Contracts binding on a minor; ‘necessaries
• The only contracts which are binding on a minor are contracts for
the supply of necessaries.
• ‘Necessaries’ are interpreted as including not just the supply of
necessary goods and services, but also contracts of service for the
minor’s benefit.
• The Pakistani act under sec 68, states that some one who
supplies necesseries to a minor is entitled to be reimbursed for
their value from the Property of that minor
• Contracts for necessary goods and services
• Under the Sale of Goods Act 1979, s. 3(2) ‘necessaries’ means
‘goods suitable to the condition in life of the minor or other person
concerned and to his actual requirements at the time of sale and
delivery’.
•
23 Necessaries: context and socio-economic standing of the
Minor
• It therefore includes more than just such essentials as food,
shelter and clothing, and in deciding the issue the courts can take
into account the social status of the particular minor
• – items which might not be considered necessaries for a working-
class child may nevertheless be necessaries for one from a
wealthy background.
• When deciding if a contract is one for necessaries:
1.the courts first of all determine whether the goods or services are
capable of amounting to necessaries in law, and
2.then consider whether they are in fact necessaries as far as the
minor before them is concerned. ( the socio-economic context)
• The tests are notoriously difficult to apply, but effectively mean that
a minor will be bound by most consumer contracts, but usually not

24
 • The tests are notoriously difficult to apply, but effectively mean that
a minor will be bound by most consumer contracts, but usually not
by commercial ones.
•
24 Cases: necessaries
• In Nash v Inman (1908) a Savile Row tailor supplied a Cambridge
undergraduate with ‘eleven fancy waistcoats at two guineas each’.
• When the tailor sued for payment, the student claimed that the
contract could not be enforced against him, as he was a minor (at
this time people were considered minors until the age of 21).
• The Court of Appeal held that although the goods were suitable to
the young man’s ‘condition in life’ (he was ‘the son of an architect
of good position’), they did not satisfy the second limb of the
statutory definition.
• They could not be regarded as suitable to his actual requirements
at the time, because his father had given uncontradicted evidence
that he already had a sufficient wardrobe of clothes.
• Therefore the contract was not binding.
•
25 Necesseries
• This was affirmed in the Indian case of Jagon Ram Marwari v
Mahadeo Prosad, where Jewels and fine cloths were supplied to a
wealthy minor landlord.
• And allowed for the contract of sale since the idea of necessities is
to do with the stature of the Minor, so what would amount to
necessaries in one case may be luxuries in another.
• In Sham Charan mal vs Chowdhry Debya Singh, the calcuta HC
considered a Loan agreement by D, who had borrowed money
from The P to defend Himself in a case of dacoity.
• The court held this was a contract for the sale of necesseries.
•
26 Contract for services? Necesseries?
• Under common law, a similar approach is taken to contracts for
services as for goods.
• In Chapple v Cooper (1844) an undertaker sued a widow, who was
a minor, for the cost of her husband’s funeral.
• She refused stating that she was a minor.
• It was held that this was a necessary service, and so the young
woman was obliged to pay.
• In discussing what kind of goods and services could be considered

27
 woman was obliged to pay.
• In discussing what kind of goods and services could be considered
necessaries, the court said ‘Articles of mere luxury are always
excluded, though luxurious articles of utility are in some cases
allowed.’
•
27 Contracts of service for the minor’s benefit

