Stephen Hedley

Keeping Contract in Its Place--Balfour v Balfour and the Enforceability of InformalAgreementsAuthor(s): Stephen HedleySource: Oxford Journal of Legal Studies, Vol. 5, No. 3 (Winter, 1985), pp. 391-415Published by: Oxford University PressStable URL: http://www.jstor.org/stable/764516 .

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KEEPING CONTRACT IN ITS PLACE- BALFOUR v BALFOUR AND THE ENFORCEABILITY OF INFORMAL

AGREEMENTS STEPHEN HEDLEY*

A further line of attack on the apparent conflict and uncertainty among the decisions in appellate courts has been to seek more understandable statement of them by grouping the facts in new-and typically but not always narrower-categories. The search is for correlations of fact-situation and outcome which (aided by common sense) may reveal when courts seize on one rather than another of the competing premises. One may even stumble on the trail of why they do . . . The process is in essence the orthodox technique of making distinctions, and reformulating-but undertaken systematically; exploited consciously, instead of being reserved until facts which refuse to be twisted by 'interpretation' force action. The departure from orthodox procedure lies chiefly in the distrust of, instead of search for, the widest sweep of generalization words permit. Not that such sweeping generalizations are not desired-if they can be made so as to state what judges do. (Karl Llewellyn, 'Some Realism about Realism-Responding to Dean Pound' 44 Harv L Rev 1222, 1240-1 (1931).)

Balfour v Balfour' sounds a simple case. A civil servant posted to Ceylon returned to England on leave with his wife. When his leave was up, his wife (who suffered from arthritis) stayed behind on medical advice. The husband assessed the sum she would need for maintenance at ?30 per month, and promised to pay that sum regularly until he returned. However, soon after his return to Ceylon he wrote to say it would be better if their separation was permanent. The wife sued on the promise of maintenance. Sargant J decided in her favour,2 but the Court of Appeal (Warrington, Duke and Atkin LJJ) reversed his decision.

The significance of the case is perhaps not obvious from a bare statement of its facts and result. The peculiar feature of the action was that Mrs Balfour was suing in contract, claiming that Mr Balfour should maintain her not because he had married her but because he had promised he would do so. This was a claim without precedent; and even a brief reading of their lordships' judgments will

*Fellow in Law, Christ's College, Cambridge. I would like to thank all the friends who have helped with earlier drafts of this article, and especially Ian Kirk, Paul Matthews, Ray Hedley and Ann Smart.

I [I919]2 KB 57i. 2 (1919) 35 TLR 476. The argument against liability before Sargant J was a simple denial of

consideration. See n 5 infra.

391 Oxford Journal of Legal Studies Vol. 5, No. 3



392 STEPHEN HEDLEY

show how reluctant they were to extend the law of contract into the area of matrimonial rights and duties, in which it had previously played very little part.3 Moreover, there was no danger that Mrs Balfour would be left without any remedy; she had already obtained orders for restitution of conjugal rights and for alimony,4 and was claiming in contract as well.

The court was unanimous in refusing to find a contract. They had no real answer to Sargant J's argument for the presence of consideration; and Duke and Atkin LJJ at least were prepared to assume that if normal principles were applied, Mrs Balfour must win.5 What was needed, then, was an excuse not to apply normal principle. All three judges found it in the mere fact that the parties were husband and wife, saying that this factor alone displaced the inference of a contract. Warrington and Duke LJJ concentrated exclusively on this point: Parliament had established a scheme for rights and duties between spouses, and if particular spouses intended to substitute a different scheme they had to make this very clear.6

Atkin LJ held the same view, but was more discursive, laying down a general requirement of 'intention to create legal relations' for all contracts.7 Why he did this was unclear. Perhaps he simply liked broad generalizations. Or perhaps he had a better grasp of contractual theory than his colleagues, and saw that they were taking a larger step than they imagined. For while the courts had previously refused to enforce agreements where the parties had deliberately excluded legal sanctions,8 this was the first time they had denied liability simply because the plaintiff could not

3 Husband and Wife could not contract at all before the Married Women's Property Act I882; and cases where such a contract was alleged (e.g. Hall v Michelmore (19oI) 18 TLR 33), let alone proved (e.g. McGregor v McGregor (1888) 21 QBD 424) are very rare until the 1940s. See n 67 infra. The right to sue for maintenance was statutory, exercisable on application to the Justices Summary Jurisdiction (Married Women) Act 1985, s 4) or as ancillary to matrimonial proceedings (Matrimonial Causes Act 1857, s 32)-

4 [19191 2 KB 572. It is unclear what advantage Mrs Balfour was seeking by exercising both contractual and matrimonial rights. The only plausible explanation seems to be that she wanted alimony plus ?30 per month; I am informed that maintenance awards at that date were not generous. There would sometimes be jurisdictional advantages which would leave a contractual action in a better position than an action for alimony, but it is hard to find one on the facts of

Balfour. 5 Some writers claim that one or other of the judges was denying consideration: Tuck 21 Canadian

Bar Rev 123, 125-6 (i943); Unger, ig Mod L Rev 96, 98 (1956); Hepple [1970] Camb LJ 122, 128-9. But this is purely a matter of semantics. Sargant J ((0919) 35 TLR 476) found consideration in Mrs Balfour's implicit undertaking not to pursue her common law remedy for failure to support her, viz by pledging Mr Balfour's credit; and nothing said in the Court of Appeal was inconsistent with that finding. The Court of Appeal's approach was not to admit agreement and deny consideration, but to deny the existence of agreement itself.

6 [1919] 2 KB 575 per Warrington LJ; 577-8 per Duke LJ. 7 [I919] 2 KB 578-9. 8 e.g. Hussey v Horne-Payne (1879) 4 App Cas 311. See infra n 125.



KEEPING CONTRACT IN ITS PLACE 393

prove that legal sanctions were intended. Balfour v Balfour introduced a new obstacle for plaintiffs, which had not been there before.9

However, Atkin LJ's judgment attracted little attention at first. It was not until the early I94o0s' that the requirement of 'intention to create legal relations' achieved prominence in the case law. This new principle is the subject of this paper, which falls into four parts. Firstly, it discusses the idea that the modem law of contract requires an 'intention to create legal relations', and suggests that whenever the courts try to determine whether such an intention exists in a particular case, they are inevitably driven to impose their own view of whether the agreement ought to be enforced. Secondly, it examines the case law usually treated today under the heading 'intent to create legal relations' and shows that a considerable amount of it is irrelevant; many of the cases would be decided in the same way whether or not the law required such an intent. Thirdly, it suggests that the principle's main use is to keep contract in its place; to keep it in the commercial sphere and out of domestic cases, except where the judges think it has a useful role to play. Finally, I will suggest that the modern law of 'intent to create legal relations' essentially reduces to this: that where the parties were dealing at arms' length, promises will generally be enforced; but in domestic contexts, contractual liability will be imposed only if the party seeking enforcement has already performed one side of the bargain and is simply seeking reciprocity. The courts will not enforce an executory agreement. Beyond this, I argue, there is no requirement of an 'intention to create legal relations'.

THE 'PURE' THEORY-LIABILITY IS IMPOSED ONLY IF THE PARTIES INTEND THIS

Firstly, I examine the idea that the courts are genuinely interested in whether the parties intended legal consequences to flow from their agreement, and suggest that the tests ostensibly aimed at discovering the parties' intentions almost invariably lead the courts to impose their view of a fair solution to the dispute. By showing that the law is not interested in 'intention' in the ordinary meaning of the word, I acknowledge that I am running down a man of straw." Few people today would support this 'intent' requirement in its pure form; most would talk of 'objectively

9 The only other contender as the first case to introduce the concept is Lens v Devonshire Club, Eastbourne before Scrutton J; and to read that Judge's reminiscences of the case in Wyatt v Kreglinger & Fernau [1933] I KB 793, 8o6, it sounds like a promising candidate. But the (admittedly incomplete) Times Law Report of 4 December 1914 gives a very different impression. Scrutton J did not mince his words over the pettiness of the plaintiff or the incompetence of the defendant; but as to the agreement, he simply said that no enforceable contract had been established. It was not the occasion for an important statement of principle, and it does not appear that Scrutton J gave one.

10 See n 66 infra. II Nor indeed do I claim any great originality for my arguments in this respect. See material

referred to in ns 76 and 77 infra.



394 STEPHEN HEDLEY

ascertained intention', or otherwise modify the 'pure' theory. But, as I will argue below,12 the arguments fatal to the 'pure' theory are not met by the modifications to it. All the theories leave the court with no alternative but to impose its own view whether the agreement should be enforced.

