ATAL BIHARI VAJPAYEE SCHOOL OF LEGAL

STUDIES (ABVSLS)

Session 2023-2024

CSJMU, Kanpur
Course:- BBA LLB(Hons.) 1st Year

Submitted to:- Submitted by:-

Mayuri Ma’am Mansi Manwani
CONTRACT
LAW
(ASSIGNMENT)
CASE LAW:- MERRITT V. MERRITT (1970)
 INTRODUCTION
oMerritt V. Merritt is a landmark case in the law of contract that deals with the issue
of INTENTION TO CREATE LEGAL RELATIONSHIP. The English court decided
the case in 1970.

oTo understand this case, we must understand the theory of INTENTION TO

CREATE LEGAL RELATIONSHIP.

oThe intention to create a legal relationship is a key element in the formation of a

contract. It refers to the intention of the parties to create a legally binding
agreement, i.e. an agreement that can be enforced by law.
 Intention to create a legal relationship
• This concept was born in the nineteenth century. If anyone creates an agreement with the intention to not have any legal
consequences during the performance of the said agreement, then that agreement cannot be called a contract. An agreement that
has consideration but is not legally binding can also not be called a contract. An objective test can be applied to the same, where the
facts of the case are looked at from the perspective of a reasonable person and then decided if such a reasonable person intended
that the afore-mentioned agreement ought to have been legally binding or not.
• In general, the law assumes that parties intend to create a legal relationship when they enter into a contract. However, in certain
situations, the parties may not intend to create a legally binding agreement, such as in social or domestic arrangements. For example,
if friends agree to meet at a café, there may not be an intention to create a legally binding agreement. In order for a contract to be
enforceable, the intention to create a legal relationship must be present at the time of entering into the agreement. This means that
both parties must have a common intention to create legal relations. The intention to create a legal relationship can be expressed or
implied. It may be expressed through the language used in the contract, such as when the parties state explicitly that they intend to
create a legally binding agreement.
• Alternatively, the intention may be implied from the circumstances surrounding the agreement. For example, if a person provides a
service and is paid for it, there may be an implied intention to create a legal relationship. If the parties do not have the intention to
create a legal relationship, the agreement will not be enforceable as a contract. Therefore, the presence or absence of the intention
to create a legal relationship is a crucial factor in determining the validity of a contract.
 Intention to create a legal relationship
There are a few concepts of intention to create legal relations. Intention to create legal relations also means an intention to be serious about agreement significance:
a) The contracting party’s mind will be obvious to enter a serious contract
When two parties decide to enter the environment of a contract, their mind will understand the contents of the contract. This is due to their ‘intention’ to be consenting mind
which both of the parties have to agree. If there is no agreement by both of the parties, it may make the contract a void agreement. Thus, both of the contracting parties will be
able to be serious in the contract.
B) If there is no intention to create legal relations the contract would not be enforceable, legal, and binding
The intention to create a legal relationship is one of the essential elements of a contract. So, if there is no intention to create a legal relation, the contract can be assumed as not
legal. Due to that, the contract may not be enforceable because there is no intention to create legal relations at the beginning which does not make contracting parties to be legally
binding.
c) Without intention to create legal relations, the parties cannot sue each other
With no intention to create legal relations, it may cause the contracting parties not to be legally binding and this circumstance may cause the contract to be enforceable. Therefore,
when the contract is enforceable, the contracting parties cannot sue each other and this will spoil their business crisis. This will make the contracting parties enquire about their
justice.
D) Without the intention to create legal relations the contract may become a mere promise
In addition, with no intention to create legal relations, it will make any contract become a mere promise. Mere promises simply like a simple promise arise when there is no
intention to create legal relations. Based on the case of studies, the situation of mere promises can be seen when Nathan, the Comfortable Furniture Sdn Bhd salesman has no
intention to create legal relations. He did not accept a cash deposit from Mr John to obey the company policy. When the mere promise occurs, the salesman still can sell the dining
set to other people because there is no legal contract between Nathan and Mr john.
e) Without the intention to create legal relations the contract may lack the binding effect
Besides that, when there is no intention to create legal relations, it will make the contract or agreement becomes less powerful due to whether one or both of the parties do not
have a consenting mind. So, if the contract lacks of binding effect, it will cause difficulty to the party involved in the future.
 Intention to create a legal relationship
• 1) Commercial or business relations
In term of general rules of commercial or business relations, there is a presumption or intention to be legally binding. Otherwise in term of exception the presumption is rebuttable.
Case example: Kleinwort Benson Ltd V Malaysia Mining Corporation Bhd in year 1989
The case shows the letters of comfort. In this case, the plaintiff (bank) agreed loan to MMC Metals, subsidiary of MMC. The bank asked MMC to guarantee loan. MMC said not policy to guarantee
loans to subsides offered letter of comfort stating: “It is our policy to ensure that the business of MMC (Metals) is at all times in a position to meet its liabilities under the arrangements”. The
bank accepted but charged higher rate of interest and the market collapsed and MMC went into liquidation. The plaintiffs tried to claim balance from MMC. First instance the court found in
favour of plaintiff, relying heavily on Skyways (1964) ruling overturned on appeal and the judge said Skyways case not was about promise supported by consideration so not applicable here.
Hence, ruled no intention to create legally binding agreement statement was not meant to act as guarantee, stating on current position, not future intention.