• Minors are also bound by contracts of service, providing these are

on the whole beneficial to them.
• In practice this generally means contracts of employment under
which a minor gains some training, experience or instruction for an
occupation – an apprenticeship would be a common example.
• In Clements v London and North Western Railway Co (1894) a
minor made an agreement under which he gave up his statutory
right to personal injury benefit, but gained rights under an
insurance scheme to which his employers would contribute.
• It was held that the rights gained were more beneficial than those
given up, and so the contract was, on balance, for the minor’s
benefit and therefore binding.
28 Contracts for the service of Minor’s benefit
• In De Francesco v Barnum (1890) a 14-year-old girl entered into a
stage-dancing apprenticeship with De Francesco, under an
agreement which was considerably more favourable to De
Francesco than to the girl.
• She was not to marry during the seven years of the
apprenticeship, could not take on professional engagements
without his written consent and was completely subject to De
Francesco’s commands.
• He, on the other hand, made no commitment to employ her, and
stated that if he did do so it would be at a very low rate of pay.
• The agreement also allowed him to send her abroad, and to put an
end to the agreement at any time.
• Fry LJ concluded: ‘Those are stipulations of an extraordinary and
unusual character, which throw, or appear to throw, an inordinate
power into the hands of the master without any correlative
obligation.’ Consequently, the court held that the contract was not
for the minor’s benefit, and could not therefore be enforced against
her.
29 Summary: necessaries.
• Both The English and Indian courts have accepted the following as
29 Summary: necessaries.
• Both The English and Indian courts have accepted the following as
Necesseries:
• 1. Medical services
• 2. legal services
• 3. Costs of funeral services
• 4. House repairs
• 5 Teaching
• 6 lease of premises to live in.
• Another thing to keep in mind: that sec 68 does Not make the
Minor Liable….it makes their Property liable…and if the property is
insufficient, the supplier will be unable to recover
30 Void contracts and the ability of Minors to enforce such a
contract
• However, there is another principle under Pakistani contract law
which creates further confusion. The principle has two limbs:
1.Where the contract is Void due to lack of capacity, A minor may
enforce such a contract/ transaction in His Favour if the Minor has
already performed his side of bargain.
2.And if any of the Minor’s obligations remain, the contract will not
be enforceable against the other party.
Which in essence means, that what we consider as Void contracts,
aren’t necessarily Void, but more likely to be voidable ( at the
insistence of the Minor)
31 Case law on Void( able) contracts be enforced??
• A.T Raghav Chariar v O.A. Srinivasa Raghav Chariar: question
arose as to whether a minor could enforce a Mortgage where he
had already paid his part of the consideration?
• The Courts held he could because the rule was to benefit and
protect the Minor
• Similarly in the Lahore HC case Noor M v M Ishaq,
• the P argued enforceability of a land sale where they had paid
their side of the money.
• But The D argued that the sale was void because the P were
Minors.
• The courts( in their obiter decision, because this point wasn’t
argued in the initial plea) stated that the Minors could enforce the
agreement in their favour when they had provided some
consideration.
•
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 consideration.
•
32 The difficulty in enforcing contracts in favour of Minors?
• The problem with all of the above cases remains the issue of how
do the courts enforce these contracts, when by definition these
Contracts never came into existence as they are Void ab initio……
• In essence the Pakistani courts, despite the wording of the CA, are
applying the principles of English law relating to Minors, which
allows for such contracts to be categorized as Voidable...
• In essence if the Minor chooses to enforce the contract they may
do so,
• but the other party may only enforce a contract against a minor if it
is for necessaries.
• Which is strange, since the courts are happy to enforce certain
contracts despite these not being specifically for necesseries
despite the statute clearly stating a Contract entered into by a
Minor is Void due to lack of capacity!!!
•
33 A summary of English law on Minors
• In four situations, a minor can create a voidable contract, meaning
that it binds both parties, but the minor can repudiate the contract
at any time before he reaches the age of 18, or within a
reasonable time afterwards:
1.Contracts concerning land (e.g. renting or selling property)
2.Marriage settlements
3.Purchase or subscription of shares
4.Partnership agreements ( but the minor will not responsible
for the losses of the partnership whilst he is a minor)

