Keyes, Mary; Burns, Kylie --- "Contract And The Family: Whither Intention" [2002] MelbULawRw 30; (2002) 26(3) Melbourne University Law Review 577
[*] BA, LLB (Hons) (Qld), Grad Cert in Higher Education (Griff); Barrister of the Supreme Court of Queensland and the High Court of Australia; Senior Lecturer, Law School, Griffith University.
[†] BA, LLB (Hons) (Qld); LLM (QUT); Lecturer, Law School, Griffith University. An earlier version of this paper was presented at the Contracts Workshop, Law Program, Research School of Social Sciences, Australian National University, 6–8 February 2002 and at the Law of Obligations: Connections and Boundaries Conference, The University of Melbourne,
21–2 February 2002. We thank Nikki English for her research assistance and the referees for their comments.
[1] This applies where the parties are living together in amity. Agreements reached by parties who are separated are far more likely to be enforced: Popiw v Popiw [1959] VicRp 32; [1959] VR 197; Merritt v Merritt [1970] EWCA Civ 6; [1970] 1 WLR 1211.
[2] Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 187 ALR 92, 100 (‘Ermogenous’). The High Court suggested that presumptions of intention are of use only to indicate where the onus of proof lies.
[3] See, eg, Peter Heffey, Jeannie Paterson and Andrew Robertson, Principles of Contract Law (2002) 107–8; J W Carter and D J Harland, Contract Law in Australia (4th ed, 2002) 165.
[4] [2002] HCA 8; (2002) 187 ALR 92.
[5] Sally Wheeler and Jo Shaw, Contract Law: Cases, Materials and Commentary (1994) 148.
[6] See Heffey, Paterson and Robertson, above n 3, 103; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract (7th ed, 1997) 181; Carter and Harland, above n 3, 163; D W Greig and J L R Davis, The Law of Contract (1987) 190.
[7] Ermogenous [2002] HCA 8; (2002) 187 ALR 92, 99 (Gaudron, McHugh, Hayne and Callinan JJ).
[8] Heffey, Paterson and Robertson, above n 3, 104; Carter and Harland, above n 3, 164, 166.
[9] [2002] HCA 8; (2002) 187 ALR 92, 100.
[10] By implication, in other cases the party alleging lack of intention bears the onus of proving that fact. The joint judgment in Ermogenous does not specifically confirm that this remains the law but we submit that this is the better interpretation of the judgment.
[11] Ermogenous [2002] HCA 8; (2002) 187 ALR 92, 100.
[12] Ibid.
[13] Ibid.
[14] Ibid. This interpretation is not inconsistent with their Honours’ statement that it would be both difficult and wrong to formulate prescriptive rules to determine when intention exists: at 99–100. However, the joint judgment does not take issue with the substance of the principle that in certain family contracts the issue of intention must positively be proved: at 100. Although the matter is not free from doubt, we take the joint judgment to be correcting reliance on presumptions, and not to be correcting the fundamental distinction between commercial cases (in which the party alleging a lack of intention must prove that fact) and family cases (in which the party alleging intention must prove that fact).
[15] Ibid 100. This is the ‘more limited proposition’ advanced by the respondent on the appeal: at 103.
[16] Edwards v Skyways Ltd [1964] 1 WLR 349; Rose and Frank Co v J R Crompton & Bros Ltd [1932] 2 KB 261.
[17] Stephen Hedley argued that ‘where parties are dealing at arms’ length’, the relevant principle is that ‘there is no requirement of intention to create legal relations’: ‘Keeping Contract in Its Place — Balfour v Balfour and the Enforceability of Informal Agreements’ (1985) 5 Oxford Journal of Legal Studies 391, 412.
[18] Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502, 523.
[19] Balfour v Balfour [1919] 2 KB 571 (‘Balfour’); Cohen v Cohen [1929] HCA 15; (1929) 42 CLR 91, 96 (‘Cohen’); Ermogenous [2002] HCA 8; (2002) 187 ALR 92.
