64 4: Formation of contract II Part B The law of obligations
Merritt v Merritt 1970
The facts: The husband had left the matrimonial home, which was owned in the joint names of husband
and wife, to live with another woman. The spouses met and held a discussion, in the course of which he
agreed to pay her £40 a month out of which she agreed to keep up the mortgage payments. The wife made
the husband sign a note of these terms and an undertaking to transfer the house into her name when the
mortgage had been paid off. The wife paid off the mortgage but the husband refused to transfer the house
to her.
Decision: In the circumstances, an intention to create legal relations was to be inferred and the wife could
sue for breach of contract.Where agreements between husband and wife or other relatives relate to property matters the courts are
very ready to impute an intention to create legal relations.4.1.2 Relatives
Agreements between other family members may also be examined by the courts.Jones v Padavatton 1969
The facts: The claimant wanted her daughter to move to England to train as a barrister, and offered to pay
her a monthly allowance. The daughter did so in 1962. In 1964 the claimant bought a house in London;
part of the house was occupied by the daughter and the other part let to tenants whose rent was collected
by the daughter for herself. In 1967 the claimant and her daughter quarrelled and the claimant issued a
summons claiming possession of the house. The daughter sued for her allowance.
Decision: There were two agreements to consider: the daughter's agreement to read for the bar in
exchange for a monthly allowance, and the agreement by which the daughter lived in her mother's house
and collected the rent from tenants. Neither agreement was intended to create legal relations.4.1.3 Other domestic arrangements
Domestic arrangements extend to those between people who are not related but who have a close
relationship of some form. The nature of the agreement itself may lead to the conclusion that legal
relations were intended.Simpkins v Pays 1955
The facts: The defendant, her granddaughter and the claimant, a paying boarder, took part together each
week in a competition organised by a Sunday newspaper. The arrangements over postage and other
expenses were informal and the entries were made in the grandmother's name. One week they won £750;
the paying boarder claimed a third share, but the defendant refused to pay on the grounds that there was
no intention to create legal relations.
Decision: There was a 'mutuality in the arrangements between the parties', amounting to a contract.4.2 Commercial agreements
When business people enter into commercial agreements it is presumed that there is an intention to enter
into legal relations unless this is expressly disclaimed or the circumstances indicate otherwise.