The first point to note is that the 'pure' theory of intent makes no provision for the case where the parties had no common view whether legal sanctions should be available. It is irrebuttably presumed that the parties had some common intention or other; evidence that they did not consider the matter at all is treated simply as something that makes the court's enquiry more difficult." In cases where there was no intention either way, this insistence that the parties must have had some intention or other forces the courts to invent an intention. Not unnaturally, they invent the one that leads to the most reasonable result, on the ground that the parties must be taken to be 'reasonable people' unless the contrary is shown. In Parker v Clark,'4 for example, the Parkers sold their house and moved in with the Clarks, Devlin J found that the Clarks' promise to leave the house to the Parkers in their wills was intended to bind them legally: 'I cannot believe ... that the defendant really thought the law would leave him at liberty, if he so chose, to tell the Parkers 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'." The opposite happened in Coward v Motor Insurers' Bureau,'6 where the Court of Appeal were considering an agreement between construction workers that one should drive the other to work on his motor cycle in return for a contribution to the cost of the petrol; they were not prepared to hold this agreement enforceable. Upjohn LJ's judgment is another example of a judge explaining precisely why he thinks liability inappropriate, but claiming that he is only spelling out what the parties intended, not his own opinion: 'The hazards of everyday life, such as temporary indisposition, the incidence of holidays, the possibility of a change of shift or of 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.'"

Of course, there is always scope for judicial fictions whenever a question turns on the 'intentions of the parties' and there is no clear indication of what the parties actually had in mind. But 'legal relations' cases are particularly susceptible to this sort of treatment, because cases where the parties do not consider the matter of legal enforceability are the rule, not the exception. If the parties are not lawyers, it is unlikely to occur to them that the law would be interested in their opinion

12 Infra 397 et seq. 13 E.g. Ford Motor Co v Amalgamated Union of Engineers and Foundry Workers [ 1969] I WLR

339; and Connell v Motor Insurers' Bureau [1969] 2 QB 494, 505ab per Sachs LJ. 14 [196o] I WLR 286. 15 Ibid 293-4- i6 [1963] 1 QB 259. 17 Per curiam ibid, 271.




whether the agreement should be enforced. It will be a rare case in which their minds are brought to bear on the point at all; if they think of it at all, it does not follow that they developed a clear intent either way; if they did, there is no reason to suppose their intents coincided. When the court purports to find an intention as to legal relations, it can only be because the court thinks that legal liability should be present, and imposes it on the parties.

Moreover, when there are indications whether the parties intended liability, it is all too easy for the courts to ignore them. Two main techniques are used to ignore these indications where they conflict with the view the court wishes to come to. Firstly, the court can arbitrarily narrow the issue, to make the indications appear irrelevant. Thus where the court wishes to hold an agreement unenforceable, it will eagerly point to indications that the parties did not envisage legal action.18 But where the court wishes to enforce, these indications are dismissed, on the (logically impeccable) ground that a lack of intention to sue is different from an intention that, if action was brought, it should fail: 'The fact that a contracting party is in some circumstances unlikely to extract his pound of flesh does not mean that he has no right to it'.19

The second technique for ignoring actual manifestations of intention is the 'principle of objectivity', which states that if the parties have 'to all outward appearances' contracted, then neither can escape by proving a subjective lack of intention.20 This is a useful device for a court that wishes to exclude evidence of an intention inconsistent with the one it wishes to find.21 But this, too, is a rule the judge can ignore when it proves inconvenient.22

I do not deny for a moment that the parties can settle for themselves the question whether legal sanctions will be present. My point is that if they wish to do so they must do it clearly,23 and if they do not the court is forced to impose its own view of what is fair in the place of the non-existent 'intentions of the parties'.

The usual response to arguments such as mine is to deny that the law ever purported to concern itself with the actual intentions of the parties-a point I will return to.24 But an argument which I suspect has strong intuitive appeal to 18 e.g. Jones v Padavatton [1969] I WLR 328, 337cd (Fenton Atkinson LJ); Horrocks v Forray

[1976) I All ER 737, 746ef(Scarman LJ). 19 Jones v Padavatton [1969] I WLR 328, 334bc per Salmon LJ; Albert v Motor Insurers' Bureau

[1972] AC 301, 34oab per Lord Cross. 20 See infra, text at n 34- 21 e.g. Smith v Mansi [1963] I WLR 26, 30 (Sellers LJ) and 37 (Russell LJ); Storer v Manchester

City Council [I9741 ] WLR 14o3, I4o8gh (Lord Denning MR). 22 e.g. Bahamas Oil Refining Co v Kristiansands Tankrederie A/S [ 1978] I Lloyd's Rep 211, where

Kerr J held that the signer of a document was entitled to introduce evidence that he did not know he was signing a contractual document; his failure to do so was one reason his claim failed: 215, col 2. See also Ford Motor Co v Amalgamated Union of Engineering and Foundry Workers [1969] I WLR 339, 355cd, where Geoffrey Lane J thought 'impossible and indeed unreal' the attempt to ignore what the parties were actually thinking. On this case see infra p 413 et seq.

23 See infra n 125. 24 See infra pp 398 et seq.



396 STEPHEN HEDLEY

lawyers, and which tries to support the notion that the law is concerned with real intentions, may be styled the 'background awareness' argument: that the parties to business arrangements do not, it is true, have any intention as to legal sanctions, but none the less everyone will know that the sanctions are available; whereas in domestic contextsvthere is no such awareness; that in the latter, but not the former, as Atkin LJ said in Balfour v Balfour, 'The terms may be repudiated, varied or renewed as performance proceeds or as disagreements develop, and the principles of the common law as to exoneration and discharge and accord and satisfaction are such as to find no place in the domestic code.'25 And indeed this argument leads me on to the important question whether, in drawing this distinction, Atkin LJ was talking about actual intentions or about what the law should regard those intentions as being. Was he talking, in other words, about facts or about policy ?

In my view, he was plainly talking of policy. If his dictum is taken as a statement of fact, then the obvious answer is that he was not comparing like with like. His dictum contrasts the actual flexibility of informal agreements with the inflexibility contractual theory inflicts on business arrangements. Certainly, legal remedies are the last thing the parties to a family arrangement think of as a way of dealing with breaches of the arrangement; in most cases literally the last thing, for few relationships could survive a legal action brought by one party against the other. And some parties would never consider legal remedies at all, even as a last resort. But the situation is not very different in business. Studies of business practice26 show that many business executives are indifferent whether their agreements constitute binding contracts;27 that business dealings are regulated more by mutual trust and shared conventions on what constitutes civilized behaviour than by what parties are legally entitled to;28 that resort to legal remedies is relatively infrequent, and is used only when the business relationship is at an end;29 and that when formal contracts are drawn up, this is frequently for purposes quite unconnected with the possibility of legal sanctions.30 A marriage run on the common law principles designed for businesses would indeed be a sorry affair, but so would a business run on those same principles. Willing co-operation without reference to legal entitlements is normal (and indeed, essential) in both spheres.

I do not wish to push this fanciful comparison between business and marital relationships too far. Still less do I wish to argue that the two are basically similar. My point is rather the reverse-that since there are such obvious differences

25 [119191 2 KB 579; supra p 391. 26 Macaulay, 'Non-contractual Relations in Business' 28 Am Sociol Rev 45 (1963), abridged in

Sociology of Law (ed. Aubert, 1969) 195; page numbers in references below are to this abridged version; Beale & Dugdale, 'Contracts between Businessmen' 2 Brit J of L & Soc 45 (1975).

27 Macaulay loc cit 196-9; Beale & Dugdale loc cit, 50. 28 Macaulay loc cit, 200, 204-05; Beale & Dugdale loc cit, 47. 29 Macaulay loc cit, 199-204; Beale & Dugdale loc cit, 51, 59. 30 Mapaulay loc cit, 2o6--o09; Beale & Douglas loc cit do not comment on this issue.




between the two, there must be something very wrong with a theoretical approach that claims to distinguish them only by reference to a presumed, unquantifiable and highly questionable difference in willingness to sue. Of course most business executives are aware that legal remedies may be available if the other side proves uncooperative; but so are most married couples. It is more realistic to admit that the law pursues different policies in the two areas, and accordingly applies different rules. It might be thought that I am viewing business relationships through rose-tinted spectacles. But it is no part of my argument how frequently businesses quarrel, any more than Atkin LJ was making any statement on the frequency of marital arguments. The question is, how are such disputes resolved? And the usual answer in both appears to be that 'you can solve any dispute if you keep the lawyers and accountants out of it. They just do not understand the give-and-take needed in business.'3'

If lawyers reading this have difficulty in believing that the business community has such a lax attitude to the legal enforceability of their agreements, they may be consoled by observing that business lawyers, too, have difficulty in believing it.32 As a result of their training, lawyers have selectively morbid imaginations. Professionally, they are concerned with agreements only when they are broken; with marriages only when they have collapsed; with medical treatment only when it has gone disasterously wrong; with factories only when the machinery has injured someone. Their perception of when people do or do not contemplate litigation is distorted by their own knowledge of when litigation actually occurs. 'To offer a friend a meal is not to invite litigation', say Cheshire and Fifoot33-as if anyone who agrees to anything 'invites litigation'I This is one indication of the conservative character of the 'legal relations' test: if the context is one where lawyers know contract litigation has taken place in the past, it is easy to infer that legal relations were 'within the contemplation of the parties'; but if it has not, it will be much more difficult. The rule begins to emerge as something which keeps contract in its place, making expansion difficult.

