Introduction
For a legally binding contract to be formed in English law, several key elements must be present: offer, acceptance, consideration, and an intention to create legal relations (ICLR). While commercial agreements are generally presumed to have ICLR, the courts adopt a different starting point for agreements made in a social or domestic context. The classic cases of Balfour v Balfour and Merritt v Merritt are fundamental to understanding how this principle is applied to arrangements between spouses. This essay will critically analyse these two landmark decisions. It will argue that the crucial distinguishing factor between them, which led to the finding of a legal obligation in Merritt but not in Balfour, was the status of the relationship between the parties at the time the agreement was made. The move from an amicable marital relationship to one of separation fundamentally altered the court's assessment of whether the parties intended their agreement to be legally enforceable. Other factors, such as the formality and certainty of the agreement, also contributed to the different outcomes.
The Presumption in Domestic Agreements
In contract law, not every promise or agreement is intended to result in legal consequences. The doctrine of ICLR acts as a filter, separating enforceable bargains from social or domestic arrangements that are not meant to be subject to court intervention. The general rule, established over time, is that there is a rebuttable presumption that parties do not intend to create legal relations when the agreement is made in a domestic or social setting (Poole, 2021).
The case of Balfour v Balfour [1919] 2 KB 571 is the leading authority for this presumption. The rationale behind it is rooted in public policy. As Lord Justice Atkin noted in his judgment, it is felt that the courts would be overwhelmed if every informal family promise could be litigated. He famously observed that "the small courts of this country would have to be multiplied one hundredfold if these arrangements were held to result in legal obligations" (Balfour v Balfour, p. 579). Furthermore, there is a belief that the law should not interfere in the private lives of families, as such disputes are often outside the proper domain of the judiciary. This presumption, however, is not absolute and can be rebutted by evidence showing that the parties did, in fact, intend for their agreement to be legally binding. The case of Merritt v Merritt provides a clear example of such a rebuttal.
Balfour v Balfour: The Foundation of the Presumption
The facts of Balfour v Balfour are straightforward. Mr and Mrs Balfour were a married couple. Mr Balfour was a civil servant based in Ceylon (now Sri Lanka). On a trip back to England, Mrs Balfour was advised by her doctor to remain there due to her health. Before Mr Balfour returned to Ceylon, he verbally promised to pay her an allowance of £30 per month until she was able to rejoin him. At the time of this agreement, their relationship was amicable. Later, their relationship deteriorated, and they separated. Mr Balfour stopped making the payments, and Mrs Balfour sued him for breach of contract.
The Court of Appeal unanimously held that there was no enforceable contract. Lord Justice Atkin’s judgment is the most frequently cited. He reasoned that arrangements made between husbands and wives are common but are not typically contracts. He stated: "Agreements such as these are outside the realm of contracts altogether. The common law does not regulate the form of agreements between spouses. Their promises are not sealed with seals and sealing wax. The consideration that really obtains for them is that natural love and affection which counts for so little in these cold Courts" (Balfour v Balfour, p. 579).
The court’s decision was based on the understanding that when the agreement was made, the Balfours were living in amity as husband and wife. In this context, the promise of a maintenance allowance was seen as a simple domestic arrangement, not a formal legal contract. The court presumed that neither party would have contemplated legal action if the promise was broken. The key factor was the context of the harmonious marital relationship, which created a strong presumption against ICLR.
Merritt v Merritt: Rebutting the Presumption
Fifty years later, the Court of Appeal was presented with a similar, yet crucially different, factual scenario in Merritt v Merritt [1970] 1 WLR 1211. Mr and Mrs Merritt jointly owned their matrimonial home. They separated after Mr Merritt formed a relationship with another woman. They met to discuss their financial situation, and Mr Merritt agreed to pay Mrs Merritt £40 per month. Crucially, he also signed a written document stating that if Mrs Merritt paid all outstanding mortgage payments, he would transfer the house into her sole name. After she had paid off the mortgage, Mr Merritt refused to transfer the property. Mrs Merritt sued for a declaration that the house belonged to her and for an order to compel the transfer.
The Court of Appeal found in favour of Mrs Merritt, holding that there was a legally binding contract. Lord Denning MR, giving the leading judgment, explicitly distinguished the case from Balfour v Balfour. He argued that the presumption against ICLR established in Balfour does not apply when the parties are separated or about to separate. He explained: "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 honourable understandings… They want everything cut and dried. It may safely be presumed that they intend to create legal relations" (Merritt v Merritt, p. 1213).
In Merritt, the context was not one of marital harmony but of separation and distrust. The parties were dealing with each other 'at arm's length' to sort out their finances following the breakdown of their marriage. In this situation, the court was prepared to find that the parties intended their agreement to have legal effect and to be enforceable if breached.
The Distinguishing Factors Analysed
The primary factor distinguishing Merritt from Balfour was the state of the relationship between the spouses. In Balfour, the agreement was made while the couple was happily married, and the presumption against ICLR was strong. In Merritt, the agreement was made when the couple had already separated. This change in circumstance was enough to rebut the presumption. As Lord Denning made clear, the "natural love and affection" that Atkin LJ spoke of in Balfour had disappeared from the Merritts' relationship. They were adversarial parties negotiating a settlement, not a loving couple making a domestic arrangement. This factual difference was the cornerstone of the legal distinction.
A second important factor was the formality of the agreement. In Balfour, the promise was made orally and was informal in nature. In contrast, the agreement in Merritt was put in writing and signed by Mr Merritt. While a written document is not conclusive proof of ICLR, it provides strong evidence of it (McKendrick, 2020). The act of writing down the terms and signing the note indicated that the parties regarded their agreement as a serious, binding commitment, not just a casual promise. This formality reinforced the conclusion that ICLR was present.
Thirdly, the certainty and nature of the agreement itself can be seen as a distinguishing point. The arrangement in Merritt concerned a significant asset—the matrimonial home—and involved a clear, one-off obligation (transfer of title) in exchange for a defined performance (paying off the mortgage). This was a major financial transaction. The agreement in Balfour, an ongoing monthly allowance, was arguably more akin to a flexible domestic housekeeping arrangement, the terms of which might naturally vary with the parties' circumstances. The certainty and significance of the terms in Merritt lent weight to the view that it was intended to be a legally enforceable contract.
Conclusion
In conclusion, the differing outcomes in Balfour v Balfour and Merritt v Merritt demonstrate the practical application and flexibility of the doctrine of intention to create legal relations. Balfour established the important presumption that in amicable domestic arrangements, the parties do not intend to be legally bound. This serves the public policy goal of keeping the law out of the private sphere of family life. However, Merritt provides a vital counterpoint, clarifying that this presumption is not absolute. The opinion of this essay is that the decisive factor differentiating the two cases was the context of the marital relationship. The shift from a state of amity in Balfour to one of separation in Merritt was sufficient for the court to rebut the presumption and find that the parties intended their agreement to be legally enforceable. The presence of a written, signed document in Merritt further evidenced this intention, creating a clear and binding legal obligation where one was absent in the purely domestic arrangement of the Balfours.
References
Balfour v Balfour [1919] 2 KB 571
McKendrick, E. (2020) Contract Law. 14th edn. London: Palgrave.
Merritt v Merritt [1970] 1 WLR 1211
Poole, J. (2021) Textbook on Contract Law. 15th edn. Oxford: Oxford University Press.