34 Incapacity due to insanity

35 Sec 12 states that a person of Unsound mind does not have
the capacity to contract

• What is a sound mind for the purposes of contracting

• sec 12 A person is said to be of sound mind for the purpose of
making a contract if, at the time when he makes it, he is capable of
understanding it and of forming a rational judgment as to its effect
upon his interests.
• A person who is usually of unsound mind, but occasionally of
sound mind, may make a contract when he is of sound mind.
 • A person who is usually of unsound mind, but occasionally of
sound mind, may make a contract when he is of sound mind.
• A person who is usually of sound mind, but occasionally of
unsound mind, may not make a contract when he is of unsound
mind.
• Illustrations
• (a) A patient in a lunatic asylum, who is at intervals of sound mind,
may contract during those intervals.
• (b) A sane man, who is delirious from fever or who is so drunk that
he cannot understand the terms of a contract or form a rational
judgment as to its effect on his interests, cannot contract whilst
such delirium or drunkenness lasts.
•
36 Drunkenness? And temporary insanity
• The Act expressly provides that drunkenness (and by implication
other forms of intoxication) may cause temporary unsoundness of
mind. .
• Loss of memory or feebleness of mind is not ordinarily
unsoundness of mind, but feebleness of mind to such an extent
that the individual is incapable of understanding the agreement
and forming a rational judgment upon it will clearly be
unsoundness of mind.
• Whether the party is of sound mind is a question of fact to be
determined on evidence.
•
37 The burden of proof for claiming Insanity
• The burden of proof ordinarily lies upon the party seeking to prove
insanity.
• However, 'if ... there is sufficient evidence to prove that the person
whose mental capacity is in doubt is usually of unsound mind, then
the burden shifts to the person who alleges his sanity to prove that
the document was executed during a lucid interval.’
• Registration endorsements by an individual will ordinarily be
evidence for soundness of mind.
•
38 Case law
• In Sultan v Nazar Sultan, the plaintiff purportedly sold land to the
defendant and subsequently claimed that the sale was void on the
basis that he was not of sound mind.
• The court considered that it was not required to examine the
38

basis that he was not of sound mind.

• The court considered that it was not required to examine the
plaintiff itself.
• It relied primarily upon a medical certificate and a statement of the
medical superintendent at the· Civil Hospital in Jhang to the effect
that the plaintiff 'did not have full mental faculties and was not able
t o understand his affairs’.
• The court held that the plaintiff was of unsound mind and as a
result the sale was void.
• As an agreement entered into by someone who is of unsound
mind is void, it cannot subsequently be ratified during a period of
lucidity.
•
39 Summary of Incapacity due to insanity
• A person of unsound mind is incompetent to contract and an
agreement entered into by such a person is void.
• A person is of unsound mind if he is incapable of understanding
the agreement in question and forming a rational judgment as to
its effect upon his interests.
• This is a question of fact to be determined upon the evidence.
which will likely include medical reports.
•
40 Intention to create legal Relations
41 Background?
• One of the essential ingredient of a binding contract is that the
parties must have had an intention to create legal relations.
• In other words, they must have had an intention to be bound by
the terms of their agreement.
• The doctrine of intention to create legal relations is a relatively
late arrival in English contract law and many times over laps with
the doctrine of Consideration( or lack thereof), especially in
Domestic arrangements.
• This doctrine is greatest outside the sphere of commercial
transactions.
• Hardly any jurisprudence in Pakistani law. So the English
Jurisprudence applies
• In the case of ordinary commercial transactions, the law presumes
that the parties did intend to create legal relations.
• The presumption that the parties to a commercial transaction
intended to create legal relations is not an irrebuttable one. It can
 • The presumption that the parties to a commercial transaction
intended to create legal relations is not an irrebuttable one. It can
be rebutted but clear evidence is required in order to do so
• The picture is otherwise when we turn to domestic and social
agreements.
• In these contexts the presumption operates the other way. The
presumption is that the parties to domestic and social agreements
do not intend to create legal relations.
•
•
•
42 Objective standard: intention to create legal relations
• The intention of the parties is judged objectively and not by
inquiring into their respective states of mind
• However, in the case where a party in fact knows that the other
party does not intend to create legal relations, he is not entitled to
assert that the parties did intend to create legal relations by
submitting that, objectively, the evidence supports the conclusion
that the parties did intend to create legal relations.
•
•
43 Domestic agreements
44 Domestic Agreements: Balfour v Balfour (1919)

