This article is written by Shefali Chitkara. This article exhaustively covers the analysis of the case of Balfour vs. Balfour (1918-19), exploring the principle of “intention to create a legal relation” for the formation of any contract, covering the essentials to form a lawful contract and an exception of social or domestic agreements. This article also discusses a few important cases on the relevancy of intention to create legal relations. This article mentions the background of the case, relevant facts, issues that were raised before the Court of Appeal, England and the judgement given by the court. This article further highlights the judgements that were referred to in this case and the important subsequent judgements that were referred to in Balfour vs. Balfour.
“Is intention relevant for turning any agreement into a contract? Let us try to find out through the analysis of this landmark case law.”
Introduction
The purpose of enacting the Indian Contract Act, 1872, or other laws governing contracts worldwide, is to provide protection in cases of breach by any of the parties to the contract. Generally, the agreements are made enforceable as contracts in the court of law if the provisions of the Act are fulfilled, but there are some instances wherein a few agreements cannot be classified as contracts in order to make them enforceable in the courts of law. One such example is the “lack of intention to create a legal relation”, which does not make the agreement or promise a contract.
The concept of “intention” in the Indian Contract Act, 1872, is very pivotal for the formation and enforceability of contracts. A contract is said to be an agreement that is legally binding, and the intention to create a legal relation is a fundamental requirement for an agreement to be recognised as a contract under the law. This intention signifies that the parties are committed to fulfilling their promises and are willing to be held accountable by law. The “intention to create legal relations” is not expressly defined under the Indian Contract Act, but this principle is implicitly woven into its provisions. Without such intention, the agreement becomes a mere promise or social arrangement, lacking enforceability as a contract.
For determining the presence of intention, the courts examine the nature of the agreement between the parties and the circumstances under which it was made. Agreements made in a commercial context are usually presumed to have an intention, considering the inherent business considerations and the expectations of the parties. However, domestic or social agreements such as those made between family members are generally presumed not to have an intention to create legal relations. The present case of Balfour vs. Balfour (1919) 2 KB 571 is a landmark case and is often cited to illustrate the principle that “not all agreements are contracts”. Before going into the details of the case, let us look at the essentials of a contract in brief:
Essentials of a contract
Section 2(h) of the Indian Contract Act, 1872 defines a contract as an agreement enforceable by law. For instance, X agrees to sell his house to Y for ₹ 10,000. This is a valid contract as it involves a promise from both sides and also a consideration, though inadequate, that is lawful and enforceable as a contract. A contract is said to be a legally binding agreement between two or more parties having certain essential elements, which are as follows:
Offer and acceptance
When one party proposes terms to another, it is known as an offer, and when the other party agrees to those terms absolutely and unconditionally (Section 7 of the Indian Contract Act, 1872), it is known as an acceptance. Section 2(a) of the Indian Contract Act, 1872 defines proposal, and Section 2(b) states that when the person to whom the proposal is made signifies his assent, the proposal is said to be accepted.
Consideration
Each party has to provide something of value, which could be a promise, an act or forbearance. In the case of Currie vs. Misa (1875) LR 10 Exch 153, the word “consideration” was defined as some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. Section 2(d) of the Indian Contract Act, 1872 defines consideration for the promise, and it has the following important ingredients:
- It is moved at the desire of the promisor,
- It is given through the promisee or any other person,
- It can be in the past, present or future,
- It should be real and competent, not illusionary,
- It need not be adequate,
- It should be legal or lawful, and
- It could be a pre-existing legal obligation.
Intention to create legal relations
The most important element that is also disputed in the present case of Balfour vs. Balfour is the intention to create legal relations. It suggests that the parties must intend for their agreement to be legally enforceable.
Capacity of the parties
Parties must also have the legal ability to enter into a contract. They should be of sound mind, adult or above 18 years of age and are not disqualified by any law. In the case of Nash vs. Inman (1908) 2 KB 1, it was held that a minor’s contract was void as it was not for the necessities.
Legality of Object
The purpose for which the contract is made must be lawful. In the case of Everet vs. Williams ((1725) 9 LQR 197), it was held that a contract between the highwaymen to share the stolen goods was unenforceable as it was for an illegal purpose.
Certainty
The contract must be certain, i.e., the terms should be clear and specific. In the case of G. Scammell and Nephew Ltd. vs. Ouston (1941) AC 251, the contract was considered void for uncertainty as there were vague terms mentioned in the contract.
