Academic journal article Melbourne University Law Review

Contract and the Family: Whither Intention?

Academic journal article Melbourne University Law Review

Contract and the Family: Whither Intention?

Article excerpt

[Contract law discriminates between commercial and non-commercial (typically, family) agreements. According to the principles of intention to be contractually bound, family agreements are presumptively unenforceable. The justifications for impeding enforcement of such agreements are ill-founded and outdated. Modern theories suggest that the distinction between commercial and family agreements cannot be maintained In particular, we employ relational contract theory and behavioural decision theory to investigate the validity of this distinction. We discuss how other areas of law, particularly estoppel and family legislation, recognise the need to enforce family agreements in some situations. We argue that contract law should take a similar approach, and that the intention principles as presently expressed serve no rational purpose.]

I    Introduction
II   Intention to Be Contractually Bound
III  A Critical Analysis of the Classical Foundations of Intention
       A  Conventional Arguments in Support of Non-Enforcement of Family
          Contracts
       B  Relational Contract Theory
       C  Behavioural Decision Theory
          1  Uncertainty and Bounded Rationality
          2  Heuristics and Biases
          3  The Effect of Context
IV   Enforcing Family Contracts?
       A  Estoppel
       B Financial Agreements between Spouses
V    Conclusion

I INTRODUCTION

Traditionally, agreements made in a family context have been seen as belonging to an extremely private sphere which is outside the realm of contract law. We can all recall classic examples of dress allowances, promises to do the washing up and other such trivialities which `demonstrate' the unsuitability of contract law to enforce family agreements. The assumption of contract law that the parties to family agreements lack an intention to be contractually bound has served a formidable gatekeeper role. (1) It is a highly effective default principle which impedes enforcement of family agreements, and performs a powerful symbolic function delineating the realm of law from the realm of the family and the feminine, privileging the former over the latter.

It must be seriously questioned whether this general assumption is sustainable in modern contract law. The last several decades have seen the breakdown of distinctions between the public and the private, and between the market and the family. In other areas of law, agreements made within the family are enforced. The High Court has recently questioned the intrinsic value of the presumptions of intention. (2) Many commentators have criticised the intention principles as they apply to family agreements. (3) This article critically scrutinises contract law's treatment of family agreements. It is argued that the central distinction between family and non-family contracts serves no legitimate purpose; it no longer reflects social conditions and is inconsistent with other areas of law.

In Part II we outline the principles governing intention to be contractually bound, including a discussion of the High Court's decision in Ermogenous v Greek Orthodox Community of SA Inc. (4) In Part III we argue that the justifications for assuming the unenforceability of family agreements are unsupportable. We particularly draw upon relational contract theory and behavioural decision theory to analyse critically this assumption. In Part IV, we discuss the enforcement of family agreements using estoppel and family legislation. These developments show that contract law's continued assumption that family contracts should not be enforced is outdated and inconsistent with other areas of law.

II INTENTION TO BE CONTRACTUALLY BOUND

The intention to create a contractually enforceable agreement is `regarded as an immovable aspect of modern [contract] doctrine.' (5) All the treatises regard it as a necessary element of contract formation. (6) Recently, in Ermogenous, the High Court affirmed that intention to create an enforceable agreement is an essential precondition to contractual liability. …

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