[20] Megaw J referred to ‘social’ and ‘domestic’ disputes: Edwards v Skyways Ltd [1964] 1 WLR 349, 354–5. Scrutton LJ referred to ‘social and family relations’: Rose and Frank Co v J R Crompton & Bros Ltd [1923] 2 KB 261, 288. Carter and Harland refer to ‘family, social and domestic agreements’: above n 3, 164. Greig and Davis refer to ‘domestic arrangements’ which arise ‘in the context of a family, household or other personal relationship’: above n 6, 191. Heffey, Paterson and Robertson describe the general category of cases in which intention must be proven as ‘domestic and social agreements’, although they proceed to define the cases more specifically: above n 3, 107–10.
[21] See Riches v Hogben [1985] 2 Qd R 292.
[23] [1929] HCA 15; (1929) 42 CLR 91, 96.
[25] Ibid 330, referring to seven reported cases in which family agreements between non-spouses were enforced, and four reported cases in which they were not enforced. The seven successful cases were: Wakeling v Ripley (1951) 51 SR (NSW) 183 (agreement between a brother and sister and her spouse); Todd v Nicol [1957] SASR 72 (agreement between sisters-in-law and aunt and niece); Parker v Clark [1960] 1 WLR 286 (agreement between aunt and niece (and members of her family)); Simpkins v Pays [1955] 1 WLR 975 (agreement between grandmother and grand-daughter); Popiw v Popiw [1959] VicRp 32; [1959] VR 197 (agreement between husband and wife who had separated); Raffaele v Raffaele [1962] WAR 29 (agreement between parents and son); Roufos v Brewster (1971) 2 SASR 218 (commercial agreement between parents-in-law and son-in-law). In these cases, the courts were more likely to consider the objective appearance of intention rather than apply a presumption of non-enforcement. Relevant factors in these cases included the existence of a formal record of the arrangement, the language used by the parties, the seriousness of the promise, and the seriousness of the consequences to the promisee: see Riches v Hogben [1985] 2 Qd R 292, 297–8 (McPherson J).
[26] See Todd v Nicol [1957] SASR 72, 77.
[27] Hedley, above n 17, 394. See also P S Atiyah, An Introduction to the Law of Contract (5th ed, 1995) 153.
[28] See below n 83 and accompanying text.
[29] Balfour [1919] 2 KB 571; Cohen [1929] HCA 15; (1929) 42 CLR 91. As we have argued above, our interpretation of Ermogenous is that the joint judgment merely corrects the form and not the substance of the intention principles. Commentators on contract law often express reservations about the assumption that family agreements are unenforceable, but this does not appear to have had much impact on the judiciary.
[30] [1919] 2 KB 571, 578–80.
[31] Ibid 579.
[32] Ibid 578. Warrington LJ made a similar argument: at 575.
[33] Greig and Davis, above n 6, 192.
[34] See Michael Freeman, ‘Contracting in the Haven: Balfour v Balfour Revisited’ in Roger Halson (ed), Exploring the Boundaries of Contract (1996) 70.
[35] Carter and Harland, above n 3, 165.
[36] See, eg, High Court Rules 1952 (Cth) O26 r 18(2); Federal Court Rules 1979 (Cth) O20 r 2(1); Uniform Civil Procedure Rules 1999 (Qld) r 171(1)(d), (2); Supreme Court (General Civil Procedure) Rules 1996 (Vic) r 23.02.
[37] Carter and Harland, above n 3, 165.
[38] See also Kirby J’s discussion of the ‘justiciability’ of employment arrangements between a church and its ministers: Ermogenous [2002] HCA 8; (2002) 187 ALR 92, 107–8.
[39] Balfour [1919] 2 KB 571, 579.
[40] [1968] EWCA Civ 4; [1969] 1 WLR 328 (involving a woman in Trinidad who offered to maintain her daughter provided that she undertook legal studies in London).