Free consent
Consent by the parties to the contract must be given freely (Section 14), without any coercion (Section 15), undue influence (Section 16), fraud (Section 17), misrepresentation (Section 18), or mistake (Sections 19, 20 and 21).
It can be said that contracts form the backbone of commercial transactions. The case at hand, i.e., Balfour vs. Balfour, discusses the essential of “intention to create a legal relation” in detail and determines whether the domestic agreements or promises form a contract enforceable in the court of law.
Details of the case
Title of the case
Balfour vs. Balfour
Case citation
[1919] 2 KB 571
Name of the appellate
Mr. Balfour (husband)
Name of the respondent
Mrs. Balfour (wife)
Court
Court of Appeal, England
Judges
Atkin LJ, Warrington LJ and Duke LJ
Judge at first instance
Justice Sargant
Facts of Balfour vs. Balfour (1919)
- There was a couple, Mr. and Mrs. Balfour, who used to live in Ceylon, Sri Lanka. They went on a vacation in England and during that vacation, Mrs. Balfour fell ill and needed medical assistance at that point of time. Due to this reason, she could not return to Ceylon with her husband.
- They both decided that Mrs. Balfour would stay in England until she recovered since Mr. Balfour had to go back to Ceylon due to his work commitments.
- Mr. Balfour promised his wife, Mrs. Balfour, that he would send 30 pounds to her every month as a part of her maintenance until she was in England and had recovered properly.
- When Mr. Balfour returned to Ceylon, his relations with Mrs. Balfour started becoming problematic.
- Due to all these problems between them, Mr. Balfour stopped sending the maintenance amount to Mrs. Balfour. When Mrs. Balfour questioned the same, Mr. Balfour refused to pay.
- Mrs. Balfour then approached the court, asking for maintenance and enforcement of the agreement between both of them as to the maintenance.
- At that time, Mr. Balfour decided to separate from Mrs. Balfour, and soon after that, they got legally separated and divorced.
- Mrs. Balfour still wanted the maintenance to continue, which was a part of the agreement between both parties.
On this issue between them, they went to the court of law.
Issues raised
The major issues raised in this case before the Hon’ble court were:
- Whether there was a bonafide intention on the part of Mr. Balfour to enter into an agreement with his wife, Mrs. Balfour?
- Whether a promise or an agreement between Mr. Balfour and Mrs. Balfour can be turned into a contract and be made enforceable?
- Whether such domestic or social agreements out of love and affection between the parties fall under the jurisdiction of the law of contract?
Applicable law
Since the case of Balfour vs. Balfour is an English case, the English law of contracts would be applicable. As per the Common Law of England, there are three essentials necessary for the formation of a contract:
- Agreement between two or more parties,
- A contractual relationship, and
- Presence of consideration which is anything of value, need not be monetary.
India follows the English Common Law for contracts, and the essentials of English Common Law are followed very well under Indian contract law. However, the Indian law does not specifically mention about “contractual relations” or “intention to create a legal relation”, and it is the principle which has evolved through the judicial precedents, especially in the present case of Balfour vs. Balfour. In India, the following conditions are required to be fulfilled for the formation of a valid contract as per Section 10 and also the other main provisions of the Indian Contract Act, 1872 as highlighted below:
- Two or more persons, i.e., promisor and promisee,
- Offer from the promisor and absolute and unqualified acceptance from the promisee,
- Free consent of both the parties (Section 14),
- Competency of both the parties (Sections 11 and 12),
- Lawful consideration (Section 23),
- Lawful object (Section 23),
- Not expressly declared to be void (Sections 24-30),
- Not in restraint of marriage (Section 26),
- Not in restraint of trade (Section 27),
- Not in restraint of legal proceedings (Section 28),
- Agreements not to be uncertain (Section 29),
- Agreements should not be for doing an impossible act (Section 36), and
- No wagering agreements (Section 30).
Procedural history of Balfour vs. Balfour (1919)
Mrs. Balfour initially filed a petition in the lower court to enforce the agreement. The additional Judge of the King’s Bench ruled in her favour and ordered Mr. Balfour to pay maintenance to his wife. Justice Charles Sargant of the lower court also held the agreement between the parties to be a contract and thus legally enforceable. After this, Mr. Balfour filed an appeal before the higher court.
Arguments advanced by the parties
Contentions of the appellant
The appellant, Mr. Balfour, contended that the agreement between them was merely a domestic agreement or a promise that was not legally enforceable in a court of law. Mr. Balfour had no intention to create an agreement with his wife.
