Case name & citation: Simpkins v Pays [(1955) 1 WLR 975; (1955) 3 All ER 10]
Jurisdiction: Assizes (Chester)
Plaintiff: Ms. Simpkins
Defendant: Ms. Pays
What is the case about?
Simpkins v Pays is one of the leading contract law cases that discusses the intention of the parties to create legal obligations where the agreement is in a domestic context.
Facts of the case (Simpkins v Pays)
The plaintiff was a paying lodger at the defendant’s house. The defendant and her granddaughter, together with the paying lodger used to regularly participate in a weekly newspaper competition every Sunday. Each of them used to fill a line in the paper and all the entries were made in the name of the defendant, on the understating that they will divide the prize of any winnings.
The expenses of this, if any, were met by one or the other without any rules. In other words, there was no set of arrangements that stated the payment of postage, etc.
Once, they won prize money of £750 out of the competition and the defendant refused to share the prize.
The paying lodger (the plaintiff) sued for her one-third share. The plaintiff claimed that there was an agreement between them that obliged the defendant to pay her the proportionate prize money. On this, the defendant contended that there was no contract because the parties did not intend to be legally bound.
The issue raised before the Court
Was the defendant liable to pay one-third share of the prize to the plaintiff?
Did the arrangement between the parties give rise to any legal contract?
Relevant law behind the case (Intention to create a legal obligation)
When two or more parties enter into an arrangement, it is essential that there is an intention to create a legal relationship. Otherwise, it won’t give rise to a legally binding contract.
In family or social agreements, for example, an agreement to entertain a person with dinner, to play sports, etc., it is usually seen that the parties do not intend legal consequences. In contrast, in business agreements, it is usual that the parties intend legal consequences to follow. However, the opposite can also be the case. That is, the parties could intend to create a legal relationship in family/social agreements too and likewise, they may not intend so in business agreements, for example, they may rely on each other’s good faith and honour.
Thus, it may vary from situation to situation. The intention of the parties has to be ascertained from the terms of the agreement and the surrounding circumstances under which it was made.
Further, the test of contractual intention is objective, and not subjective. It means that what matters is not what the parties had in mind, but rather what a reasonable person would think their intention to be in the circumstances of the arrangement. Merely because a promisor asserts that there was no intention to create a legal relationship may not exempt him from liability if the Courts decide that the opposite is true. (Carlill v Carbolic Smoke Ball Co.)
Judgement of the Court in Simpkins v Pays
In the instant case, the Court held that the defendant was bound to share the prize because any reasonable man looking at their contract would at once conclude that they must have intended to share the prize and to create a contractual obligation.
Moreover, 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.
Hence, it was determined that it was a legally binding contract and the plaintiff was entitled to a one-third share.
You may also want to have a look at another case law named “Rose and Frank v Crompton & Bros.”. Here, the intention of the parties to create a legal relationship in the context of a business agreement was the subject matter.
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