[41] Sandra Berns lists government control of registration of marriages, the validity of marriages, taxation and welfare benefits which are dependent on family circumstances, dissolution of marriage and its consequences, and the welfare of children: Sandra Berns, ‘Regulation of the Family: Whose Interests Does It Serve?’ [1992] GriffLawRw 12; (1992) 1 Griffith Law Review 152, 153–4. See also Frances Olsen, ‘The Myth of State Intervention in the Family’ (1985) 18 University of Michigan Journal of Law Reform 835.
[42] See, eg, R v L [1991] HCA 48; (1991) 174 CLR 379 (holding that marriage does not constitute automatic consent to sexual intercourse). Not all legislative attempts to respond to these problems have been practically effective. For evidence in the case of domestic violence in Queensland, see Heather Douglas and Lee Godden, The Decriminalisation of Domestic Violence (2002).
[43] This is because the right of access to the courts is a fundamental constitutional entitlement: see Bremer Vulkan v South India Shipping Corporation Ltd [1981] AC 909, 977; Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603, 623 (Gummow J); Hi-Fert Pty Ltd v Kuikiang Maritime Carriers [1997] FCA 575; (1997) 75 FCR 583, 589. See also Atiyah, above n 27, 320. In extremely unusual circumstances, the court is obliged to give effect to the parties’ contractual submission to arbitration: International Arbitration Act 1974 (Cth) s 7(2).
[44] See generally Katherine O’Donovan, Sexual Divisions in Law (1985) ch 1.
[45] Clare Dalton, ‘An Essay in the Deconstruction of Contract Doctrine’ (1985) 94 Yale Law Journal 997, 1098–9.
[46] Wheeler and Shaw, above n 5, 165. See also Margaret Thornton, ‘Intention to Contract: Public Act or Private Sentiment?’ in Ngaire Naffine, Rosemary Owens and John Williams (eds), Intention in Law and Philosophy (2001) 217.
[47] Balfour [1919] 2 KB 571, 577 (Duke LJ), 579 (Atkin LJ).
[48] Ibid.
[49] Ibid.
[50] See E Eugene Clar, ‘Small Claims Courts and Tribunals in Australia: Development and Emerging Issues’ [1991] UTasLawRw 7; (1991) 10 University of Tasmania Law Review 201; John Goldring, ‘Small Claims Tribunals in Australia’ (Pt 1) (1976) 2 Legal Service Bulletin 2; David de Vaus, ‘Small Claims Tribunals: An Effective Alternative to the Court System?’ (1987) 22 Australian Journal of Social Issues 597.
[51] For discussions of the contribution of Macneil’s work to contract theory see William Whitford, ‘Ian Macneil’s Contribution to Contracts Scholarship’ [1985] Wisconsin Law Review 545; ‘Relational Contract Theory: Unanswered Questions’ (2000) 94 Northwestern University Law Review 735; Jay Feinman, ‘Relational Contract Theory in Context’ (2000) 94 Northwestern University Law Review 737; Ian Macneil, ‘Relational Contract Theory: Challenges and Queries’ (2000) 94 Northwestern University Law Review 877; Eric Posner, ‘A Theory of Contract Law under Conditions of Radical Judicial Error’ (2000) 94 Northwestern University Law Review 749. Some argue, however, that the effect of relational contract theory on the development of contract theory and the substantive law has been limited: Matthew Lees, ‘Contract, Conscience, Communitarian Conspiracies and Confucius: Normativism through the Looking Glass of Relational Contract Theory’ [2001] MelbULawRw 4; (2001) 25 Melbourne University Law Review 82, 83.
[52] Heffey, Paterson and Robertson, above n 3, 31.
[53] Posner, ‘Conditions of Radical Judicial Error’, above n 51, 749.
[54] Elizabeth Scott and Robert Scott, ‘Marriage as Relational Contract’ (1998) 84 Virginia Law Review 1225, 1248–9.