ATTEMPTS TO SALVAGE THE 'INTENTIONS OF THE PARTIES'

Few people, either today or at any date, would care to defend the 'pure' theory I have been attacking. But none of the suggested modifications make good the basic flaw of the 'pure' theory-that in most cases the parties have no intention at all, and the only possible source for such an intention is the court itself. There are three main theories.

31 Quoted by Macaulay loc cit, 2oo from an American purchasing agent. 32 Macaulay loc cit, 200; Beale and Dugdale loc cit, 59. 33 Law of Contract (ioth edn, 1981) 97.



398 STEPHEN HEDLEY

Firstly, there is the notion of 'objective ascertainment of intention'.34 This theory asserts that the law of contract is not concerned with what parties actually intend but with what the 'reasonable fly on the wall' would conclude their intention was. This is quite clearly a rule which (rightly or wrongly) excludes certain forms of evidence as to intention. Thus it cannot be a defence to the charge that there will usually be no evidence at all from which an intention can be deduced; indeed, it makes matters worse.

Secondly, there is the notion of 'presumptions of intent': that there is no need to prove 'intent to create legal relations' in business contexts because it can be presumed, whereas no such presumption exists in other contexts.3" But a presumption is a matter of evidence; and, the exceptional case of the 'conclusive presumption' aside, it will always yield to other evidence. The presumption of innocence in criminal matters will yield to proof of guilt, the presumption that a document is properly executed will yield to proof that it is not.36 Not so with the 'presumption' of 'intention to create legal relations'. As I have noted above,37 the court is bound by the very nature of the exercise to ignore proof that the parties have no intention either way. The truth is that, while such things as 'common intents' sometimes exist, the insistence of contractual theory that the parties must have had some common intent ensures that we are dealing not with facts but with legal fictions. The 'common intent' is not, generally speaking, a real thing in the real world, but a legal construct-a figment of the contract lawyer's imagination.

The third modification of the 'intent' test is to say that we are not concerned with whether the parties intended liability, but with whether 'the reasonable man' in their places would have intended it.38 This approach is an improvement. At least it admits that we are in the field of values, not facts; that when liability is imposed it is because the 'reasonable man' intends it, not the parties. But two further steps are needed before we have a workable theory. First, we must carefully remind ourselves of Lord Radcliffe's dictum that 'the spokesman of the fair and reasonable man . . . is and must be the the court itself.'"3 When the court considers what is 'reasonable', it is consulting its own values, not some ideal values and not those of the community at large. It does not have the material with which to do otherwise. Secondly, we must rid ourselves of any reluctance to subject judicial values to objective study. Law is the study of what judges do, and if that study involves us in statements about judicial values, then that is the

34 This notion is as old as textbooks on contract themselves. But its first use to reconcile a supposed requirement of 'intention to create legal relations' with the absence of evidence of this intention is by Cheshire & Fifoot (ist edn, 1945), unless Winfield's dismissive comments at 55 Law Q Rev 501-02 (1939) can be read this way.

35 e.g. Anson (25th edn, 1979) 68. 36 On presumptions, see generally Cross on Evidence (5th edn, 1979) Chap 6. 37 Supra pp 394-6. 38 e.g. Merritt v Merritt [1970] 1 WLR 12Ii at 1213e per Lord Denning; Albert v Motor Insurers'

Bureau [1972] AC 301 at 339 ef per Lord Cross. 39 Davis Contractors v Fareham UDC [1956] AC 696, 728.




direction we must go in. Of course, it would not be surprising if, given the vast scope 'intention to create legal relations' gives to individual judges, they produced widely differing results, utterly irreconcilable with each other. But in my contention this simply has not happened. The results can be reduced to the form of a reasonably precise set of rules; and I will attempt below to state those rules.40

CLASSIFICATION OF 'LEGAL RELATIONS' CASES-WHAT WAS BALFOUR ABOUT?

Accordingly, I do not think that the concept of 'intention to create legal relations' is a useful one in a case where the parties make no specific declarations on the matter. But because it has become so widely accepted that 'intent to create legal relations' is a necessary element of contract, various cases have been rationalized in those terms even though they have no necessary connection with the doctrine. The results in these cases would, however be no different if the law lacked the 'legal relations' requirement; and examples of them occur both before and after Atkin LJ introduced the requirement in Balfour v Balfour.41

To explain the point, I must immediately draw a distinction between 'intent to create legal relations' and 'contractual intent'. When the courts ask whether 'contractual intent' is present in a particular case, they mean 'Does what the parties intended qualify as a contract?' Thus by implication they refer to all the requirements of the law of contract and ask whether the intentions of the parties comply with them. 'Intent to create legal relations', by contrast, is only one such requirement-namely, the suggested requirement that the parties must intend to create not only actual expectations but legal obligations as well. Thus 'intent to create legal relations' is simply one sub-division of 'contractual intent',42 and to treat the two concepts as interchangeable43 can only lead to confusion. Where the question is whether a free bus pass creates a conditional licence or a contract,44 the issue is whether what the parties intended constitutes a 'bargain'; the legal issues involved relate to the doctrine of consideration, not 'legal relations', and it is only the court's misleading statement that it is discussing whether a 'contractual animus' was present45 that makes the issue appear to have anything in common 40 See infra pp 405 et seq. 41 Most of what I say in this section has already been said, perhaps more lucidly, by Hepple Camb

LJ 122, 130-4 [1970]. However, he tries to explain too much in these terms, and is often reduced to accusing the judges of distorting the underlying concepts. With respect, if the results do not tally with the concepts, then it is the concepts we must discard, and quickly.

42 So long as we are only concerned with contract, that is. On non-contractual property interests see infra pp 411-2.

43 As does Treitel (6th edn, 1983) Chap 4, 124 and passim. 44 As in Gore v Van der Lann [1967] 2 QB 31. 45 [1967] 2 QB 4If (Willmer LJ); 45de (Salmon LJ). Treitel talks of whether the pass was 'couched

in contractual language' (130), which to me seems the same fallacy expressed another way: the argument that the pass was not 'couched in contractual language' was essentially a denial of consideration.



400 STEPHEN HEDLEY

with 'legal relations' cases. Bus passes are plainly intended to produce legal consequences of some sort; the problem is what sort. Again, in asking whether a statement is a warranty, the relevant test does indeed turn on 'the intention with which the statement was made';46 but again, 'legal relations' are not in issue. The question is whether the person making the statement is to be treated as promising that it is true; if yes, no one doubts that the promise will he held binding. Further examples could be given; but to sum the matter up in a sentence, 'contractual intention' tries to classify an expression of intention to see if it -is contractual, but 'intent to create legal relations' examines the question whether there was any expression of intention to affect the legal position at all.

On these definitions (which I do not put forward as being 'right' or superior to anyone else's, but simply to make clear what Balfour v Balfour47 was concerned with and what it was not),48 it is clear that many cases discussed today under the heading of 'intent to create legal relations' do not properly belong there: the results of the cases would be no different whether or not the law possessed such a requirement. This can be said, in particular, of all the cases decided before Balfour v Balfour. Writers differ in which cases they include in the 'legal relations' category;49 but there is a hard core of three classes of case which all writers include, and which would mesh perfectly with a test of 'intention to create legal relations', if that test represented a genuine enquiry into what the parties intended. As it is, I argue that they are better kept distinct.

Firstly, there are those cases where the alleged 'promise' was plainly not seriously meant."5 'Legal relations' have little to do with this: the defendant's argument is not that there was a promise which the law will not enforce, but that there was no promise at all. The problem which the courts are struggling with in these cases is that litigation is based on written pleadings, and so it is all too easy for the plaintiff to concentrate on the precise words used, as opposed to what they meant to the person to whom they were directed. This emerges clearly from White v Bluett,si where a son alleged that his father had released him from liability on a promissory note, in consideration for the son's ceasing to bother him with

46 Treitel (6th edn, 1983) 124. Of course, the 'intent' here is usually no more real that it is in cases of 'intent to create legal relations'. My point is simply that the two issues are distinct.

