ATAL BIHARI VAJPAYEE SCHOOL OF

LEGAL STUDIES (ABVSLS)

Session 2023-2024

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

Submitted Submitted
to:- by:-
Mayuri Ma’am Mansi
 CONTRACT
LAW
(ASSIGNMENT)
CASE LAW:- MERRITT V. MERRITT (1970)
 INTRODUCTION
o Merritt 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.

o To understand this case, we must understand the theory of

INTENTION TO CREATE LEGAL RELATIONSHIP.

o The 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
 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
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
o Mr. 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.

o Mrs. 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 overpresentation
the Building
title Society’s mortgage book to the wife. She
 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
20XX presentation
majority of the court thought that those words introducedtitle such an element of uncertainty that the 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
Thank You
Made By:- Mansi Manwani
1st Year BBA LLB(Hons.)