Case Study

Exemplar for assignment answer Nicole and Joel, who just had a baby, decided to take a break from their hectic rock star life style and drive around Queensland once Joel had finished singing with his band. While they were at the Gold Coast, Nicole and Joel stayed at a great house by the beach owned by their friend Sophie. They all agreed that Nicole, Joel and the baby would be at the beach house for four weeks and would pay Sophie $1000 a week for allowing them to stay in her house. Nicole and Joel end up having a terrible time, their baby does not sleep at all and they do not like staying so close to the beach. It is hot and sandy and there is lots of noise from all the people on the beach. After two weeks they pack up and go to Sydney. They don’t pay Sophie any money at all for rent because the holiday was so disappointing. Sophie however, really wants Nicole and Joel to pay her the rent as they had agreed. Sophie had counted on the money to pay for her recent cosmetic surgery. She is hurt by their failure to pay and has come to you to ask whether she can make them pay her the rent that they owe her. Question Using the four step process discuss whether there is an intention to be legally bound and a contract formed between the parties. Can Sophie enforce the agreement between her and Nicole and Joel? Identify the principle or issue of law The principle (or issue) of law is that for a valid contract to be formed there must be an intention to be legally bound by both parties. Explain the rule(s) of law relevant to the principle/area/issue of law identified in step one with reference to authority. There are three main requirements for the formation of a legally enforceable contract, intention, agreement and consideration. The element that requires discussion here is the existence of an intention by the parties to enter into a legally binding agreement. An agreement is only legally enforceable if the parties intended at the time the agreement is made to be legally bound. Intention is to be judged objectively. The court asks whether, in the circumstances, a reasonable person would regard the agreement as intended to be binding. The test is an objective one however the courts rely on presumptions to assist with ascertaining whether the parties intended to be legally bound by the agreement.

Comment [HF1]: Note the brevity of this statement. You don’t need to repeat the question or make general statements here.

Comment [A2]: You may not need to refer to every single case that is listed for each rule of law in the lecture outlines/Source Book. Please, do not refer to cases from outside of the course.

Comment [A3]: If you are going to have an introductory type paragraph KEEP IT BRIEF. Look at the marking rubric. The marks in Step 2 are awarded based on the quality of your explanation of the law with reference to authority. Sometimes students find it hard to begin writing an answer without a general overview statement, but too often they spend much too long on this type of thing. A simple statement like this does enhance the flow of your answer, provided you have left enough time for the important stuff. It’s good to include a definition here of a relevant topic (i.e. offer/acceptance or consideration).

 

 

Where arrangements are made between family members or friends the court presumes that the parties to these agreements do not intend to be legally bound. “A person who wants to treat an agreement with a close family relation as legally binding will have to prove additional circumstances from which an intention to be legally bound can be inferred” (Lambiris 2011 p.36) In the case of Balfour v Balfour [1919] 2 KB 571 during their marriage a husband and wife came to an arrangement whereby the husband agreed to pay his wife an amount each month for her maintenance. After the parties divorced, Mrs Balfour brought and action against Mr Balfour to enforce the payment of the promised maintenance. The issue for the court was whether Mr Balfour intended to be legally bound to his wife when he promised to pay her maintenance. The court held that the agreement was not legally enforceable. The court said that domestic arrangements between spouses are not legally enforceable because at the time of making the agreement, they do not intend that they should be sued upon. In Cohen v Cohen (1929) 41 CLR 91 prior to the parties marrying they came to an agreement that Mr. Cohen would pay Ms Cohen a yearly dress allowance paid quarterly. After the parties separated, Ms Cohen brought a claim against Mr. Cohen for the unpaid installments of the promised dress allowance. The court found that in the circumstances it could not be inferred that a legally enforceable arrangement was intended. Arrangements between intending husband and wife are only enforceable if at the time the agreement is made there is an intention by the parties that the arrangement will give rise to legal relations. An example of where the presumption concerning social and domestic agreements was rebutted is in the matter of Merritt v Merritt [1970] 2 All ER 760. In this case, the parties built a home and lived in it together whilst married, jointly contributing to paying off the home loan. During the marriage the home was transferred into joint ownership, initially having only been in the husband’s name. Upon their separation the parties agreed that Ms Merritt would reside in the home and pay the remainder of the loan. Mr. Merritt agreed that once the loan was paid off in full he would transfer the house into Ms Merritt’s sole ownership. A letter to this effect was signed. After the loan was repaid, Mr. Merritt refused to transfer ownership to Ms Merritt. Ms Merritt sought to enforce the agreement. The court found that the parties intended to be bound by this agreement and therefore it was legally enforceable. The court stated that when all the circumstances at the time the agreement was made were taken into account, a reasonable person would regard the parties to the agreement as intending to be bound by it.

When an agreement is reached in a commercial or business context, the court presumes that the parties to the agreement intended that the agreement

Comment [HF4]: Note that this question is mainly concerned with the presumption concerning social and domestic agreements. It’s a good idea to discuss the most relevant aspects of your discussion first.