• In the case of agreements entered into in a domestic context the

presumption is that the parties did not intend to create legal
relations. The leading case is:
• Balfour v. Balfour [1919]
• The defendant and plaintiff were husband and wife. They were
married in 1900 and went to live in Ceylon (now Sri Lanka).
• They returned to England in 1915 when the defendant (the
husband) had some leave from his work. When his leave came to
an end he returned to Ceylon but his wife remained in England, on
the advice of her doctor.
• Shortly before the defendant set sail for Ceylon in August 1916 the
plaintiff alleged that they made an oral agreement, according to
which he promised to pay her £30 per month until she returned to
Ceylon.
• Differences then arose between them and the defendant wrote to
the plaintiff suggesting that they should live apart. The plaintiff
 • Differences then arose between them and the defendant wrote to
the plaintiff suggesting that they should live apart. The plaintiff
commenced divorce proceedings in 1918 and she obtained an
order for alimony.
• In the present proceedings the plaintiff sought to enforce the
alleged agreement by which the defendant had promised to pay
her £30 per month.
•
•
•
45 The Judgement in Balfour
• The first instance judge, Sargant J, held that the defendant was
under an obligation to support his wife and that effect should be
given to the agreement reached by the parties.
• The defendant appealed to the Court of Appeal. His appeal was
allowed and it was held that he was not liable to make the
promised payments to the plaintiff.

46 Warrington LJ in Balfour v balfour

• ‘The matter really reduces itself to an absurdity when one

considers it, because if we were to hold that there was a contract
in this case we should have to hold that with regard to all the more
or less trivial concerns of life where a wife, at the request of her
husband, makes a promise to him, that is a promise which can be
enforced in law.
• All I can say is that there is no such contract here. These two
people never intended to make a bargain which could be enforced
in law. The husband expressed his intention to make this payment,
and he promised to make it, and was bound in honour to continue
it so long as he was in a position to do so.
• The wife on the other hand, so far as I can see, made no bargain
at all. That is in my opinion sufficient to dispose of the case ... ‘
•
47 Atkin LJ

• The defence to this action on the alleged contract is that the

defendant, the husband, entered into no contract with his wife, and
for the determination of that it is necessary to remember that there
are agreements between parties which do not result in contracts
within the meaning of that term in our law.
 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.
• It is quite common, and it is the natural and inevitable result of the
relationship of husband and wife, that the two spouses should
make arrangements between themselves—agreements such as
are in dispute in this action—agreements for allowances, by which
the husband agrees that he will pay to his wife a certain sum of
money, per week, or per month, or per year, to cover either her
own expenses or the necessary expenses of the household and of
the children of the marriage, and in which the wife promises either
expressly or impliedly to apply the allowance for the purpose for
which it is given.
•
48 (a) The Scope of the Presumption