• 2) Social friend’s relations

In term of general rules of social friend’s relations, there is no presumption to be legally binding. Otherwise, in term of exception the presumption is rebuttable.
Case example: Simpkins V Pays in year 1955
The case shows mutuality. In this case .the defendant, her granddaughter and the plaintiff (paying lodger) regularly took part in newspaper competition. All contributed but entered in defendant’s
name. There is no set of arrangement that state payment of postage etc. When entry of the competition is successful, defendant refused to share with plaintiff. The plaintiff sued for his share.
Court ruled legally binding relationship as sufficient mutuality in the arrangements between parties.

• 3) Family or domestic relations

In term of general rules of family or domestic relations, there is no presumption to be legally binding. Otherwise, in term of exception the presumption is rebuttable.
Case example: Balfour v Balfour in year 1919
The husband brought wife to England from Sri Lanka. The husband had to return but wife stayed for medical reasons. He promised to pay her £30/month until his return. When he failed to pay,
the wife sued the husband. Wife’s action failed because there is no consideration moved from her and there is no intention to create legally binding agreement found. The court stated in husband
and wife cases, burden of proof is on plaintiff to prove intention to create legally binding agreement.
Merritt V.
Merritt(1970)
case summary
Facts
o Mr. and Mrs. Merritt married in 1941. They held their matrimonial home in joint
names. In 1966 Mr. Merritt left the family home to live with another woman. Mr.
Merritt agreed to pay Mrs. Merritt £40 per month. At Mrs. Merritt’s request, he
signed a document confirming that when she had repaid the balance on the
mortgage, he would transfer the matrimonial home into her sole name. Mrs. Merritt
paid off the mortgage and successfully acquired a declaration that the house
belonged to her. Mr. Merritt appealed.

o Mr. Merritt said that the agreement between his wife and himself was that of a
domestic nature. There were no intentions to create legal relations and hence no
contract. He also said that as there was no proper consideration provided by Mrs.
Merritt’s result of the agreement could not be called a contract.
Issues
oMr. Merritt contended the agreement was a domestic arrangement between
husband and wife and there was no intention to create legal relations and, as
such, there was no enforceable contract. He also argued the purported
contract was insufficiently certain to be enforceable by the court, and that Mrs.
Merritt had failed to provide consideration for his promise.

oMrs. Merritt argued that given they were in the process of separating, the
presumption of there being no intention to create legal relations did not apply.
She claimed there was every intention of creating legal relations, and her
having paid off all the expenses on the home and finishing off the mortgage
payments amounted to consideration
 Decision/Outcome
o Mr. Merritt’s appeal was unsuccessful. When parties are in the process of separating or are separated,
the presumption of there being no intention to create legal relations does not apply. The arrangement
was sufficiently certain to be enforceable, and the paying of the mortgage was ample consideration for
Mr. Merritt’s promise. Mrs. Merritt was entitled to the matrimonial home entirely.

o The court explained that the fact that the parties were married did not necessarily mean that there
was no intention to create a legal relationship. The court noted that the parties were separated and
had agreed to transfer ownership of the property in exchange for Mrs. Merritt’s payment of the
mortgage. The court found that the agreement was not merely a domestic arrangement, but a binding
and enforceable contract. Therefore, the case established the principle that an agreement made
between spouses or family members may give rise to a binding contract, provided that there is
evidence of an intention to create a legal relationship and that both parties have given consideration in
exchange for the promise made by the other.

20XX presentation title 10

 COMPARISON TO “BALFOUR V.
BALFOUR”

Despite the fact that both Balfour v. Balfour and Merritt v. Merritt talk about the intention to create
legal relations, in Merritt v. Merritt, it was held that the circumstances of both the cases were
different because, in Balfour v. Balfour, the couple were married whereas in this case they were
separated. Another issue is that it is normally assumed that any arrangement between divorcees
intends to have legal consequences.

