Intention to create legal obligation
1. Is Fran bound by the written agreement with Marco?
2. Does the doctrine of promissory estoppel apply to Fran and Octavia?
3. Is Dante bound by the contract with Fran?
4. Is Arjun entitled to the month’s supply of free chocolates?
Whether a legally binding agreement has been formed between Fran and Marco in relation to the element of intention to creation legal obligation under contract law
One of the primary elements which is needed for formation of a valid contract is that of “intention to create a legal obligation”. The parties must have intended to be legally bound by the agreement terms for the agreement to be valid at law. When it comes to a commercial agreement the ICLR element is deemed to be present by the courts. On the other hand in relation to a domestic agreement the court has an assumption that the parties to the agreement do not want to be bound to the terms of it. However the assumptions which are made by the court have the right to be rebutted through proper evidence.
The rules in relation to domestic agreements have been discussed primarily by two cases. The cases are of Balfour v Balfour [1919] 2 KB 571 and Errington v Errington Woods [1952] 1 KB 290.
In the Balfour v Balfour case the defendant was the husband of the plaintiff who had promised to send maintenance payments. When the agreement took place the couples were married by when the relationship deteriorated the husband stopped sending the money. The court held that there was no contract as no intention to create legal obligation was present[1].
On the other hand in the case of Errington v Errington Woods it had been ruled by the court that where the parties who are in a domestic relationship have gone into a written agreement then it is sufficiently proved that the intention to create a legal obligation was present between the parties[2].
In the givens situation it has been provided that Fran wants a person for making deliveries in relation to his business and for such reason he has had a written contract with his brother Marco. However he does not like the idea after signing the contract and thus wants to form a contract with his niece instead. As per the principles of Balfour v Balfour there is no agreement between Fran and Marco as they are both in domestic relationship. However as per the application of the case of Errington v Errington the above presumption can be rebutted where there is a written agreement. Thus as a written agreement has been formed there is a contract between Fran and Marco.
Domestic vs. commercial agreements
Conclusion
A contract has been formed between Marco and Fran.
The issue in this context is that whether the doctrine of promissory estoppels can be applied in the situation of Fran and Octavia
The doctrine of promissory estoppels is an equitable doctrine which is applied to stop a party from going back on his or her promise even where there is no consideration.
There are certain requirements which have to be complied with in order to identify the application of the doctrine. In the case of Combe v Combe [1951] 2 KB 215 it had been ruled by the court that the doctrine will only be applicable in the situation where there was a pre-existing contractual relationship between the parties and the relationship has been modified due to the promise made by one of the parties[3].
In the case of Woodhouse A.C. Israel Cocoa Ltd. v. Nigerian Product Marketing Co. Ltd. [1972] AC 741 it had been further ruled by the court that there must be a unambiguous and implied promise between the parties for the doctrine to be applicable[4].
In the case of Alan v El Nasr [1972] 2 WLR 800 the court held that where a change in position has taken place in relation to the parties to the contract the doctrine of promissory estoppels would be applicable[5].
Further in the case of D & C Builders v Rees [1966] 2 WLR 28 it was stated by the court that the doctrine would be applicable when it would be against the nature of equity to let the promisor go back on his promise[6].
In the landmark case of Central London Property Trust Ltd v High Trees Ltd [1947] KB 130 it has been stated by the court that the doctrine could not be applied in relation to a claim but rather to defend a claim. The doctrine is a shield and not a sword[7].
In the given situation it is clear through the facts of the case that no contract has been formed between Fran and Octavia as the offer made by her has not be accepted by Fran. Thus there no legal relationship between the parties and it would be difficult to apply the doctrine as per Combe v Combe.
Further there has not been any change of position to either parties who are involved in the context and thus the doctrine would not be applicable. The case in which the doctrine of promissory estoppels had been created which is Central London Property Trust Ltd v High Trees Ltd made it clear that the doctrine could not be applied in relation to a claim but rather to defend a claim. The doctrine is a shield and not a sword. The issue in context is in relation to a claim for the fan installation price rather than defending a claim and thus the doctrine cannot be applied.
