This article has been written by Nikita Goel pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction

The Balfour vs. Balfour (1919)  case was heard by the King’s Bench Division in England in 1919. It is the first landmark case addressing the parties’ intention to create a legal relationship for a valid contract. The case is about a married couple’s agreement. This case is important from an Indian perspective, as there is no express provision related to the intention of a contract under the Indian Contract Act of 1872.

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Facts of the case

The couple got married in 1900 and went to Ceylon, as the husband was working under the Government of Ceylon under the Department of Irrigation. They stayed there till 1915, when they came to England as the husband was on leave.

In August 1916, when the husband’s leave was up and he was returning to Ceylon, he entered into an arrangement with his wife to provide her with £30 per month during her temporary stay in England due to her medical condition, so that she could maintain herself.

When the husband failed to make the payment, the wife sued him and claimed the money due under an alleged verbal agreement. This matter first came before Sargant J., under whom the wife commenced the proceeding for restitution of conjugal rights in March 1918. In July 1918, she obtained the decree nisi and in the same year, in December, she obtained an order for alimony.

Sargent J. held that in marriage, the husband was under an obligation to maintain his wife. Before leaving for Ceylon, the husband entered into the above mentioned arrangement with his wife. The wife’s assent to the said arrangement is sufficient consideration to constitute a contract. Subsequently, Sargent J. made the decision in favour of the wife.

Aggrieved by this decision, the husband appealed to the King’s Division Bench of England.

Issues involved in the case

After hearing the facts, the King’s Division Bench came up with the following issues in Balfour’s case:

Whether the arrangement between the couple constitutes a contract or was it just a part of a domestic arrangement in amity?

Arguments made on behalf of the husband

It was argued on behalf of the husband that the couple had no separation agreement. The arrangement was temporary due to the wife’s medical condition, after which she rejoined the company of her husband in Ceylon.

The wife also agreed to the arrangement and did not make any kind of bargain or consideration, which has led to a contractual obligation.

Arguments made on behalf of the wife

The wife’s side made the argument by quoting the case of Eastland v. Burchell, stating that when husband and wife live separately by mutual consent, the wife has the right to demand maintenance as per her needs but she loses the authority to pledge his credit. Also, the wife is as capable of making an agreement with her husband as she is with any other person.

Judgement of the Court

The judges came to the decision that the lower court made the wrong decision as the arrangement between the couple does not constitute a contract. The King’s Division Bench allowed the appeal filed by the husband. They opined that the promise made by the husband that he will provide the wife with £ 30 per month and the wife’s assent to it is in no way a consideration or a bargain, which is an essential requirement to constitute a contract.

The arrangement was merely of a domestic nature, made between the couple living in amity and involved no separation agreement. The promise made by the husband was only until his wife returned to Ceylon and joined his company. They did not make the promise with the intention that they could sue each other if one failed to fulfil it. In a domestic relationship, in order to prove that a contract has been made, the party has to prove that there were more than mere mutual promises between the parties. In this case, the onus to prove that the arrangement constitutes a contract was on the wife, which she failed to do.

Analysis

In commercial agreements, the presumption is that the parties have the intention to make the contract legally binding. However, in domestic or social agreements, the contracts are binding or not and the party’s intention to create a legal relationship depends on the circumstances of the case, except in cases of separation or splitting up. For instance, agreements between husband and wife, parent and child, and agreements between friends or relatives are examples of social or domestic relationships.

Significance of the case

Landmark precedent: Balfour vs. Balfour is considered a landmark case in contract law, as it established the principle that the intention of the parties is crucial in determining the existence of a legally binding contract.

Objective approach: The court adopted an objective approach, focusing on the outward manifestations of the parties’ intentions rather than their subjective thoughts and feelings.

Contextual analysis: The court considered the context of the agreement, including the relationship between the parties and the purpose of the promise, in determining the parties’ intent.

Impact on contract law: Balfour vs. Balfour has influenced the development of contract law, particularly in common law jurisdictions, by emphasising the importance of objective factors in assessing the parties’ intentions.

Cases related to social or domestic agreements

McGregor vs. McGregor (1888)

Before Balfour vs. Balfour, a case, McGregor vs. McGregor (1888), came before the Court of England. In this case, the agreement between husband and wife was held to be legally binding because they willingly entered into an agreement to live apart and agreed that the husband would provide maintenance to the wife and in turn, the wife would refrain from pledging his credit. Whereas in the Balfour case, the parties did not have the intention to create a contract or that they would sue each other in case one party failed to fulfil the promise. Both cases were different in respect to the facts and circumstances.

Merritt vs. Merritt (1970)

The case, Merritt vs. Merritt (1970), is another example of agreement between husband and wife. In this case, husband and wife decided to live separately and the house in which they were living was on mortgage. The wife stayed and the husband left the house. They decided that the husband would provide the mortgage payment to the wife and she would pay it off. The wife made this arrangement, signed by the husband on a piece of paper. The court held that the parties had the intention to be bound by the legal contract and create a legal relationship.

Jones vs. Padavatton (1969)

Jones vs. Padavatton (1969) is a case between a mother and her daughter. In this case, the mother persuaded her divorced daughter to study for the bar in England and offered that she would provide her with the allowance for the same. After some time, the mother came to England and bought a house. The daughter came to stay with her mother. They both stayed in one part of the house and gave the other part away on rent. The mother gave the rent to her daughter to cover her expenses. Later, some differences arose between the two, and the mother asked her daughter to evict. The daughter then took the matter to court, claiming that her mother was legally bound to fulfil the promise made to her. The court found that no agreement was made between the mother and daughter and there was no intention to create a legal relationship.

 Parker vs. Clark (1960)

The case of Parker vs. Clark (1960) is related to an agreement between relatives. This case is an exception to social agreements, as in this case the promise between uncle and aunt and their niece and her husband was held to be legally binding because of the serious consequences suffered by the niece and her husband. In this case, what happened was that the uncle and aunt were getting old so they asked their niece and her husband to live with them, and in return, they offered them a share of the house. The niece and her husband accepted the offer. They sold the house and went to live with them but when they fell off, they were denied the share given to them by the uncle and aunt.

Coward vs. Motor Insurance Bureau (1963)

The case of Coward vs. Motor Insurance Bureau (1963) is an example of an agreement between friends. In this case, Mr. Coward and his friend had a simple arrangement between them and did not have any intention to create a legal relationship. Mr. Coward agreed to share the expenses of petrol in return for his friend giving him a lift on his motorcycle to work. When there was an accident and Mr. Coward got injured, so he reached out to the insurance company to indemnify him. The insurance company asked for evidence from Mr. Coward to show that he was a paying passenger, which he was unable to show.

Conclusion

The Indian Contract Act does not expressly provide for the provision that the parties must have an intention to create a legal relationship. In my opinion, it is also not necessary, as the intention of the parties can be found from the facts and circumstances of the case, which vary from case to case. Also, it is generally the case that there is no intention to create a legal relationship between the parties in social engagements. Thus, a mere promise to go for a walk or to watch a movie cannot be considered an agreement that could be enforced in a court of law.

It can be concluded that a mere domestic obligation between the spouses cannot be held valid or made enforceable in court. The matrimonial tie between the husband and wife creates an obligation towards each other. It does not mean that whenever one of the spouses fails to fulfil the obligation or there is a difference of opinion between the husband and wife, they will sue each other and take the matter to court. These matters will only burden the court with unnecessary litigation, which would only waste their time.

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