Case name & citation: Todd v Nicol  SASR 72
Jurisdiction: The Supreme Court of South Australia
Year of the case: 1957
Area of law: Intention to create legal relations
Facts of the case (Todd v Nicol)
Nicol was living on her own. Her husband had passed away, so she wrote a letter to her sister-in-law requesting that she and her daughter relocate to South Australia to live with her. They were currently staying in Scotland.
Nicol stated in the letter that if they came to live with her, it would be rent-free and the house would be left to them if she died. Nicol also promised to change her will to reflect this.
Todd’s agreed and moved. They arrived and later got into a dispute with Nicol. The relationship between them eventually got affected.
Nicol wanted to remove the Todd’s from the house, but the Todd’s sued, saying there was a contract.
Issue raised in “Todd v Nicol”
Did Nicol intend to be legally obligated when she said that her sister-in-law and niece could live with her for life?
Was there a legally binding contract?
The presumption in domestic agreements and its rebuttal
In law, if the parties do not intend to establish legal connections, an agreement would not be considered a contract. That is to say, an agreement cannot qualify as a contract if there is no intention to establish legal relations; as a result, it is void from the very beginning.
Now, the general presumption in social or domestic agreements is that no legal relations are contemplated. In other words, there is no intention to create legal relations in domestic agreements. However, this presumption can be very much rebutted if the circumstances of the case prove to the contrary.
In general, the presumption can be rebutted where:
- There is clarity of terms, i.e., the rights and obligations of the parties are spelt out clearly. If not, it indicates that the parties did not think it to be a contractual arrangement.
- The promisee suffers some cost and inconvenience.
- The flavour of the agreement is that of a commercial one. That is, whether the agreement is formal enough or it just happens to be between family members or friends in mutual trust and affection.
Judgement of the Court in “Todd v Nicol”
The Court determined that there is sufficient evidence to rebut the presumption in this particular case. Cost and inconvenience to the plaintiff served as the needed evidence. According to the Court, the presumption can be rebutted in cases like these where it is possible to show significant commercial consequences that flow from the particular social or domestic agreement.
The Court inferred that there was an intention to create legal relations. It was judged from the following factors:
- Nicol promised to alter her will to reflect her sister-in-law and niece’s interest in the estate.
- Nicol invited them to the house of her own accord.
- In reliance on Nicol’s promise, a substantial amount of expenses were incurred by the Todd’s for relocation to Australia. They sold their furniture and other belongings, the niece quit her job, and they bought tickets to Australia.
Thus, a legally binding contract was found between the two parties.
Further, another issue arose as to the implied terms of the contract. Justice Mayo decided that even though contractual relations were deemed to be intended, the claim of the plaintiff (Todd’s) fails because there was an implied term in the contract to act reasonably. The plaintiff needed to act in such a way as to maintain liveable conditions for the defendant (Nicol). However, since the Todd’s did not act so, they were in breach of the agreement.
Final decision of the Court
Contractual relations were intended, but the Todd’s breached the agreement by acting unreasonably.
Hence, the judgement was given in favour of Nicol and the Todd’s were ordered to vacate the house.
There are some other cases as well that throw light on the intention of the parties to create a legal relationship. One such case is Simpkins v Pays (1955) wherein a paying lodger sued the defendant for a share in the prize of a newspaper competition which they had submitted entries for. Here, the presence of the lodger in the case, among other things, had the impact of negating the presumption that this was purely a domestic affair with no legal consequences at all.
Jones v Padavatton (1969) is yet another case on the legality of domestic agreements.
Agreements in a business context
The situation is different in agreements of commercial nature. When an agreement is made in the course of business operations rather than in a domestic or social setting, there is a presumption that the parties intend to form legal relationships.
For example, in the case of Edwards v Skyways (1964), it was held that the agreement between an airline company and the British Airline Pilots Association to pay a redundancy payment to redundant pilots was an enforceable contract (and was not merely a moral one).
The aforesaid presumption in business contracts, however, may be negated by express terms to the contrary. And the case of Rose & Frank v Crompton & Bros. (1925) is a relevant example of this. Read the full case here.
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