• As Balfour demonstrates the presumption that parties to domestic

agreements do not intend to create legal relations is applicable as
between husbands and wives, at least where they have not
separated and are living together ‘in amity’.
• The position is otherwise where they have separated at the time at
which the agreement is made. Thus in Merritt v. Merritt [1970] 1
WLR 1211 the Court of Appeal held that an agreement between a
husband and wife who had separated was enforceable as a
contract.
•
49 Other Domestic relations:
Jones v. Padavatton [1969] 1 WLR 328
• The presumption that parties to a domestic agreement do not
intend to create legal relations has also been applied to an
agreement between a mother and her daughter.
• In Jones v. Padavatton [1969] 1 WLR 328 a mother promised to
maintain her daughter if she gave up her job in Washington and
went to London to read for the Bar with a view to practising as a
 maintain her daughter if she gave up her job in Washington and
went to London to read for the Bar with a view to practising as a
lawyer in Trinidad.
• The mother lived in Trinidad and her promise was made in 1962.
Initially, the promise took the form of a promise of a monthly
allowance but subsequently that arrangement was varied and the
mother bought a house for her daughter in 1964, on the
understanding that the daughter could live there rent free, rent out
rooms in the house to lodgers and use the rent to provide for her
maintenance.
• The daughter entered on her studies for the Bar in November
1962 but by November 1968, the date of the hearing before the
Court of Appeal, she had not completed the course successfully
(she had passed all but one of her Part I papers but had not yet
embarked upon Part II).
• In 1967 the mother issued a summons in which she claimed
possession of the house.
• The daughter resisted her attempt to do so on the ground that she
had a contractual entitlement to live in the house. The Court of
Appeal held that the mother was entitled to possession of the
house. The reasons given for the rejection of the daughter’s claim
differed.
•
•
50 Courts :
• There is no doubt that this case is a most difficult one, but I have
reached a conclusion that the present case is one of those family
arrangements which depend on the good faith of the promises
which are made and are not intended to be rigid, binding
agreements.
• Balfour v. Balfour was a case of husband and wife, but there is no
doubt that the same principles apply to dealings between other
relations, such as father and son and daughter and mother. This,
indeed, seems to me a compelling case.
• Mrs Jones and her daughter seem to have been on very good
terms before 1967. The mother was arranging for a career for her
daughter which she hoped would lead to success. This involved a
visit to England in conditions which could not be wholly foreseen.
• What was required was an arrangement which was to be financed
by the mother, and was such as would be adaptable to
circumstances, as it in fact was.
• The operation about the house was, in my view, not a completely

51
 circumstances, as it in fact was.
• The operation about the house was, in my view, not a completely
fresh arrangement, but an adaptation of the mother’s financial
assistance to the daughter due to the situation which was found to
exist in England. It was not a stiff contractual operation any more
than the original arrangement.
•
51 (b) Rebutting the Presumption

• The presumption that the parties to domestic agreements do not

intend to create legal relations can be rebutted in a number of
different ways.
• 1. first place the context in which the agreement was concluded
has often been a factor in persuading the court to rebut the
presumption. For example, the presumption may be rebutted
where a husband and wife enter into an ‘agreement to share the
ownership or tenancy of the matrimonial home, bank accounts,
savings or other assets’
• the presumption is, also, more likely to be rebutted in the case
where the relationship between the parties is approaching the
point of break-down .
• Similarly, where the context in which the agreement is reached is
a commercial one, as in the example of an agreement made in
connection with the running of a family business, a court is more
likely to conclude that the presumption has been rebutted
•
•
•
52 Secondly, where the parties have acted to their detriment in
reliance upon the agreement that has been concluded between
the parties.
But this is not always the case as we saw in Jones v Padavatton
• But where it has worked: An example is Parker v. Clark [1960] 1
WLR 286.
• The plaintiffs, a married couple, agreed to give up their own home
in order to move in and share the home of the defendants, an
elderly couple.
• The parties reached an agreement under which they agreed to
share the household expenses and the defendants promised to
leave the house in their will for the benefit of the plaintiffs and their
relatives.
 leave the house in their will for the benefit of the plaintiffs and their
relatives.
• In reliance upon the agreement, the plaintiffs sold their home and
lent part of the proceeds to their daughter in order to enable her to
buy a flat.
• The plaintiffs moved in to the defendants’ home in March 1956 and
they did most of the work around the house. However, the
relationship between the parties soon began to deteriorate and in
December 1957 the plaintiffs, in order to avoid being evicted, left
the house.
• They brought an action for damages against the defendants.
• One of the grounds on which the defendants denied that they were
liable to the plaintiffs was that the parties had not concluded a
contract because they had no intention to create legal relations.
•
•
53 The Judgement in
• Devlin J concluded that there was a contract between the parties
and that the defendants were liable in damages to the plaintiffs. He
stated:
• ‘I cannot believe ... that the defendant really thought that the law
would leave him at liberty, if he so chose, to tell the plaintiffs when
they arrived that he had changed his mind, that they could take
their furniture away and that he was indifferent whether they found
anywhere else to live or not. Yet this is what the defence means. ...
I am satisfied that an arrangement binding in law was intended by
both parties. ‘
• But what if the arrangements had ended before the P acted to their
detriment?
• In that case, the probability is that the Courts would not have
enforced such an arrangement.
•
54 (c) The Rationale Behind the Presumption