[55] Seddon and Ellinghaus, above n 6, 894–6.
[56] Heffey, Paterson and Robertson, above n 3, 27.
[57] Stewart Macaulay, ‘Non-Contractual Relations in Business: A Preliminary Study’ (1963) 28 American Sociological Review 55. For a recent study of patterns in litigation of contractual disputes, see Marc Galanter, ‘Contract in Court; Or Almost Everything You May or May Not Want to Know about Contract Litigation’ [2001] Wisconsin Law Review 577.
[58] Although relational contract theorists do not argue that contract law has no role in the regulation of contracts and dispute resolution, only that it has a far more limited role than traditionally thought.
[59] This is so even to the extent of ignoring contractual rights, or renegotiating contractual entitlements during the course of the ongoing relationship.
[60] Relational contract theory has been criticised on the basis of whether all categories of contract can be considered ‘relational’, and whether the results of empirical work in particular industries can extrapolated to all categories of contract. Some industries, such as the commercial banking industry, may be less ‘relational’ than others: see Heffey, Paterson and Robertson, above n 3, 28.
[61] Wheeler and Shaw, above n 5, 150. See also Hedley, above n 17, 394.
[63] In fact, even marriage itself may be viewed as a relational contract: see Scott and Scott, above n 54; cf John Wightman, ‘Intimate Relationships, Relational Contract Theory, and the Reach of Contract’ (2000) 8 Feminist Legal Studies 93. Wightman argues that the potential of relational contract theory to explain or enhance the enforcement of tacit or partly expressed intimate relationship arrangements needs further consideration. He highlights differences in the application of relational contract theory to commercial arrangements and intimate arrangements.
[64] Behavioural decision theory is also known by other names, including ‘behavioural law and economics’, and the ‘“new” law and psychology’. This is not an uncontroversial area. Some writers have urged restraint and caution in reliance on a field whose legitimacy in analysing the legal system is yet to be proven. See, eg, Robert Hillman, ‘The Limits of Behavioral Decision Theory in Legal Analysis: The Case of Liquidated Damages’ (2000) 85 Cornell Law Review 717; Tanina Rostain, ‘Educating Homo Economicus: Cautionary Notes on the New Behavioral Law and Economics Movement’ (2000) 34 Law and Society Review 973.
[66] Melvin Eisenberg, ‘The Limits of Cognition and the Limits of Contract’ (1995) 47 Stanford Law Review 211; Russell Korobkin, ‘The Status Quo and Contract Default Rules’ (1998) 83 Cornell Law Review 608. For criticisms of the application of BDT to contract, see Hillman, above n 64.
[67] For summaries of BDT and behavioural law and economics see Cass Sunstein (ed), Behavioral Law and Economics (2000); Russell Korobkin and Thomas Ulen, ‘Law and Behavioral Science: Removing the Rationality Assumption from Law and Economics’ (2000) 88 California Law Review 1051; Christine Jolls, Cass Sunstein and Richard Thaler, ‘A Behavioral Approach to Law and Economics’ in Cass Sunstein (ed), Behavioural Law and Economics (2000) 13; Jeffrey Rachlinski, ‘The “New” Law and Psychology: A Reply to Critics, Skeptics and Cautious Supporters’ (2000) 85 Cornell Law Review 739.
[68] In weaker versions of rational choice theory, utility maximisation is substituted for wealth maximisation. See Korobkin and Ulen, above n 67, 1060–6, for different versions and critiques of rational choice theory.
[69] Jolls, Sunstein and Thaler, above n 67, 13–17. It should be noted, however, that some theorists seek to use these perspectives within the larger school of law and economics on the basis that the insight of behavioural sciences improves upon, rather than destroys, the existing methodologies of law and economics: see ibid. See also Richard Posner, ‘Rational Choice, Behavioral Economics and the Law’ (1998) 50 Stanford Law Review 1551, for a critique of BDT attacks on rational choice theory.