47 [1991] 2 KB 571; supra p 391. 48 It is this terminological difficulty that seems to be at the heart of the argument over Treitel's

statement that 'one cannot tell whether mutual promises constitute a bargain or an 'exchange of gifts' without regard to the intention of the parties' (6th edn, 1983) 132. Whether this statement is regarded as obviously correct or (as Hepple Camb LJ 130 [1970] seems to think, and is certainly my view) as a mere tautology, seems to be a purely semantic dispute. On neither view does it tell us anything about 'intention to create legal relations'.

49 Treitel includes the most material (6th edn, 1983, Chap 4); the writer who includes the least seems to be Anson (25th edn, 1979) 66-9. The amount of material included seems to increase with the date of the last effective revision (as opposed to the last up-dating).

5o e.g. Weeks v Tybald (1604) Noy II, 74 ER 982; Guthing v Lynn (1831) 2 B & Ad 232, 109 ER 1130.

51 (1853)23 LJ Ex 36.




complaints of unfair treatment. Something of Pollock CB's irritation with having to find a formal reason why the promise was unenforceable comes over in his extempore judgment: 'The plea is clearly bad. By the argument a principle is pressed to an absurdity, as a bubble is blown until it bursts. Looking at the words merely, there is some foundation for the argument, and following the words only, the conclusion may be arrived at ... It is ridiculous to suppose that such promises could be binding.'52

A second class of cases which are treated today as part of 'intent to create legal relations' are those where the alleged promise was in fact a mere statement of intention, to which the 'promisor' plainly made no commitment.53 But again, we do not have to explain this in 'legal relations' terms. If nothing was said from which the 'reasonable man' could infer a promise, then there is nothing for the law of contract to get to work on in the first place."4

The last class of cases is where the parties have quite deliberately excluded all legal effect from their agreement.55 It may seem perverse (or at any rate, wrong) for me to argue that these cases have no necessary connection with 'intent to create legal relations'.56 Indeed, if I thought that the 'legal relations' test was a genuine enquiry into the intentions of the parties, I would agree that these cases mesh perfectly with such enquiry. But the fact that a rule of law may be excluded by the intentions of the parties does not show that the rule itself is based on those intentions. Contract law frequency assumes that rules which can be excluded by the intentions of the parties are themselves based on those intentions; but this should be recognized for the fiction it is.

The cases I have been discussing thus have no necessary connection with the rule in Balfour v Balfour; examples occurred both before and after that case; and for clarity of thought they are best kept distinct. The Balfour rule had no counterpart in the earlier law. Its function is to deal with fact-situations which had not been before the courts until that time.

52 (1853) 23 LJ Ex at 37. 53 e.g. Maddison v Alderson (1883) 8 App Cas 420; Grainger v Gough [1896] AC 325. 54 Several writers have felt the need to 'rationalize' the first two classes of case on 'legal relations'

grounds--e.g. Treitel (6th edn, 1983) 132-3. But if the 'promisor' said nothing that could reasonably be regarded as a promise, why the need for refined reasoning to rationalize the refusal of liability? See also G. MacCormack Juridical Rev 70, 80 et seq (1976), who has immense difficulties in seeing the distinction between a lack of intention to impose moral sanctions and a lack of intention to impose legal sanctions, and supposes that laypeople too suffer from this disability.

55 e.g. Tiverton v Wearwell [1975] Ch 146. 56 Interestingly, textbook writers in the 1920S seized on Rose & Frank v Crompton [1925] AC 445

(legal effect removed by parties from formal business agreement) as clinching proof of a requirement of intent to create legal relations, consigning Balfour to the oblivion of the law on married women's contracts.



402 STEPHEN HEDLEY

THE REDEFINITION OF THE ROLE OF CONTRACT LAW IN THE

TWENTIETH CENTURY

Speaking in broad terms, the Victorians invented the idea that the law will enforce contracts as such. They were given a law of contracts, but turned it into a law of contract, with general principles applicable to all agreements."7 The responsibility for this development is largely that of Leake, Pollock and Anson, who each produced major textbooks expounding a law of contract and not merely collecting together rules on different types of contracts.58 The subject-matter of contract was overwhelmingly business and consumer transactions;59 the general principles of contract were thus largely designed for commercial work.

There was, however, no formal rule restricting contract to commercial contexts. The major limit on which promises the law would enforce was provided by the reformed doctrine of consideration, which was taken to imply the need for a two-sided arrangement or 'bargain'. The word 'bargain' naturally suggests a commercial transaction. But while it may well be that the commercial flavour of the cases naturally suggested the concept of 'bargain' to the theorists, there was nothing in the concept to keep contract to commercial areas. The contrary argument60 is to my mind simply a play on words: people in domestic contexts do indeed rarely engage in protracted negotiations or 'bargaining', but the requirement of 'bargain' was never meant to be restricted to those who did so. All it meant was that each side of the arrangement must be given in exchange for the other, or even simply that they were both given as part of the same arrangement.61 The reason why contract was rarely applied outside the commercial sphere seems to be simply that few people in other spheres sought to invoke it.62

By the beginning of this century, consideration had acquired a somewhat mystical aura amongst academic writers. Its High Priests debated points which, to an outsider, were not simply trivial but utterly without practical import. No one who had not been brought up to view the requirement of 'benefit' or 'detriment' as an eleventh commandment, and the rule that mutual promises could be good consideration for each other as a twelfth, could possibly be interested in an argument on how to 'reconcile' the two rules.63 The doctrine had become an

57 See generally P.S. Atiyah, The Rise and Fall of Freedom of Contract (1979) 681-93- 58 See Leake (ist edn, 1867); Pollock (ist edn, 1876); Anson (Ist edn, 1879). Previous works (e.g.

Addison, Ist edn, 1847) spent little time on general principles, for the most part dealing with individual classes of contracts.

59 The only major exception to this was the action for breach of promise of marriage. My assertion in the text is based on my own impressions of the case law, and so is unashamedly subjective.

60 Advanced by Unger 19 Mod L Rev 96, 98 (1956); Hepple Camb LJ 122, 13o [1970]. See n 138 infra.

61 As in New Zealand Shipping Co v A M Satterthwaite and Co [I975] AC 154; Clarke v Earl Dunraven [1897] AC 59. See pp 405-6 infra for the assumptions I will be making as to the meaning of 'Consideration' when I come to consider the modern law.

62 See n 59 supra. 63 For a brief account of this and other debates, see Atiyah op cit 687-8.




academic plaything; and the judges, it seems, had no wish to get involved. When change came, it was not by open modifications to the doctrine but by more devious means. Tort began to take bigger and bigger bites out of contractual territory.64 New forms of promissory liability sprang up,65 on the excuse that consideration only limited contractual enforcement-ignoring the point that the Victorians had used the words 'contract' to denote all forms of promissory liability.66 Great care was taken not to fracture the form of contract, while entirely changing its substance to making it only one of the means by which agreements could be enforced.

But contract could not simply be left to regulate the commercial cases while equity regulated the domestic ones. From the early 1940s onward, plaintiffs were increasingly seeking to apply contract outside its usual context.67 What had happened once in Balfour v Balfour68 was now happening again and again: contract was attempting to invade the preserves of other bodies of law. Moreover, the results of letting it do so would not all be bad. The judges wanted contract let into domestic contexts, but only on their terms; and they found the perfect device for achieving this in the solution Atkin LJ had adopted, of postulating a doctrine of 'intent to create legal relations'. If liability were thought appropriate on certain facts, it could plausibly be made out as 'intended'; if not, it would be easy to deny the existence of the requisite intention. I am not saying that the judges consciously thought along these lines, though some of them may well have done. But this was the effect. The 'legal relations' doctrine gave the judges carte blanche to impose or refuse contractual liability in unfamiliar contexts-with results I will go on to describe.

This judicial activism, then, was simply forced by events; it was not the result of any sudden conversion to the academic view that all contracts required an intention to create legal relations. Leake had insisted on this

64 The biggest bites were Donoghue v Stevenson [1932] AC 562; Hedley Byrne & Co v Heller & Partners [1964] AC 465; Anns v London Borough of Merton [1978] AC 728; Junior Books v Vietchi[I983] I AC 520.

65 Principally the promissory estoppels and various varieties of implied and constructive trusts. Most of these existed in the Victorian law, but the modern version is scarcely recognizable from these prototypes.