Contentions of the respondent
On the other hand, the respondent, Mrs. Balfour, argued that the appellant is liable to pay the maintenance since he entered into a domestic agreement to pay her 30 pounds every month, for which she agreed to stay in England. The respondent’s side also quoted the case of Eastland vs. Burchell (1878), and stated that in case a wife and her husband live separately by mutual consent, the wife is entitled to demand maintenance from her husband as per her needs, and she is capable of making a contract with the husband like she can with any other person.
Judgement in Balfour vs. Balfour (1919)
Although Justice Sargent held in favour of the wife, Mrs. Balfour, and upheld the agreement as a contract, the three-judge bench in the Court of Appeal unanimously overruled the stand taken by the Subordinate Court and stated that domestic agreements between the spouses with no intention on the husband’s part to establish legal relation are not a contract. Lord Justice Atkin held that the promises made between the husband and wife, son and father or between other domestic relations are not enforceable agreements as they do not fulfil the requirements to form a valid contract. These are mere domestic agreements and are based on promises, like a promise made by a father to give his son pocket money and to his wife as maintenance. These mere promises cannot be termed as a contract because there is an absence of valid intention to create a legal obligation.
These agreements between the parties are oral and unregistered and are referred to as “simple domestic promises” or “social agreements”. The court further stated that it is on the promisee (Mrs. Balfour in this case) to prove the legal intention of the promisor to make it a valid contract.
If such promises are given validation as a contract, there would be a bulk of cases before the court for enforcement of such promises. Thus, it was held that a mere domestic agreement between the parties in this case is not a valid contract and, hence, not enforceable.
Further, in the present case, it was a unilateral form of contract in which Mrs. Balfour did not make any promise in exchange for the agreement to provide for maintenance by Mr. Balfour. This is also one of the reasons due to which it could not be termed as a legally enforceable agreement since there must be reciprocal promises from both sides to create a legally binding agreement.
Judgements on intention to create a legal relation
Merritt vs. Merritt (1970)
Facts of the case
In this case, the couple got married in 1941, and they had their matrimonial home in joint names. After a few years, Mr. Merritt left the family to live with another girl, and he agreed to pay 40 pounds per month to Mrs. Merritt. Further, at her request, Mr. Merritt also agreed to sign a document confirming the transfer of the home in her name on the condition that she would pay the mortgage amount. Subsequently, she acquired a declaration that the home belonged to her after paying off the mortgage, and Mr. Merritt appealed against the same.
Issue raised
Whether there was an intention to create a legal relationship in this case?
Judgement
The court favoured Mrs. Merritt and held that since the parties were in the process of separating, the presumption of absence of intention was not applicable here. It was certain to be enforceable, and the payment by Mrs. Merritt of the mortgage was sufficient consideration for her promise. Thus, she was entitled to the matrimonial home.
The present case of Balfour vs. Balfour is generally quoted in conjunction with the case of Merritt vs. Merritt. The court noticed that the difference in these two cases lies in the fact that Mr. and Mrs. Merritt, although married, but estranged when the agreement was made between them and thus, that agreement was made with the intention to create a legal relationship as opposed to the facts in Balfour vs. Balfour.
McGregor vs. McGregor [(1888), 21 Q.B.D 424]
Facts of the case
This case was considered even before the case of Balfour vs. Balfour. The husband and wife made an agreement to live apart from each other. The husband agreed to give maintenance, and in return, the wife would refrain from pledging his credit.
Issue raised
Whether the agreement entered into by the parties was a valid contract and enforceable in the court of law?
Judgement
It was noted that the agreement between the spouses was legally binding on them because there was an intention and willingness to live separately, and consideration was also present from both sides.
Jones vs. Padavatton (1968)
Facts of the case
In this case, a mother, Mrs. Violet Laglee Jones and her daughter, Mrs. Ruby Padavatton had entered into an agreement through which the mother agreed to maintain her daughter if the daughter, in return, agreed to study for the bar by giving up her secretary job at the Indian embassy in Washington DC. They both began to fulfil their duties as per the agreement. The mother used to give a monthly payment of 42 pounds, and she also bought a London house, which she rented out. Later, they altered the agreement, and it was agreed by the mother to provide her daughter with that house in which she could study and reside. The dispute then arose as to the occupancy of the house, and the mother sought possession. The daughter was, at first, given the possession against which the mother appealed.