Comment [HF5]: Here is an example of a direct quote from the text. This quote must be in quotation marks and have a reference after it to tell the marker where the quote is from. In this case, the quote is from page 36 of the textbook by Lambiris.

Comment [HF6]: When discussing a case it is vital that you refer to the facts, issue that the court had to decide and the decision of the court. For this answer however, given that the issue for the court is the same, it is not necessary to repeat it for each case on that particular point.

Comment [A7]: Note the different ways to introduce a case – any of the ways shown is fine.

 

 

would be legally binding (Lambiris 2011 p.36). The party wanting to establish that this is not the case will need to adduce evidence to show otherwise. In Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117 Esso promised to give motorists who purchased their fuel a commemorative coin. The Commissioner argued that these coins were subject to a tax because they were not “free”, but part of a sale agreement. The issue before the court was whether Esso had intended to be legally bound by the offer to give the coins to motorists who purchased its fuel. The court held that the terms of the promotion were intended to be a legally binding promise. This was a commercial promotion even though the coins were described as “free” and it could be presumed from these circumstances that it was a promise made with an intention to be legally bound. In the case of Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 a religious minister employed by the Greek Orthodox Community, (an incorporated association) brought an action against the Community for breach of the employment contract when the Community refused to pay him for accumulated leave entitlements. The Community argued that the agreement was in the nature of a social arrangement and it was not intended to be legally binding. The court held that the agreement was intended to be legally binding and Ermogenous was entitled to the payments under the enforceable contract of employment. The court stated that an agreement with a minister of religion does not in itself mean the agreement is not intended to be legally binding if other circumstances indicate otherwise. In these circumstances an incorporated non- religious body made an agreement and it provided monetary and economic benefits to the minister. Apply the law to the facts of the question in a detailed and logical manner. As an agreement is only legally enforceable if the parties intend to be legally bound at the time the agreement is made, an objective assessment of the circumstances in which Joel and Nicole and Sophie made the agreement needs to be undertaken. The question is whether, in the circumstances, a reasonable person would regard the rental agreement as intended to be binding. The parties here are friends. There are no facts to indicate that the rental agreement was made in a commercial or business context, such as the beach house regularly being rented out by Sophie as a source of income or for investment. Given that the parties are friends and the rental agreement appears to have been made in a social context, the courts will rely on the presumption that in these circumstances Nicole and Joel and Sophie did not intend to be legally bound at the time the agreement was made.

Comment [HF8]: Here is an example of paraphrasing. Note that while the words are not exactly the same as the text, they are similar enough to require acknowledgment of the text as the original source.

Comment [HF9]: Note that this presumption is less important to the question so it should be discussed second

Comment [A10]: In a test or exam situation you could shorten this case name to “the Esso case”, as there is no other “Esso case” on this rule of law. It is okay to abbreviate case names, however just make sure your abbreviation CLEARLY identifies the case you are referring to and cannot be confused with another similarly named case.

Comment [HF11]: In assignments it is important for you to show the citation of the cases.

Comment [A12]: This is similar to the comment made above regarding introductory paragraphs. This may help order your argument, but make sure it is not too long winded it takes time away for getting to the detailed application of the law to the facts, as this is where the marks are.

 

 

To enforce the rental agreement Sophie will have to prove additional facts to rebut this presumption. There are two facts mentioned that suggest Sophie may be able to argue that at the time they made the arrangement they all intended the agreement for the use of the beach house to be legally binding. First the agreement itself. The rental payment is substantial and appears to be a commercial rate, not a reduced rate for friends. The agreement is also for a reasonable length of time. They have agreed that Joel, Nicole and the baby will stay at the beach house for four weeks. However, there is nothing in the facts to suggest the agreement is in writing. If the rental agreement had been reduced to writing, this would assist Sophie in establishing that contrary to the presumption, the parties intended the rental agreement to be legally binding. Second Sophie appears to have acted on the basis that she will be receiving the full rental amount as agreed. She has incurred costs for medical procedures and seems to be relying on the payment from Joel and Nicole to pay for these costs. The question does not say, but if Joel and Nicole knew about this fact at the time the agreement was made, this would strengthen Sophie’s argument that the parties intended to be bound. In these circumstances, a reasonable person would regard the agreement as intended to be binding. Draw possible conclusions In conclusion, it is likely that the rental agreement is legally enforceable because Nicole and Joel and Sophie intended to be legally bound at the time the agreement was made. A contract has been formed and Sophie can enforce the agreement between her and Nicole and Joel in order to receive payment.

List of Cases Referred to

Balfour v Balfour [1919] 2 KB 571 Cohen v Cohen (1929) 41 CLR 91 Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117 Merritt v Merritt [1970] 2 All ER 760

List of other sources

Lambiris, M. 2011. First Principles of Business Law. Sydney: CCH Australia

Comment [A13]: This is the maximum that would be expected for a conclusion.

Comment [HF14]: At the end of your assignment you should list all of the cases that you have referred to in your work, in alphabetical order.

Comment [HF15]: If you refer to the textbook or lecture slides then you should reference them here. There is no need to reference each page that you have referred to.

 

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