66 See e.g. per Lord Cranworth LC in Jorden v Money (1854) [I843-86o0] All ER 350, 356ci, where what the defendant was contending for would now be described as a promissory estoppel. See generally R. M. Jackson, 'The Scope of the term "Contract"' 53 Law Q Rev 525 (1937)-

67 The first of these cases, so far as I am aware, were Peters v IRC [1941] 2 All ER 620 (written maintenance agreement held enforceable and hence tax-deductible) and Bramwell v Bramwell [1942] I KB 370 (oral agreement by husband to let wife occupy the former matrimonial home in return for a diminution of alimony held unenforceable). An unusually perceptive writer at x70 Law Times 317 (1930) saw that contract could be expanded into the domestic sphere at any time the courts wished it; he/she can be forgiven for not guessing the precise circumstances in which they would do so, or that Balfour would be used to keep this incursion under control.

68 [I919] 2 KB 571; see 391 supra.



404 STEPHEN HEDLEY

requirement since 1867,69 and Pollock70 and Anson7' had followed suit. But this requirement was effectively meaningless until plaintiffs in domestic contexts sought to enforce their agreements as contracts. Indeed, Leake's insistence was based on Civilian writers;72 and he was deterred neither by the absence of authority nor by the -thought that a legal system with a Statute of Frauds and a tolerably precise doctrine of consideration would not necessarily need a further limiting doctrine." At a superficial level, this can be seen as triumph of academic thought over precedent-the introduction of the 'legal relations' requirement for no better reason than that eminent academics had consistently argued that it should be there. But to see the matter this way requires us to pretend that the courts take the requirement seriously, genuinely searching for the intentions of the parties and refusing to give up what will usually be a quite hopeless search. And this is essentially what modem textbooks expect us to believe. Modem treatments of 'intention to create legal relations' might almost be described as formalistic, if this were not too grand a word for what amounts to a refusal to examine what the judges are doing even when what they are saying makes no sense at all. Some writers retreat into the fiction that the judges are assessing (or 'objectively assessing') the intentions of the parties;74 others simply state the rule and immediately proceed to 'illustrations', leaving their (no doubt puzzled) readers to guess the connection between the two, with nothing to encourage them but the observation that 'In the last resort, the question is one of fact'.75

Of course, I am by no means the first writer to criticize this formalistic tendency. Williston pointed out in 1914 that the 'legal relations' doctrine not only gives a confusing picture of the case law, but is actually meaningless unless the courts seriously mean to take the drastic step of refusing liability unless the parties had legal consequences in mind.76 And within our own legal system, various writers have made these and other criticisms with equal

69 (1st edn, 1867) 9. Some earlier writers had done so too; the earliest I know of is Fox, Treatise on

Simple Contracts (1842) 62-3. 70 (Ist edn, 1876) 2. 71 (Ist edn, 1879) 14. Other writers would have none of it. Addison (Ist edn, 1847, uith and last

edn, 1911) never mentioned it; and Chitty (Ist edn, 1828) avoids all reference to the doctrine until the I8th edn (ed. MacFarlane and Wrangham, I93o) Io. See P. S. Atiyah, op cit, 690.

72 Specifically Pothier, though he also cites Austin, Maine and the Code Civil. Pollock based himself on the writings of the civilian Savigny. For a review of what different systems have made of the requirement, see A. G. Chloros 33 Tulane L Rev 607 (1959)-

73 It has often been suggested that the common law requirement of consideration is a sufficient substitute for the Civilian requirement of writing; whether the matter is really as simple as this is open to doubt, given our own (at some periods quite extensive) requirements of writing.

74 Anson (25th edn, 1979) 66-8; Cheshire & Fifoot (ioth edn, 1981) 98. 75 Treitel (6th edn, 1983) 13o; and very similar is Chitty (25th edn, 1983) ss 123-33 (ed. Treitel). 76 In 'Consideration in Bilateral Contracts' 27 Harvard L Rev 503, 506-07 (1914). He discusses the

matter at greater length in Law of Contract (Ist edn, 1921) s 21. His view is criticized-ineffectually, in my view-by G. MacCormack Juridical Rev 70, 78-84 [1976].




force." But while Atiyah at least has begun the task of describing what the judges are actually doing, other writers on the English law have been reluctant to go beyond a demonstration that what they are saying is meaningless. It is in some ways rather odd that so many other writers should have exposed the inadequacies of the concept, and yet failed to study what the courts have actually made of the requirement in practical terms. But, while this is odd, it is not particularly unusual. One does not have to subscribe to any particular legal philosophy to be able to 'trash' legal concepts; but a willingness to go beyond this point, to make use of the fact that the concept has been trashed, is apparently regarded by many as either beyond their abilities, deeply uninteresting, 'unlawyerly', or all three. Accordingly, for the remainder of this paper I will be attempting a sketch of the modem law of 'intention to create legal relations'. I will be considering only the case where the parties cannot realistically be said to have any intention as to legal consequences; I acknowledge that if they have one, the courts will usually give effect to it. I also acknowledge that some of the cases I refer to could be regarded as ones where the parties had legal consequences in mind, without a shadow of artificiality.78

THE MODERN LAW-(I) PARTIES WHO ARE NOT AT ARMS' LENGTH

A preliminary note on 'consideration': I will be using the word to refer to the notion that there must be an act or promise in return for an act or promise before contractual remedies are available. To reconcile this notion with the cases, I must give 'exchange' a somewhat extended meaning: it covers not merely everything the expression covers in everyday speech (except perhaps an 'exchange of gifts', which is in this connection a contradiction in terms) but also three further situations: (I) where one party makes a promise with the intention of encouraging a specified act from the other;" (2) where promises are made or acts done as part of a wider arrangement to which both parties contribute;80 and (3) where one party makes a precise promise to the other in respect of an unliquidated claim the other has, and that other accepts-I am thinking primarily of maintenance agreements.81 Some might think this an unnecessarily wide definition; and indeed some have argued that most cases where liability was refused on 'legal relations'

77 e.g. N. M. Selwyn, 'Collective Agreements and the Law' 32 Mod L Rev 377 esp pages 378-80 (1969); P. S. Atiyah, Introduction to Contract (3rd edn, 1981) Chap 7 passim, see also material referred to in n 82.

78 e.g. Merritt v Merritt infra, 406. 79 e.g. Jones v Padavatton infra, 41o; Tanner v Tanner infra, 409. A commercial parallel is Carlill

v Carbolic Smoke Ball Co [1893] i QB 256. 80 e.g. Simpkins v Pays infra, 407; Parker v Clark infra, 407. A commercial parallel is New

Zealand Shipping Co v Saiterthwaite & Co [1975] AC 154. 8I Peters v IRC infra n 93; Gould v Gould infra n 92. A commercial parallel is Re Casey's Patent

[1892]I Ch Io04



406 STEPHEN HEDLEY

grounds are examples of absence of bargain."2 But this theory is useless unless or until its proponents produce some narrower and more precise criterion that corresponds at least roughly with the results in 'legal relations' cases.

In domestic cases, the rule is that agreements will be enforced only at the instance of a party who has performed one side of the bargain; but there is no need to prove any intention that sanctions be available. In other words, the courts' concern is to prevent one side taking the benefits of the arrangement and refusing the burdens, but they are unconcerned at the prospect of bireach of a purely executory arrangement. The cases where the greatest liabilities are imposed are those where the plaintiff has supplied some substantial and once-for-all consideration, and will get nothing in return unless contractual liability is imposed. Thus in Merritt v Merritt,83 where on the breakdown of their marriage the husband agreed to transfer the freehold of the house to the wife in return for her promise to assume responsibility for the mortgage payments, he was held bound by this promise in an action brought by the wife after she had paid off the mortgage completely. But if performance is non-existent or a travesty of what was promised, enforcement is not available. Thus in White v Blackmore84 the estate of a jalopy racer sued the organisers of the race in which he had met his death, for negligence; one defence was an alleged contract under which the rider surrendered any right to sue in return for being allowed to compete. But their fatally negligent performance could not constitute a sufficient consideration to allow them to enforce.

These once-off transactions appear only rarely in reported cases. The more usual situation is a proposed series of exchanges of benefits over a period. The general rule is that each individual exchange is viewed in isolation, and enforced only where consideration is actually supplied, and not just promised. In practical terms, the executed part of the agreement is severed from the purely executory, and enforced on its own. Thus, where there is an agreement that one will drive another to work in return for a contribution to the cost of the petrol, an action for payment for journeys already completed will succeed,"5 but no action lies for failure to carry;86 and if on one journey the driver negligently injures the passenger, he cannot use this defective performance to justify enforcing an agreement by the passenger not to sue."' There 82 Unger 19 Mod L Rev 96 (1956); Hepple Camb LJ 122 [1970]. 83 [1970] 1 WLR 1211. 84 [I972] 2 QB 651. Lord Denning MR dissented on this point; my theory cannot be reconciled

with his reasoning. Curiously, in both this case and in the very similar case of Buckpitt v Oates (infra n 87) a plea of Volenti non fit Injuria succeeded on the same facts. I share the doubts of IGF Karsten 32 Mod L Rev 88 (1969) on this point. See now Road Traffic Act 1972, s 148 (3); Transport Act 1980, s 61.