Rebutting the presumption of non-intention to create legal obligation
Conclusion
The doctrine of promissory estoppels would not be applicable in the give situation due to the reasons discussed above.
The issue which have been identified in the given situation is that whether the restraint of trade clause between Fran and is legally valid or not
A restraint of trade clause is incorporated as a contractual term in order to protect the legitimate interest of the employer in relation to his business. The clause prevents the person on whom it is binding to carry out a business activity which is prohibited by the clause for the period for which the clause is applicable.
In the case of Buckley v Tutty (1971) 125 CLR 353 at 380 it had been stated by the court that although a restraint of trade clause is legally incorporated into a contract it cannot be valid if it imposes an unreasonable burden on the person to whom it is applicable. There are no fixed time limits in relation to the clause but the limits are decided based on the circumstances of the case[8].
In the case of Lloyd’s Ships Holdings Pty Ltd v Davros Pty Ltd (1987) 17 FCR 505 the court ruled that even in situation where the restraint of trade clause had been signed it cannot be enforced if the nature of the clause is unreasonable[9].
In the given situation it is seen that a restraint of trade clause has been imposed by Fran on Dante that he is not supposed to carry out business which is in competition to Fran’s business by using the business for a period of two years. He was also not supposed to carry out the business by using client information from Fran’s business. it can be stated in this situation that the clause which has been imposed on Dante is totally reasonable as it only aims to protect the legitimate interest of the business. Thus where the clause is not of an unreasonable nature it is legally binding on the parties.
Conclusion
The restraint of trade clause is binding on Dante.
Whether Arjun has the right to claim the box of chocolates as per the principles of offer, acceptance and past consideration
It is a general rule at common law that a person can only accept an offer if he has knowledge in relation to its existence. The primary case in relation to the rule in the case of R v Clarke [1927] HCA 47 where it had been ruled by the court that prior knowledge of the offer is required for the purpose of being accepted. In this case the defendant had announced a prize amount for any person who provided information about two convicts. The plaintiff did not have knowledge about such offer and provided the information about the convicts. Latter when he came across the offer he made a claim in relation to the price. His claim had been rejected by the court because he did not have prior knowledge about the offer before fulfilling its terms[10].
In the same way as the above discussed case, in this situation also Arjun did not have prior knowledge in relation to the existence of the offer which Fran had made in relation to recommendation of an employee. He provided the information about the requirement of Fran without any intention of claiming the chocolates. Thus as he came across the offer after the terms had been met he cannot claim the box of chocolates from Fran.
Conclusion
Arjun is not entitled to the box of chocolates as he did not have prior knowledge about the offer.
References
Alan v El Nasr [1972] 2 WLR 800
Balfour v Balfour [1919] 2 KB 571
Buckley v Tutty (1971) 125 CLR 353 at 380
Central London Property Trust Ltd v High Trees Ltd [1947] KB 130
Combe v Combe [1951] 2 KB 215
D & C Builders v Rees [1966] 2 WLR 28
Errington v Errington Woods [1952] 1 KB 290.
Lloyd’s Ships Holdings Pty Ltd v Davros Pty Ltd (1987) 17 FCR 505
Woodhouse A.C. Israel Cocoa Ltd. v. Nigerian Product Marketing Co. Ltd. [1972] AC 741
Balfour v Balfour [1919] 2 KB 571
Errington v Errington Woods [1952] 1 KB 290.
Combe v Combe [1951] 2 KB 215
Woodhouse A.C. Israel Cocoa Ltd. v. Nigerian Product Marketing Co. Ltd. [1972] AC 741
Alan v El Nasr [1972] 2 WLR 800
D & C Builders v Rees [1966] 2 WLR 28
Central London Property Trust Ltd v High Trees Ltd [1947] KB 130
Buckley v Tutty (1971) 125 CLR 353 at 380
Lloyd’s Ships Holdings Pty Ltd v Davros Pty Ltd (1987) 17 FCR 505
R v Clarke [1927] HCA 47
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