[70] Cass Sunstein, ‘Introduction’ in Cass Sunstein (ed), Behavioral Law and Economics (2000) 1,
1–7.
[71] The concept was originally introduced in Herbert Simon, ‘A Behavioral Model of Rational Choice’ (1955) 69 Quarterly Journal of Economics 99.
[72] Jolls, Sunstein and Thaler, ‘A Behavioral Approach to Law and Economics’, above n 67, 14.
[73] Korobkin and Ulen, above n 67, 1075.
[74] Ibid 1075–6.
[75] Ibid 1077–83.
[76] Ibid 1076.
[77] Ibid. Although, as Korobkin and Ulen note, the everyday use of heuristics is also a ‘useful evolutionary adaption’ which allows ease in everyday decision-making: at 1076.
[78] Sunstein, ‘Introduction’, above n 70, 4.
[79] Lyn A Baker and Robert E Emery, ‘When Every Relationship Is Above Average: Perceptions and Expectations of Divorce at the Time of Marriage’ (1993) 17 Law and Human Behavior 439.
[80] Sunstein, ‘Introduction’, above n 70, 6.
[81] Eisenberg, above n 66, 221. Another example of the effect of the availability heuristic could be fears that the current Australian insurance crisis has been caused by an explosion in litigation. American evidence suggests a public overestimation of the increase in claims and the costs of claims due to the effect of publicity. See, eg, Donald Bailis and Robert MacCounn, ‘Estimating Liability Risks with the Media as Your Guide: A Content Analysis of the Media Coverage of Tort Litigation’ (1996) 20 Law and Human Behavior 419; Marc Galanter, ‘Reading the Landscape of Disputes: What We Know and Don’t Know (and Think We Know) about Our Allegedly Contentious and Litigious Society’ (1983) 31 University of California Los Angeles Law Review 4.
[82] Eisenberg, above n 66, 222.
[83] Sunstein, ‘Introduction’, above n 70, 4. The status quo bias is related to the endowment effect, which posits that ‘individuals will often place a higher value on an entitlement if they own it than if they do not’: Korobkin, above n 66, 625.
[84] Korobkin, above n 66, 629.
[85] Particularly those in ‘thick’ relationships such as family relationships. See Eisenberg, above n 66, 251.
[86] Ibid 227.
[87] Ibid 251.
[88] Ibid 228, 251–2.
[89] See Korobkin, above n 66.
[90] Ibid 613.
[91] Ibid 621. This assumes an absence of transaction costs. Some writers have argued that the content of default rules does matter: see Ian Ayres and Robert Gertner, ‘Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules’ (1989) 99 Yale Law Journal 87.
[92] Korobkin, above n 66, 611–12.
[93] Ibid 630–3.
[94] Of course, as more often will be the case, parties will simply not turn their minds at all to the existence of a default legal rule.
[95] Korobkin, above n 66, 666–8.
[96] Korobkin and Ulen, above n 67, 1113–19.
[97] Ibid 1114.
[98] Ibid 1115.
[99] The nullification is effective because in many cases the remedy awarded in estoppel is equivalent to the enforcement of the contractual promise: see Heffey, Paterson and Robertson, above n 3, 172–4.
[100] Family Law Amendment Act 2000 (Cth), amending the Family Law Act 1975 (Cth).
[101] Family Law Act 1975 (Cth) ss 90B(2) (agreements made before marriage), 90C(2) (agreements made during marriage), 90D(2) (agreements made after dissolution of marriage).
[102] Prior to the modern development of equitable estoppel, a similar function was performed by the constructive trust. Now, a constructive trust will not be imposed until the court has first determined whether ‘there is an appropriate equitable remedy which falls short of the imposition of a trust’: Giumelli v Giumelli (1999) 196 CLR 101, 102.