85 McGoonan v Motor Insurers' Bureau [1969] 2 Lloyd's Rep 34 QBD; Lord Cross in Albert v Motor Insurers' Bureau [1972] AC 301, 34oab.

86 Coward v Motor Insurers' Bureau [1963] I QB 259. 87 Buckpitt v Oates [1968] I All ER 1145, Devon Assizes. My theory cannot be reconciled with

John Stephenson J's dictum (I147cd) that no action would have been available for the agreed amount if the journey had been completed without incident-unless of course he was simply saying that no amount had been agreed at all.




are several examples in the cases where liability was imposed in respect of the executed parts of a transaction, where liability on the whole of the agreement would have been unthinkable. In Simpkins v Pays,88 the plaintiff, the defendant and a third party agreed to enter a newspaper competition every week, splitting the job of completing the application form and the costs of applying and agreeing to share the prize if they won. When they did, the plaintiff was held entitled to sue the defendant (to whom the prize-money had been paid) for her third share. And in R v Cullen,89 where a man gave the woman he was living with money for housekeeping but she lost it all at bingo, the Court of Appeal were prepared to assume that she had undertaken a legal obligation and so was liable for theft."9 Maintenance agreements are in a special position: the wife cannot legally surrender her right to an order for maintenance,91 and accordingly for present purposes can never execute her side of the bargain. Contractual liability has thus been refused92 except in one case, where the husband was dead, the payments had all been made and the wife had never applied to the court; it was held that the payments had been made under an enforceable contract, and were therefore tax-deductible.93

There is one class of cases, however, where the courts have consistently refused to sever the agreement into executed and executory parts, but have instead enforced the whole.94 These are cases where one party has allowed another to occupy premises in return for some periodical payment or service; and so long as the occupier is prepared to go on with the bargain, the courts will either forbid eviction or (if more appropriate) give compensation for it."9 Sometimes the reason seems to be that there is some underlying bargain, which the court will enforce as a whole. For example, in Parker v Clark96 the plaintiff and defendant couples agreed to share the defendants' house and split the running costs; when arguments broke out after a year and the plaintiffs left, they were held able to sue for damages on the underlying bargain that they would sell their former house and the

88 [1955] I WLR 975-

89 Unreported (1974) no 968/C/74; referred to in Smith and Hogan's Criminal Law: Cases and Materials (2nd edn, 1980) 486.

90 See Theft Act 1968, s 5 (3). There was no conclusive authority that 'obligation' meant 'legal obligation', but this seems the only reasonable view. A similar case is Davidge v Burnett [19841 Crim LR 297, where the defendant spent on presents money her flatmates had given her to pay the gas bill. The Magistrates and the Divisional Court were prepared to assume that this was theft, relying on s 5 (3).

91 See Hyman v Hyman [1929] AC 60l. 92 e.g. Gould v Gould [1970] I QB 275. See now Matrimonial Causes Act 1973 s 34 (1); quaere

whether this alters the position. 93 Peters v IRC [I194] 2 All ER 620. 94 Bramwell v Bramwell [1942] I KB 370 seems inconsistent with modem practice; I ignore it in

what follows. 95 Refusing eviction is the normal remedy, but is not considered appropriate if the claimant has

already left the premises-Parker v Clark infra, Tanner v Tanner infra, 409. 96 [1960] 1 WLR 286. Another such case is Errington v Errington and Woods [1952] 1 KB 290.



408 STEPHEN HEDLEY

defendants would leave theirs to the plaintiffs by will. But there does not seem to be any necessity for an underlying bargain. In Hardwick v Johnson97 the plaintiff let her son and daughter-in-law occupy a house she owned for ?7 per week; it was unclear whether this was rent or to pay off the mortgage. After the marriage broke down, the daughter-in-law was held contractually entitled to remain, at least while she continued to pay."98

The fallacy to be avoided here consists of asking the question 'Is there a contract ?', but forgetting that a court is almost invariably faced with a particular claim based on an alleged contract. The perspective given by the claim made alters everything. Take a variation of the classic academic conundrum in this area:" Jack and Jill agree to go out to dinner and to split the bill. By asking the academic question 'Is there a contract?' we are immediately in the realm of the abstract. If, however, we approach the matter from a practical standpoint, we must know what claim is being made. If Jill is suing Jack because Jack has refused to go to dinner at all, the arguments against liability are compelling. Surely Jack cannot be taken as giving an outright commitment to go to dinner-what if he is ill, or they cannot agree on a suitable restaurant? But imagine that the two already had their dinner, for convenience Jill pays the bill in full, but Jack subsequently refuses to pay his half. The perspective changes. It is no longer so obvious that the contract cannot be enforced. If it is the 'reasonable man' we are consulting, then the 'reasonable man's' opinion may change in the course of the transaction. Jack's contention that there was no intention to form a binding contract is likely to receive little sympathy. Blanket statements in cases that there is no 'intention to contract' on the facts before the court should therefore be treated with suspicion; it is vital to note whether this was being said in relation to an executed or an executory contract.

This is even more so because the court is sometimes trapped into asking simply 'whether there is a contract', and which way the court decides this class of case seems to depend simply on how their minds are directed by counsel. This seems to be what happened in the Motor Insurers' Bureau cases, where the courts had to consider whether there was a contract between workers who agreed that one should carry the others to work in return for a contribution to the cost of the petrol.100 In 97 [1978] I

WLR 683. 98 In fact, the court went even further, allowing the daughter-in-law to remain even though she had

not paid a substantial amount. As to one period, the mother-in-law had waived payment at the time, and all seemed to assume this entitled the daughter-in-law to be treated as if she had paid; for the rest, the daughter-in-law paid the arrears on judgment in her favour.

99 The example of two people agreeing to go to dinner is a commonplace of textbooks in this area, usually as a stock example of a situation that cannot possibly give rise to legal liability; the earliest example I know of is Anson (2nd edn, 1882) 22. I know no case where our legal system has been asked to decide the issue, but see (1930) 170 LT 317 for a reference to a French case where apparently liability was found to exist.

1oo The House of Lords eventually held in Albert v Motor Insurers' Bureau [1972] AC 301 that determining whether the passengers were 'carried for hire or reward' and so within the MIB agreement did not, after all, require them to determine whether or not there was a contract between the driver and the passengers.




the cases where it was held that there was no contract, it is plain that the court was asking itself the question 'Could the driver be compelled to carry the others in the future ?', and so refused to find a contract: '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 party contemplated that the one was legally bound to carry and the other to be carried to work.""' But if the court is thinking of a contract simply to pay for the service once it is rendered, 'a plea on the part of the passenger that he never meant to enter into a contract would [receive] short shrift

.'02 The difficulty for my theory is that it renders meaningless the question 'whether there was a contract'. But this is the price that must be paid for a theory which works.

Various points of detail need to be considered. Firstly, the effect of vagueness in the agreement. It occasionally happens that the evidence of an agreement is so unsatisfactory that the court cannot hold that there was an agreement at all, unless there is some relevant presumption of agreement to fall back on.'o3 But in cases of executed arrangements, where there was plainly an agreement of some sort, the courts will cure the uncertainty with implied terms. It is difficult to state precisely which terms the courts will imply in any given situation; all that can be said is that they will provide what they think is a fair recompense for the consideration supplied. In Tanner v Tanner104 the arrangement was that the defendant should come to live in the flat provided by the plaintiff-in doing so she provided consideration by giving up her own Rent-Act-protected flat. The relationship subsequently broke down; but the defendant relied on the agreement as a defence to the plaintiff's action for possession of his flat. The Court of Appeal held the arrangement enforceable, but were in a quandary as to the length of time she was entitled to remain there. Naturally, this had been left quite vague by the parties themselves. In the end the court held she had the right to remain for as long as her children were of school age, subject to any relevant change in her circumstances.