• What is the basis of the presumption that the parties to domestic

agreements do not intend to create legal relations?
• Is it to be found in the actual, albeit unexpressed, intention of the
parties or is its basis to be found in a rule of law or of public
policy?
• The judgment of Atkin LJ in Balfour suggests that the initial
presumption is derived from the law (or, if one prefers, public
 • The judgment of Atkin LJ in Balfour suggests that the initial
presumption is derived from the law (or, if one prefers, public
policy) rather than the intention of the parties.
• 1. The reasons he gave in support of the conclusion that the
parties did not intend to create legal relations did not relate
specifically to the position of Mr and Mrs Balfour but were of
general application.
• 2. Thus he advanced the floodgates argument (‘the small courts of
this country would have to be multiplied one hundredfold if these
arrangements were held to result in legal obligations’) and
• 3. also reasons of policy about the role of the law in the regulation
of family relationships (‘the common law does not regulate the
form of agreements between spouses. ... The consideration that
really obtains for them is that natural love and affection which
counts for so little in these cold Courts.’).
• This is not to say that the intention of the parties is irrelevant. Their
intention is relevant but it is only relevant to the rebuttal of the
presumption.
•
55 Social agreements
56 Social Agreements

• A similar presumption operates in the context of social

agreements, where the courts presume that the parties did not
intend to create legal relations.
• In his judgment in Balfour v. Balfour Atkin LJ provided two
examples of social agreements that are not generally intended to
give rise to legal relations, namely an agreement between two
people to take a walk together and an offer and acceptance of
hospitality.
• A further example is provided by the case of Lens v. Devonshire
Club, The Times, 4 December 1914, where it was held that the
winner of a golf competition was not entitled to sue in order to
recover the prize (although many competitions, for example those
in national newspapers, do now give rise to legal relations
between the competitors and the organizers of the competition:
see O’Brien v. MGN Ltd [2002] CLC 33,
•
57 Rebuttable Presumptions
• The presumption is a rebuttable one and the factors relevant to the
rebuttal of the presumption in a domestic context are also
57
• The presumption is a rebuttable one and the factors relevant to the
rebuttal of the presumption in a domestic context are also
applicable to social agreements. i.e the context of the agreement
and the where the parties have acted to their detriment
• In Simpkins v. Pays [1955] 1 WLR 975.
• The plaintiff lived with the defendant as her lodger. Each week the
plaintiff, the defendant, and the defendant’s granddaughter
entered a competition in a Sunday newspaper.
• The plaintiff filled out the coupon in the defendant’s name. They
shared the entry fee and the postage between themselves.
• One week they won the prize and the sum of £750 was paid to the
defendant.
• The defendant refused to pay to the plaintiff a one-third share of
the prize.
• One of the grounds on which the defendant refused to pay was
that she alleged that the agreement made between them was not
intended to be legally binding.
• Sellers J held that the plaintiff was entitled to payment of a one-
third share of the prize
•
•
58 Court in Sumpkins vs Pays
• ‘It may well be there are many family associations where some
sort of rough and ready thing is said which would not, on a proper
estimate of the circumstances, establish a contract which was
contemplated to have legal consequences, but I do not so find
here.
• I think that there was here a mutuality in the arrangement between
the parties. It was not very formal, but certainly in effect it was
agreed that every week the forecast should go in in the name of
the defendant, and that if there was success, no matter who won,
all should share equally. That seems to be the implication from or
the interpretation of what was said, that this was in the nature of a
very informal syndicate so that they should all get the benefit of
success.’