Issue raised
Whether there was an intention to create a legal relation or was it merely a family arrangement, and the mother would be given possession of the house?
Judgement
The mother’s appeal succeeded, and she was given possession of the house. It was noted that it was just a family arrangement, and there was no intention to create a legal relation. A binding contract to make it enforceable in the court of law was present. Thus, the daughter was said to have no defence against the mother’s claim for the house.
Parker vs. Clark ([1960] 1 WLR 286)
Facts of the case
In this case, Mr. and Mrs. Clerk were a married couple, and Mrs. Parker was the niece of Mrs. Clerk. Mr. Clerk suggested Mrs. Parker and her husband move to their place with them. Mr. Parker agreed with him but was concerned that they would then have to sell their own house. Mr. Clark gave them in writing and stated that they would bequeath their home to Mrs. Parker, her sister, and her daughter upon their death. Agreeing to this idea, Mr. and Mrs. Parker sold their house and moved in with Mr. and Mrs. Clark. After some time, the arrangement did not work out well for them, and, therefore, Clarks told them to move out of their house. Against this, the Parkers filed a case for the breach of contract.
Issue raised
Whether there was a valid contract between the Clarks and the Parkers, and did the Clarks breach the agreement by giving them the notice to quit?
Judgement given
The Parkers succeeded in their claim against the Clarks, and they were held to be entitled to the damages for the loss of the inheritance right and value of the benefit of staying in the house. Mr. Clark’s letter was sufficient to satisfy the essentials of a contract by being a valid offer, and there was an intention on the part of both parties to make the agreement legally enforceable.
Significance in the 21st century
The case of Balfour vs. Balfour is a landmark precedent and is still relevant as it gave birth to the important principle of “legal intention to enter into a contract”. This position in the law of contract is still prevalent, and if any agreement lacks an intention to form a legal relationship, it cannot be considered a valid enforceable contract.
Since the court highlighted an important essential in this case that was not specifically mentioned in the statute, it becomes a relevant case law and acts as a precedent for future cases concerning domestic agreements or promises. It expressly asserted that all domestic or social agreements are mere promises and are not capable of being enforced in the courts. The major criticism associated with this judgement is that in today’s time when there are nuclear families, and people have become money-minded, this doctrine has the tendency to exploit the promisee, as there could be a lot of circumstances wherein the promisor may cheat the promisee by making such false promises. Even in the present case, Mrs. Balfour was not earning and was solely dependent on Mr. Balfour for the expenses, and the breach of that promise made Mrs. Balfour suffer due to the non-enforceability of the domestic agreements.
Thus, just like a coin has two sides, the judgement of this case is believed to be a great decision since it developed the principle of ‘intention to create legal relation’ and thereby prevented the flooding of cases involving domestic agreements but on the other hand, it paved the way for instances of exploitation of promisee by the promisor.
Conclusion
The Court of Appeal in the case of Balfour vs. Balfour (1919) has concluded that the agreements made between spouses are generally presumed not to have the intention of creating legal relations. This case has established a significant precedent in the law of contracts that reinforced the principle that social and domestic agreements do not usually amount to enforceable contracts as the parties involved do not intend legal consequences for breach of such agreements. However, there is still a requirement for safeguarding the rights and interests of the promisee in such domestic relationships if the courts do not recognise them as contracts.
Frequently Asked Questions (FAQs)
Which is the landmark judgement on the intention to create a legal relation?
The present case of Balfour vs. Balfour is the landmark judgement on the principle of “intention to create a legal relation”.
Are domestic arrangements enforceable as contracts in the court of law?
Generally, the domestic or social agreements or arrangements are not treated as contracts and are not enforceable in the court of law.
Which provision talks about the “intention to create a legal relation” in a contract?
There is no specific provision that explicitly mentions that the intention is required on the part of both parties to make the contract legally enforceable, but it is an implied requirement under Section 10 of the Indian Contract Act, 1872, and has evolved through the legal precedents like in the present case of Balfour vs. Balfour.
Can it be said that all agreements are contracts?
No, not every agreement is a contract. For turning any agreement into a contract, certain conditions are required to be fulfilled, such as there should be a promise, lawful consideration, and object, the agreement should be legally enforceable, and the intention of the parties to make it a contract must be present.
Can it be said that all contracts are agreements?
Yes, all the contracts are agreements first. It can be said that agreements are genus and contracts are species.
References
- SCC Online
- Dr. R.K. Bangia, Sixteenth Edition, 2015
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3166017
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