Objective Test for Intention to Create Legal Relations

Discuss About The Rmogenous V Greek Orthodox Community SA Inc.

The issue that has been identified in the given scenario is whether the contract of selling the flower business is a valid one and whether there was intention of the parties to be legally bound by the terms of the contract.

It can  be mentioned that the intention create legal relation is an essential element for the formation of a contract. A contract will only be legally binding upon the parties if it is assessed by the courts that parties involved in the contract had the intention to be legally bound.  The courts generally analyze and assess this element to give validity to the contract.  The objective test is applied to assess intention to create legal relations. Previously it had been held by the courts in that domestic or family contract are not enforceable as the courts assumed that the parties to the domestic agreements did not intend to create legal relations. This had been illustrated in the case. However, this view of the courts of considering the assumptions of while determining the intention of the parties had been rejected. In the Ermogenous case it had been held by the court that the courts are not to consider any assumptions while determining the intent of the parties.

The cases that are relevant to the given scenario are:

 Carlill v Carbolic Smoke Ball Company [1893] – objective test

Balfour v Balfour- domestic agreement

Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95

By analyzing the facts of the case it can be said that if Ali sues Charlie in the court for breach of a term of the contract he is likely to succeed. As held in the Ermogenous case, it can be stated that the courts will not consider ay presumptions that the parties did not intend to be legally bound. Thus as it had been clearly mentioned in the terms of the contract that Ali was prohibited to open a business within a radius kilometers, Ali’s act of opening the flower shop within one kilometer of Charlie’s shop would constitute breach of contract.

It can be stated that a person is not required to consideration to party if it is established that the party had an existing public duty to perform the same duty. Thus this means that the consideration is not required to be paid to police personnel as it is already their duty to provide protection to the people of the society. However, it is assessed that someone exceeded their public duty, consideration is required to be paid to such person.

Domestic Agreements and Intention to Create Legal Relations

Collins v Godefroy (1831) 1 B & Ad 950- No consideration to be paid where there is an existing public duty of the party.

Glassbrooke Bros v Glamorgan County Council [1925] AC 270- Consideration to be paid for exceeding public duties

Nick is required to pay consideration to the police as he wanted a police officer to be posted outside his entrance. This is exceeding the public duty as per the decision of the case Glassbrooke Bros v Glamorgan County Council. Thus the police department can sue Nick.

It can be stated that part consideration cannot be held to be good consideration. If a person owes money to a party and he pays only a part of the entire amount in full settlement, the consideration cannot be held to be good consideration for a promise to give up the claim of the rest of the amount. However, it can be stated that a part consideration would be considered to be valid and would be binding on the creditor, if the debtor at the request of the creditor provides fresh or new consideration.  Part consideration would be held to be valid if the creditor accepts from the debtor:

• Part of the entire amount on a date which is earlier than the due date
• Service or chattel instead of the money
• Part payment in a different place.

Pinnel’s case (1602) 77 ER 237 – part payment of consideration

Thus by analyzing the facts of the case it can be stated that Helen will not win in court if she sues Mike for breach of contract. Mike had provided chattel instead of money. He had fixed the steering wheel of the car by relying on the promise of Helen to forgo the outstanding amount.

Terms in an unsigned contract can only be enforceable if it is established that such term had been brought to the attention of the parties at the time of entering the contract. Whether or not the terms would be enforceable depends on whether reasonable notice had been given by the party who wishes to enforce such term. If the other party had been given reasonable notice the term would be binding upon the parties. The red hand rule can be applied to assess whether the terms are unusual and whether such term can be enforced upon the parties. This rule states that the more unreasonable the clause, the greater the notice should be given by the party who wishes to enforce such term.

Spurling v Bradshaw Ltd [1956] 1 WLR 461 – Red hand rule for incorporation of Unusual term

Cases Relevant to the Given Scenario

Parker v South Eastern Railway Co 2 CPD 416- Requirement to give reasonable notice for incorporation of term

 Thus by analyzing the facts of the case it can be stated that Lizzie is likely to win the case if the DVD store sues Lizzzie. There were numerous terms in the advertisement. The DVD store did not give reasonable notice to Lizzie about the clause which mentioned the penalty provision for failing to return the DVD. This term can be considered to an unusual one as the normal rental fee of DVD is 5 dollars per day.

It can be stated that exclusion clauses are incorporated into contracts for the purpose of limiting or restricting the liability of the party which incorporates such clause. An exclusion clause can be held to be valid if reasonable notice of such clause had been given to the parties. However, in case of a signed contract the terms of the contract are held to be binding upon the party who signs it irrespective of the fact whether such party has read the terms or not.

Parker v South Eastern Railway Co 2 CPD 416 – Reasonable notice of the term

L’Estrange v Graucob [1934] 2 KB 394 – written contract

By analyzing the facts of the case it can be stated that Tori would not be successful in claiming damages from the dry cleaners. Tori had signed the contract which contained the clause that the dry cleaners would not be responsible for any damage caused to the dress. By the application of the L’Estrange v Graucob case it can be stated that terms of the contract would be binding on the party if such party signs the contract irrespective of whether such party had read the terms or not. Therefore she cannot sue the Dry cleaners for damaging the dress.

It has been provided in section 19 of the Goods Act Victoria 1958 that none of the indirect conditions regarding the sale of goods are to be considered except in cases when an individual buys such goods through suggestions of someone and especially when such suggestion has been given in regards to the purpose of the goods to be used. However, it can be stated that the aforementioned section does not imply that the goods have dissimilar deception which would make such goods unsuitable for the pupose they are purchased.

In the case David Jones v Willis (1934) 52 CLR 110 the buyer had purchased the goods by relying on the information given by the seller in relation to the purpose of the goods. However, it turned out that the goods were not fit for the purpose that they were bought. Thus the aforementioned section had been violated in this case.

Thus by analyzing the facts of the case it can be stated that Sanders can claim damages from Mr. Smith as she had relied on the expert advice of Mr. Smith. She had clearly specified the purpose for which she had bought the printer. However the machine could not handle the amount of tasks and had become slow. Therefore she can enforce her rights against Mr. Smith  

Reference List:

Carlill v Carbolic Smoke Ball Company [1893]

Balfour v Balfour

rmogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95

Collins v Godefroy (1831) 1 B & Ad 950

Glassbrooke Bros v Glamorgan County Council [1925] AC 270

Pinnel’s case (1602) 77 ER 237

Spurling v Bradshaw Ltd [1956] 1 WLR 461

Parker v South Eastern Railway Co 2 CPD 416

L’Estrange v Graucob [1934] 2 KB 394

Jones v Willis (1934) 52 CLR 110