Lord Denning was of the opinion that the appeal should be dismissed because on the ground that
he agreed with Stamp J (who had declared that the property was to go to Mrs. Merritt, which was
appealed against by Mr Merritt in the Court of Appeal). He said that the case of Balfour v. Balfour
was not applicable in this case for the evidence is quite clear that there was intention to create legal
relations through the letter. Widgery LJ said that without the feeling of love and affection that
comes through marriage, when lost, cannot be a ground for an agreement to be called a domestic
one and hence there was no intention to create legal relations
,
 Actual Judgement
“The husband and the wife were married as long ago as 1941. After the war, in 1949they got a building plot and built a
house. It was a freehold house, 133 Clayton Road, Hook, Chessington. It was in the husband’s name, with a considerable
sum on a mortgage with a building society. There they lived and brought up their three children, two daughters, now aged
20 and 17, and a boy now 14. The wife went out to work and contributed to the household expenses. Early in 1966, they
came to an agreement whereby the house was to be put in joint names. That was done. It reflected the legal position when
a house is acquired by a husband and wife by financial contributions of each.

o But, unfortunately, about that time the husband formed an attachment to another woman. He left the house and went
to live with her. The wife then pressed the husband for some arrangement to be made for the future. On 25 May, they
talked it over in the husband’s car. The husband said that he would make the wife a monthly payment of £40 and told
her that out of it she would have to make the outstanding payments to the building society. There was only £180
outstanding. He handed over the Building Society’s mortgage book to the wife. She was herself going out to work,
earning net £7 10s a week. Before she left the car she insisted that he put down in writing a further agreement. It forms
the subject of the present action.
presentation title
 Actual Judgement
o He wrote these words on a piece of paper in consideration of the fact that you will pay all charges in connection with the house at
133, Clayton Road, Chessington, Surrey, until such time as the mortgage repayment has been completed, when the mortgage has been
completed I will agree to transfer the property into your sole ownership. Signed. John B. Merritt 25.5.66. “The wife took that paper
away with her. She did, in fact, over the ensuing months pay off the balance of the mortgage, partly, maybe, out of the money the
husband gave her, £40 a month, and partly out of her own earnings. When the mortgage had been paid off, he reduced the £40 a
month to £25 a month. The wife asked the husband to transfer the house into her sole ownership. He refused to do so. She brought
an action in the.
o Chancery Division for a declaration that the house should belong to her and for an order that he should make the conveyance.
The judge, Stamp J, made the order; but the husband now appeals to this court.
o The first point taken on his behalf by counsel for the husband was that the agreement was not intended to create legal relations. It was,
he says, a family arrangement such as was considered by the court in Balfour v Balfour and in Jones v Padavatton. So the wife could
not sue on it. I do not think that those cases have any application here. The parties there were living together in amity. In such cases,
their domestic arrangements are ordinarily not intended to create legal relations. It is altogether different when the parties are not living
in amity but are separated, or about to separate. They then bargain keenly. They do not rely on honorable understandings. They want
everything cut and dried. It may safely be presumed that they intend to create legal relations.
o Counsel for the husband then relied on the recent case of Gould v Gould, when the parties had separated, and the husband agreed to
pay the wife £12 a week so long as he could manage it. The majority of the court thought that those words introduced such an
element of uncertainty that the agreement was not intended to create legal relations. But for that element of uncertainty, I am sure that
the majority would have held the agreement to be binding.

20XX presentation title 13

 Actual Judgement
o They did not differ from the general proposition which I stated ([1969] 3 All ER at 730, [1970] 1 QB at 280):µWhen « husband and
wife, at arm’s length, decide to separate and the husband promises to pay a sum as maintenance to the wife during the separation, the
court does, as a rule, impute to them an intention to create legal relations. In all these cases the court does not try to discover the
intention by looking into the minds of the parties. I look at the situation in which they were placed and ask myself: would reasonable
people regard the agreements as intended to be binding?

o Counsel for the husband sought to say that this agreement was uncertain because of the arrangement for £40 a month maintenance.
That is obviously untenable. Next, he said that there was no consideration for the agreement. That point is no good. The wife paid the
outstanding amount to the building society. That was ample consideration. It is true that the husband paid her £40 a month which she
may have used to pay the building society. But still, her act of paying was a good consideration.

o Counsel for the husband took a small point about rates. There was nothing in it. The rates were adjusted fairly between the parties
afterward. Finally, counsel for the husband said that, under s 17 of the

o Married Women’s Property Act 1882, this house should be owned by the husband and the wife jointly; and that, even if this house
were transferred to the wife, she should hold it on trust for them both jointly. There is nothing at this point either. The paper which
the husband signed dealt with the beneficial ownership of the house. It was intended to belong entirely to the wife
Thank You
Made By:- Mansi Manwani
1st Year BBA LLB(Hons.)