[103] [1957] SASR 72. This case concerned a promise by the plaintiff to allow the defendants (her sister-in-law and niece) to reside in her home for the rest of their lives if they would move from Scotland to Adelaide to live with her. The defendants acted in reliance on that promise to their detriment. At the time the case was decided, promissory estoppel was only recognised as a defence and hence gave them no substantive claim against the plaintiff.
[104] (1951) 51 SR (NSW) 183. In this case, the defendant promised the plaintiffs (his sister and her husband) that if they moved from England to live with him in Sydney, he would give them a place in which to live during his lifetime and, on his death, he would give all his property to them.
[105] [1919] 2 KB 571. See Ray Mulholland, ‘Nay, This Be Estoppel’ [1998] New Zealand Law Journal 179, 181.
[106] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 404 (Mason CJ and Wilson J).
[107] Ibid 402 (Mason CJ and Wilson J). See similar comments at 424 (Brennan J) and 453 (Deane J). See generally Miroslav Mijatovic, ‘Intention as a Unifying Concept in Contract Law’ [1991] Commercial Law Quarterly 30.
[108] In many cases, the parties are closely related: see, eg, Giumelli v Giumelli (1999) 196 CLR 1011 (where the plaintiff was the defendants’ son). See also W v G (1996) 20 Fam LR 49 (the parties had previously been in a cohabiting lesbian relationship in which children were born to one partner). W v G is discussed in detail by Wightman, who makes the point that in that case there was no express agreement between the parties in relation to child support and therefore contract law was inappropriate for resolving the dispute: Wightman, above n 63, 95, 98.
[109] Hedley, above n 17, 412.
[110] (1990) 170 CLR 394, 412. See also Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 433 (Brennan J).
[111] Hedley, above n 17, 412.
[112] The court could take any agreement between the parties into account but such agreements were not enforceable per se: In the Marriage of Hannema (1981) 54 FLR 79, 87. The Family Law Act 1975 (Cth) s 79 contains the relevant provisions to which the court must refer in making adjustments to property. Financial agreements reached after relationship breakdown were enforceable in some circumstances: Family Law Act 1975 (Cth) ss 86–7. In some States and Territories, legislation specifically recognises as enforceable financial agreements made between de facto spouses: see, eg, Property (Relationships) Act 1984 (NSW) pt 4.
[113] Family Law Act 1975 (Cth) pt VIIIA.
[114] Sections 90B(2) (agreements made before marriage), 90C(2) (agreements made during marriage), 90D(2) (agreements made after dissolution of marriage).
[118] They refer to the Explanatory Memorandum, Family Law Amendment Bill 1999 (Cth) and the Attorney-General’s Second Reading speech: Belinda Fehlberg and Bruce Smyth, ‘Pre-Nuptial Agreements for Australia: Why Not?’ (2000) 14 Australian Journal of Family Law 80, 88–9. See also Commonwealth, Parliamentary Debates, House of Representatives, 22 September 1999, 10 151 (Daryl Williams, Attorney-General).
[119] This argument is naive. If the parties question the enforceability of the financial agreement, litigation is unlikely to be less complex, lengthy or costly than it would be in the absence of a financial agreement.
[120] Fehlberg and Smyth, above n 118, 89 (emphasis in original).
[121] Ibid 93.
[122] Marcia Neave, ‘Private Ordering in Family Law: Will Women Benefit?’ in Margaret Thornton (ed), Public and Private: Feminist Legal Debates (1995) 144, 155.
[123] We would not push this point too far. As Hedley has observed, ‘[c]ontract-talk in relation to family relations is ubiquitous, and can be used on both sides of most possible arguments’: Stephen Hedley, Restitution: Its Division and Ordering (2001) 76.
[124] Fehlberg and Smyth, above n 118, 89–93. Similar arguments are made in detail by Neave, writing five years before the legislation was passed: Neave, above n 122.
[126] This argument is made by Fehlberg and Smyth, because of ‘features typically associated with the marriage relationship’: Fehlberg and Smyth, above n 118, 96.