This is a civil case that concerns contract law and the alleged making of an agreement between friends.
Civil cases involve a plaintiff (the person bringing the claim in court) and a defendant (the person arguing against the claim) and are decided on the balance of probabilities. When deciding on a civil case, the court must consider the evidence on the basis of what a reasonable person would think of what the parties said to each other, as well as taking into account all of the surrounding circumstances. The case was heard in the Supreme Court of New South Wales before Justice Campbell.
What is a Contract
A contract is a binding agreement between parties.
For a contract or legal agreement to be formed it must have several legal elements. These are:
- An offer made by one party; } Together being
- Acceptance of the offer by another party; } the ‘Agreement’
- Intention to create a legal relationship by the parties. There are certain categories where there is a presumption that the parties are not intending that their agreement will be a contract. This includes families and some social relationships.
- Consideration for the offer (that is a price given in exchange for the promise, otherwise known as the price paid for the offer).
How can a Contract be Formed
In contract law an agreement can be formed in writing, through a discussion by parties (oral) or it can be implied.
An example of an implied contract might be where person A has a discussion with person B and promises to pay person B some money if person B undertakes a task. Person B does not specifically say they agree, but undertakes the task anyway. Person A cannot then say they did not enter into the agreement, because person B did not agree in writing or by saying specific words. The fact that person B undertook a task specifically requested by person A and person A offered to pay person B a price for that promise (consideration) means there was a legal agreement.
Cases where the Law says there is no Intention to Form a Contract
The courts have decided that in certain cases there should be a ‘rebuttable presumption’ against the formation of a contact. A ‘rebuttable presumption’ means that the court will assume there is no contact in specific cases, unless one party can argue that in their particular matter, that legal principle should not apply.
There is a ‘rebuttable presumption’ that there is no binding legal contract between family members or in social relationships.
The Facts of the Case
In this case the plaintiff said that the defendant had promised in 2010 that if the plaintiff did clerical services for her in relation to the defendant’s family court proceedings, she would buy the plaintiff a small house in the suburb of Double Bay in Sydney.
The plaintiff was a single woman aged 77 years. The defendant was a married woman in her mid-50’s. The parties met prior to late 2008, but it appears that they became friends about 2008 and until the friendship broke down in 2010.
The defendant said that she and the plaintiff had a close and personal friendship. The plaintiff agreed that the parties had a friendship and that she had voluntarily helped the defendant with her family law proceedings up to 2010.
The plaintiff said that the defendant had told her in 2009 that when her legal case was over, she would buy a house for the plaintiff. The plaintiff said this conversation occurred as a result of her being told she would have to move out of her rented unit. In 2010 the plaintiff said that the defendant entered into an agreement with her, stating that she would buy the house, if the defendant continued to perform the work she had previously done for the plaintiff.
The plaintiff said that the outline of the agreement was written on a document and that the rest of the agreement was oral (the words they said to each other) or implied by what each of the parties did. The plaintiff said that she had given that document to lawyers and it had not been returned to her. It had been lost.
In 2010 the defendant also sent an email to the plaintiff saying that she had trusted her with everything and she always thought about the future of the plaintiff and where she would live and be comfortable.
The plaintiff replied in writing and noted that the defendant had said that she would pay her enough money to buy a house. She asked when she would be paid. It appears that the defendant did not reply to the plaintiff’s email.
As noted above, the plaintiff said that the defendant would buy her a house, if the plaintiff continued to assist her with work on her legal case. The evidence indicated that the plaintiff did work on the legal case. At one point, the defendant told a third person that the plaintiff had spent a large amount of time working on her case.
The Court’s Decision
The court said that not every promise is legally enforceable.
It did not accept, on the balance of probabilities, that there was a letter from the defendant in 2010 allegedly offering to buy the defendant a house. It accepted that the defendant probably did make a promise to buy the plaintiff a house, when the legal case was over. This was supported by the emails and particularly the defendant’s failure to reply to the plaintiff’s last email about the defendant providing her with money to buy a house. The court said most people would reply and deny that statement if it was false. The defendant did not.
The court therefore accepted that a promise was made in 2010.
The court did not accept that there was consideration from the plaintiff for the promise made by the defendant. The court also noted that it was not very clear how much work the plaintiff had done for the defendant in her legal case. A reasonable person would consider that the value of the promised house was out of proportion with any work the plaintiff was doing for the defendant. At the time of the hearing the court noted a small house in Double Bay was worth approximately $1,200,000.
The court also found that there was no intention to create legal relations between the parties, as they had a social relationship. A reasonable person would not consider the language used by the parties to show that there was a specific act that had to be done in exchange for the promise to buy a house.
The defendant had said that the plaintiff was helping her as a friend, just as she had done for the plaintiff by paying occasionally for meals and by paying for the plaintiff’s expenses to have a total knee replacement in a hospital overseas, as well as for overseas holidays. The court found that the defendant intended only to give the plaintiff a substantial gift as a friend, if her family court proceedings went well.
There was no intention to form a binding agreement. The plaintiff lost the case.