59 Other examples of social arrangements

• Giving a friend a lift in one’s car for petrol?
• For example, in Coward v. Motor Insurers’ Bureau [1963] 1 QB
259 Mr Cole regularly gave a lift to his work colleague Mr Coward
on the pillion seat of his motorcycle. Mr Coward made a
59

259 Mr Cole regularly gave a lift to his work colleague Mr Coward

on the pillion seat of his motorcycle. Mr Coward made a
contribution to Mr Cole’s expenses.
• One of the issues before the court was whether or not Mr Cole had
carried Mr Coward ‘for reward’.
• The Court of Appeal concluded that he had not.
•
•
60 The Judgement( rationale):
• ‘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.
•
•
61 Completed journeys?
• But later case of Albert v. Motor Insurers’ Bureau [1972] AC 301
Lord Cross adopted a different approach. In his view, there may be
a contract, at least in relation to completed journeys.
• “Suppose that when one of Mr Quirk’s fellow workers [Mr Quirk
being the driver of the car] got in touch with him and asked him
whether he could travel in his car to Tilbury and back next day, an
‘officious bystander’ had asked ‘Will you be paying anything for
your transport?’ the prospective passenger would have answered
at once ‘Of course I will pay’.
• If the officious bystander had gone on to ask Mr Quirk whether, if
he was not paid, he would sue the man in the county court, Mr
Quirk might well have answered ... ‘Not bloody likely’.
 he was not paid, he would sue the man in the county court, Mr
Quirk might well have answered ... ‘Not bloody likely’.
• But the fact that if default was made Mr Quirk would not have
started legal proceedings but would have resorted to extrajudicial
remedies does not mean that an action could not in theory have
been brought to recover payment for the carriage. If one imagines
such proceedings being brought, a plea on the part of the
passenger that he never meant to enter into a contract would have
received short shrift ..."
•
•
62 Commercial arrangements
63 Esso Petroleum Ltd v Comrs of Customs and Excise [1976] 1
WLR 1.

• The presumption is that parties to commercial agreements do

intend to create legal relations, and the presumption is a heavy
one. T
• The operation of the presumption can be seen in the case of Esso
Petroleum Ltd v Comrs of Customs and Excise [1976] 1 WLR 1.
• Esso supplied garages with World Cup Coins in 1970, instructing
the garages to give away one coin with every four gallons of petrol
sold.
• It was sought to subject these coins to a purchase tax on the
ground that they had been sold.
• On the facts, it was held that the coins were not supplied under a
contract of sale.
64 HOL:
• But the House of Lords divided on the issue of whether or not
there was an intention to create legal relations.
• The majority, Lord Simon, Lord Wilberforce and Lord Fraser, held
that there was an intention to create legal relations.
• They placed heavy reliance on the onus of proof in commercial
transactions and on the fact that Esso envisaged a bargain of
some description between the garage owner and the customer.
• But the minority, Lord Russell and Viscount Dilhorne, relying upon
the language of the advertising posters which said that the coins
were ‘going free’ and the minimal value of the coins, held that
there was no intention to create legal relations
•
65
 there was no intention to create legal relations
•
65 Rebutting the Presumption
• The presumption may be rebutted by an express term of the
contract which states that the parties do not intend to create legal
relations.
• The parties must, however, make their intention clear.
• Thus, agreements for the sale of land are usually made ‘subject to
contract’ and, on that ground, do not create legal relations. Unless
in writing!!!
• At common law a collective agreement entered into between trade
unions and an employer was held not to give rise to legal relations
(Ford Motor Co Ltd v AEF [1969] 1 WLR 339).
• This common law rule has been reinforced by a statutory
presumption to the effect that a collective agreement is
conclusively presumed not to have been intended by the parties to
be a legally enforceable contract unless it is in writing and
expressly provides to the contrary
•
66 Honor clauses
• The most interesting example in this category is, however, what is
known as an honour clause. In Rose and Frank Co v J R
Crompton and Bros Ltd [1925] AC 445, an agreement stated:
• this arrangement is not entered into as a formal or legal
agreement, and shall not be subject to legal jurisdiction in the Law
Courts but is only a definite expression and record of the purpose
and intention of the parties concerned to which they each
honourably pledge themselves.
• The court held that this agreement was not a legally binding
contract because it was not intended that it would have such an
effect.
• The courts interpret such clauses restrictively and clear words
must be used to create such an honour clause
•