The court in Tanner seems to have been heavily influenced by their view that the plaintiff was under a moral obligation to provide for the defendant and her children: Lord Denning MR said so expressly,105 and his fellow judges suggested no other ground to justify the link between the duration of the licence and the education of the children. But the concept of recompense for consideration supplied seems central; in Horrocks v Forray,1'06 which is superficially similar but the woman's side of the arrangement was thought to involve her in no detriment, IoI Upjohn LJ per curiam in Coward v Motor Insurers' Bureau [ 1967] I QB 259, 271. 102 Per Lord Cross in Albert v Motor Insurers' Bureau [1972] AC 301, 340oab. 103 e.g. Hoddinott v Hoddinott [I949] 2 KB 406. Denning LJ's dissent argued that there was such a

presumption: 415-16. 104 ['97513 All ER 776. 105 [19751 3 All ER 779h. See also Chandler v Kerley [1978] I WLR 699, where again the reasoning

had distinctly moral overtones. io6 [1976] I All ER 737.



410 STEPHEN HEDLEY

no contract was found.7"' It is important to note that the Court's difficulties in Tanner were not in holding there was an enforceable contract, but in determining what that contract was; she had plainly relied on the arrangement, and mere difficulty in quantifying precisely what she had been promised was no bar to her claim. The uncertainty did not destroy the contract, it merely made the court's job in spelling out its terms more difficult.

Perhaps part of the reason why there is so little indication of which terms will be implied is that the courts rarely say precisely what term they are implying. It will usually be sufficient for them to say that whatever the precise content of the term, it is clear which party wins and which loses.108 And when one member of the court is prepared to be precise and the others are not, it looks as if that judge is taking a different view of the facts. In Jones v Padavatton,'09 a woman gave up her job in New York and studied in England for the Bar, living in a house provided by her mother, who promised to keep it available until she had passed the Bar Finals. Their agreement did not expressly cover the events that happened, namely that she made several attempts at the exams, failed, but kept on trying. After many unsuccessful attempts to pass, her mother sought an order for possession. The Court of Appeal held that there was no defence. Each member of the court stressed the open-ended nature of the agreement."o But this factor entered the theoretical reasoning of the various judges in different ways. The daughter could only win if the arrangement enforced included an indefinite right to retake. Danckwerts and Fenton Atkinson LJJ argued that this was the arrangement and refused to enforce it-such an arrangement could not possibly have been meant to be legally binding. Salmon LJ approached the matter from the other direction: how much would the arrangement have to be cut down before the truncated version could be enforced ? He accordingly found that there was a legally enforceable arrangement, but that after a few unsuccessful attempts at the exams it became determinable by the mother on notice. Both lines of reasoning start with the idea that the daughter was claiming more than her detrimental reliance reasonably entitled her to; both end with denying her claim. It is only the theoretical steps along the way that distinguish them.

Jones v Padavatton also illustrates the proposition that, as in other areas of contract, vagueness and inequality in the exchange are symbiotic. Vagueness gives the court the excuse to imply terms equalizing the exchange; but it is frequently the inequality flowing from a literal interpretation of the contract that convinces the

107 The defendant alleged various matters as constituting consideration-see extract from her defence [1976] I All ER 741ac-but the reasoning of the court was simply that there was no agreement to the effect she claimed: [1976] I All ER 744gh (Megaw LJ); 745hj (Scarman LJ).

io8 e.g. Hardwick vJohnson [1978] I WLR 683; Chandler v Kerley [1978] I WLR 699. o09 [1969] 1 WLR 328. I io [1969] I WLR 332cd (Danckwerts LJ); 334cg (Salmon LJ); 337ac (Fenton Atkinson LJ).



KEEPING CONTRACT IN ITS PLACE 4II

court it could not have been meant literally and was thus in need of 'clarification' by implied terms.'11

Is it possible to argue that a particular arrangement is too trivial to merit contractual remedies? It seems not, unless the parties themselves saw the matter as so utterly trivial that no serious expectations were created on either side."'2 The point was not argued in Ferris v Weaven,"3 where a husband promised his wife when their marriage broke down that she could have the house provided she did not pester him any more. After ten years, in which time she presumably did not pester him, she was held to have a contractual right to the house. The 'triviality' point can only succeed if the court is considering the matter in the abstract, for some reason other than that one party to the arrangement has sued. Such a case is Esso Petroleum Co v Customs and Excise Commissioners,114 where the House of Lords considered the enforceability of a 'gift' offer of medallions with petrol; individually, the sums involved were trivial, but in aggregate they amounted to a sufficiently large amount for the tax to be worth fighting over.11s The result on this point is distinctly ambivalent: a bare majority thought the triviality irrelevant."' The point can only arise in a case very similar to Esso; again we see the difficulties caused when the courts are forced to answer the question 'Is there a contract?' without a reference to a particular claim under it."7

A final matter is the application of all I have said to the creation of non-contractual property interests. Reference to Balfour v Balfour in this area is spasmodic, but the analysis I supply above can, mutatis mutandis, be used to explain the application of this requirement to property rights as well. Where the right claimed is purely a matter of gift, legal relations will not be affected"' except where this is very plainly intended. But where the right is based on contract or something analogous, such as the contributions in Pettit v

i II A commercial example is Staffordshire Area Health Authority v South Staffordshire Waterworks Co [1979] I WLR 1387. Perhaps the greatest triumph for this approach was Wickham Machine Tool Sales v L Schuler AG [ 1974] AC 235, where a majority of the House of Lords decided that an agreement could not be taken literally when it provided that performance of certain terms was to be a 'condition of this agreement'. Whether the House would do the same in the wake of Photo Production v Securicor Transport [1980] AC 827 is open to question.

I12 See supra 400-oI. 113 [I952]2 All ER 233- 114 [I976] I WLR i. i 5 The issue was whether the medallions were 'produced in quantity for general sale'; the House

held that they were, and accordingly Esso were liable to pay some ?200,000o purchase tax. I 16 The majority was 3:2. Taking into account the judgements of the lower courts at [1975] i WLR

406 and [1973] I WLR I240, the overall figure was 5:4 the other way. I 17 See supra 408-9. Accordingly, I think P. S. Atiyah's alarm at the thought that triviality could be

relevant to 'legal relations' 39 Mod L Rev 335 (I976) is misplaced; the Esso case is no real indication as to what the courts would do if a motorist had sued for a failure to get a medallion.

118 e.g. Spellman v Spellman [i96i] I WLR 921; and note the refusal to imply terms in Heslop v Burns [I974] IWLR 124I.



412 STEPHEN HEDLEY

Pettit"9 or the detrimental reliance in proprietary estoppel, again we find that the arrangement is enforced to the extent that it has been acted on by the plaintiff, and that when it has been so acted on the court will cure any vagueness by the implication of reasonable terms.120 In some areas, indeed, it seems to make no difference whether the claim is treated as based on contract or on some property doctrine. If my view is accepted, the unresolved question whether Balfour is restricted to contract121 can safely remain unresolved, for in practical terms it makes no difference. Lord Denning MR consistently argued that Balfour v Balfour 22 should be used to sweep contract entirely out of the field of domestic relations, leaving the way clear for broad equitable principles;'23 but since these principles generally have the effect of enforcing an agreement that has been relied upon, it makes little difference whether we call this 'equity' or 'contract'. There is plainly a need, if not for fusion of contract, equity and property into one body of rules in this area, then at least for a common terminology between them to stop senseless theoretical battles on which no practical issues turn.124

THE MODERN LAW-(2) PARTIES AT ARMS' LENGTH

Where the parties are dealing at arms' length, the rule is simple: there is no requirement of intention to create legal relations. It is open to one party to show that legal liability was excluded, though it will take strong words to do this.125 Where there is an apparently workable agreement by which the parties intended to abide, the court will approach a clause appearing to exclude legal sanctions by asking not so much 'What does this clause mean?' as 'Can this clause possibly be construed as permitting legal sanctions, or are we forced to hold them unavailable?'.'26 It is no doubt possible for one party to escape liability by

I19 [i979] AC 777. In the context of contributions to the purchase of houses, the Court of Appeal has recently affirmed the importance of agreement: Burns v Burns [1984] I All ER 244. Whatever may be the position on agreement-in-fact, however, their reference to Balfour v

Balfour is, as ever, mere lip-service. 120 e.g. Crabbv Arun District Council[1976] Ch 79; EvesvEvesv[1975] I WLR 1338. 121 Raised but not settled in Pettitt v Pettitt [1970] AC 777; and see Cowcher v Cowcher [1972] I

WLR 425, 436d per Bagnall J. 122 [191912 KB 571;supra 391. 123 e.g. Hardwick v Johnson [1978] 1 WLR 688h. 124 See more generally H. Lesser, 'The Acquisition of inter vivos Matrimonial Property in English

Law: A Doctrinal Melting Pot' 23 U Toronto LJ 148 esp at 162-7 (1973); J. D. Davies, 'Informal Arrangements affecting Land' 8 Sydney L Rev 578 esp at 582-3 (1979).

125 e.g. Rose & Frank v Crompton [1925] AC 445. Note that despite the unequivocal wording of the clause, the case was fought all the way to the Lords on construction. This may however simply be a result of the novelty of such a clause.

126 e.g. Edwards v Skyways [1964] I WLR 349. And note Michael Richards Properties v St. Saviour's Parish, Southwark [19751 3 All ER 416, where Goff J held the words 'subject to contract' to be, in his particular context, meaningless. There was an excellent practical reason for this-the phrase had only been included by clerical error-but this could not come out in formal legal theory, and hence the need for 'interpretation' of what would otherwise be

unambiguous words.




showing that the alleged 'promise' was no promise at all but merely a statement of intent, though I know of no clear modem example.'27 But these cases aside, there is no requirement of 'intention to create legal relations'. The attitude taken by the courts was summed up by Ormrod J when he enforced an agreement between the directors of a company, who were all brothers: '. . . I . . . am satisfied that this agreement was intended by all ... to be binding on them, both in honour and in law. I do not think it occurred to any of them that there was any difference between these two concepts."'28 Yet again, the judge forms his own view of the realities of the situation, and pretends that it belongs to the parties.

I know of only three cases which cast doubt on this analysis.129 In all, contract was being invoked in unusual circumstances; and in all the attempted invocation was a failure. But the use of 'legal relations' theory to explain the issue was not nearly so successful as in domestic contexts. I will review the cases briefly, but they really show little more than that entirely the wrong kind of test is being applied.

Ford Motor Co v Amalgamated Union of Engineering and Foundry Workers'30 is a neat example of the way unthinking application of the 'legal relations' test will make the court paint itself into a corner. The issue was whether a collective agreement between the Ford motor company and nineteen unions was enforceable at Ford's instance. It is hard not to admire the audacious way in which Geoffrey Lane J dismissed all the easy ways out of this legal conundrum. There was to be no appeal to previous authority; for all of them had assumed (not unnaturally) that serious promises in the business sphere were enforceable, and so from Geoffrey Lane J's point of view had 'ignored' the 'requirement' of intention to create legal relations.13' Nor could he retreat behind the mask of the 'reasonable man'-one need only read the length of his disclaimer that he was deciding any political issue'32 to know that using the 'reasonable man' test would virtually commit this hypothetical figure to sympathy with one or other of the major political parties.

Eventually he reached what is usually a safe haven for first-instance judges. Intention, he said, is a question of fact; and as arbiter of the facts he determined

127 See ns 53-4 supra. 128 Snelling v Snelling [ 1972] I All ER 79, 84j. 129 I have already explained my reasons for refusing to regard Lens v Devonshire Club as involving

any serious proposition of law-supra n 9. One situation which may give rise to such problems in future is suggested by Casson v University of Aston in Birmingham [1983] I All ER 88, where the plaintiff sought damages for the withdrawal of an offer of a place to read Human Communications. Lord Hailsham LC (acting for the Visitor) held that he had no jurisdiction, and that the plaintiff's remedy (if she had one at all) was in contract.

130 [1969] 2 All ER 481. 131 [1969] 2 All ER 488df, 49od. Both Geoffrey Lane J and Clark 33 Mod L Rev 117 (1970) miss the

basic point that there is no requirement of 'intention to create legal relations' in any particular business context until the courts introduce it-and this was precisely what Geoffrey Lane J was doing, whether he realized it or not. Naturally, this misconception plays havoc with their assessment of earlier case law.

132 [1969] 2 All ER 487hi.



414 STEPHEN HEDLEY

that there was a general climate adverse to enforceability.'33 But this usually dependable technique fails when the facts in question are public property; far from receiving the immunity from criticism a 'judgment on the facts' can usually expect, the case has been vigorously criticized.134 For present purposes the case is perhaps unimportant: in the political climate of the time, it was inevitable that the matter should become a political football, and the decision taken away from the courts by statute.'35 The point, I think, is simply this: that the Ford case is merely an extreme example of the absurdities which follow from the fiction that 'intention to create legal relations' is a question of fact. It is too much to expect the courts to approach such a highly political matter on an overt policy basis; but travesties such as the Ford case should not be treated as the normal and proper reaction when it is questioned whether contract is appropriate in some other context.

In the other two cases, the Court of Appeal had no such excuse. These are Rogers v Booth'36 and President of the Methodist Conference v Parfitt;'37 they are very similar, so for convenience I will discuss only the second. Reverend Parfitt was dismissed by his church after disciplinary proceedings. He contended that he had been unfairly dismissed, but the Court of Appeal held that there was no contract between him and his church, so that his claim failed in limine.

The court seemed mesmerized by the prospect of a conflict between two bodies of law, one human and one divine. Anyone who imagines that religious natural law theories are a relic of past ages should note their resurgence in the Court of Appeal in 1983: ... the spiritual nature of the functions of the minister, the spiritual nature of the act of ordination by the imposition of hands and the doctrinal standards of the Methodist Church which are so fundamental to that Church and to the position of every minister in it make it impossible to conclude that any contract, let alone a contract of service, came into being between the newly ordained minister and the Methodist Church when the minister

133 [1969] 2 All ER 494i. 134 Selwyn 32 Mod L Rev 377 (1969) ably demonstrates the difficulties in the way of accepting

Geoffrey Lane J's view, and indeed in the very notion of arguing from any 'climate of opinion' at all. I find his arguments for enforcement unconvincing; but at least he had the honesty to put them forward as his own, and not pretend they belonged to 'the reasonable man'.

135 See Industrial Relations Act 1971 s 334; Trade Union and Labour Relations Act 1974 s 18. 136 [1937] 2 All ER 751. The question was whether the plaintiff, a Salvation Army officer, was a

'workman' within the Workmen's Compensation Act 1925. The Court of Appeal held she was not, refusing liability on much the same grounds as in Parfitt infra. There are several other cases raising similar issues--e.g. Re Employment of Methodist Ministers (1912) 107 LTR 143, Joyce J-but these assume the existence of legal relations in some form or other, and seek to

classify them as 'contract of service' or not. 137 [1983] 3 All ER 747.




was received into full connection. The nature of the stipend'38 supports this view. In the spiritual sense, the minister sets out to serve God as his master; I do not think that it is right to say that in the legal sense he is at the point of ordination undertaking by contract to serve the Church or the Conference as his master throughout the years of his ministry. 139

The spirit of St. Thomas Aquinas was no doubt looking on with approval at this delicate sensibility for the claims of divine law; as he said a mere seven centuries ago, 'All humanly enacted laws are in accord with reason to the extent that they derive from the natural law. And if a human law is at variance in any particular with the natural law, it is no longer legal, but rather a corruption of law.''40

A concluding thought: the Reverend Parfitt lost his case because he was judged by lawyers. All the lay members of the tribunals below decided in his favour; all the lawyers (applying the same test) were against him.'41 It takes a lawyer's training to convince anyone that the law of contract is not merely a statement of certain practical results that sometimes follow from human conduct, but a mystical body of semi-divine lore. For those without such training, the answer to the Methodist Conference's argument is obvious: 'The circumstances of the appointment of a minister, the conditions attached to the appointment and the degree of control exercised by the Church lead the majority of us to the conclusion that a contractual arrangement existed; . . . the spiritual nature of a minister's work is not incompatible with such a legal relationship.""42 It is not enough to point out simply that contract is not a branch of theology, for no lawyer consciously believes that it is. It is precisely because the notion is buried so deep in the legal psyche that it is so hard to weed out.

I38 Viz that a Minister's stipend was seen not as payment for services rendered but simply as the means to support himself while he did God's work: see [1983] 3 All ER 75xfh. Seen as a legal argument, this is similar to Unger's claim (see n 82 supra) that spouses do not 'bargain'. Both arguments derive their force, as it seems to me, from the commercial connotations of the word 'bargain'-connotations which are irrelevant to the contractual concept. A bargain does not cease to be a bargain simply because the parties would find this label odd or even offensive.

139 [1983] 3 All ER 752ab per Dillon LJ; and per May LJ at 754h-755d. 140 Of course, Aquinas was not a Methodist, but the point holds none the less. The quotation is

from Summa Theologica, q 95 (trans. J. G. Dawson). 141 Both Industrial Tribunals and the Employment Appeal Tribunal generally sit with a legally

qualified chairman and two lay members with knowledge of Industrial Relations. Reverend Parfitt won by a bare majority at both levels; in each case it was the chairman who dissented: see [ 19831 3 All ER 748ef, 75oa. The Court of Appeal were unanimous in allowing the appeal.

142 Waterhouse J (dissenting) delivering the judgement of the Employment Appeal Tribunal (The Times, 18 November 1982, EAT 143/82).



Stephen Hedley

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