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Keyes, Mary; Burns, Kylie --- "Contract And The Family: Whither Intention" [2002] MelbULawRw 30; (2002) 26(3) Melbourne University Law Review 577

Contract And The Family: Whither Intention?

MARY KEYES[*]AND KYLIE BURNS[†]

[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 The justifications for impeding enforcement of such agreements are ill-founded and outdated.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.]

CONTENTS


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 Ermo-

genous 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.[7] Determining intention is a question of fact and, as for other aspects of contract law, an objective test applies. Until Ermogenous, it was very widely agreed that the determination of intention was technically to be resolved by reference to presumptions of fact.[8] Different presumptions applied depending on whether the arrangement was characterised as a commercial or non-commercial transaction. In Ermogenous, Gaudron, McHugh, Hayne and Callinan JJ, who gave a joint judgment, stated that they doubted ‘the utility of using the language of presumptions in this context.’[9] Whether the language of presumptions is used or not, their Honours apparently confirmed that in certain types of cases, the Court commences its determination as to the existence of intention with the view that the parties lacked intention and requires the party alleging a contract to prove the existence of intention.[10] The joint judgment recognised that the presumptions had been elevated to such an extent that they had become difficult, if not impossible, to rebut. Their Honours believed — correctly, in our view — that the presumptions of fact, which should merely signify where the onus of proof falls, had ossified into strict rules of law.[11]

Despite acknowledging that it was inappropriate to express the relevant principles in the form of presumptions, their Honours evidently endorsed the existing principles of proof of intention. As they did not clearly indicate precisely when it would be necessary to prove intention, it must be assumed that the well-established distinction between commercial and family agreements continues to apply. Ermogenous concerned the entitlement of an archbishop of the Greek Orthodox Church, under an alleged contract of employment, to a payment in respect of unused annual and long service leave upon the termination of his employment. The Church argued that he was not entitled under contract law because there was no intention to be contractually bound. The issue of intention was the focus of the appeal before the High Court. The majority held that ‘there could be no doubt’[12] that the onus of proving the existence of a contract fell on the appellant, who alleged the existence of a contractual relationship. It is not clear why the onus fell on him — it may have been because the dispute concerned ‘the engagement of a minister of religion’,[13] or that ‘issue was joined’ as to intention.[14] If the latter is the case, intention must be positively proven whenever one party puts it in issue. This interpretation seems to us unlikely as it would represent a significant change from the previous principles. We therefore assume that the High Court in Ermogenous extended the class of cases in which intention must positively be proved to include matters ‘concerning the engagement of a minister of religion.’[15] In the following discussion, therefore, we recast the principles of intention to take into account the criticism in the joint judgment of the language of presumptions, but not of the substance of the principles.

In commercial disputes — the vast majority of litigated disputes — the party who alleges that a commercial agreement is not contractually enforceable bears the onus of proving that the parties did not intend that the agreement would be enforceable as a contract.[16] In commercial cases, intention will seldom be in issue.[17] Rogers CJ stated that

[t]he whole thrust of the law today is to attempt to give proper effect to commercial transactions. ... If the statements are appropriately promissory in character, courts should enforce them when they are uttered in the course of business and there is no clear indication that they are not intended to be legally enforceable.[18]

In certain classes of non-commercial disputes, on the other hand, the party who seeks enforcement of the agreement bears the onus of proving that the agreement was intended to be contractually enforceable.[19] Non-commercial disputes are variously referred to by both courts and commentators as ‘family’, ‘social’ and ‘domestic’ disputes.[20] We observe in passing that the cases support a more limited class.[21] Both Balfour v Balfour[22] and Cohen v Cohen,[23] the cases which established the requirement of intention, concerned arrangements between spouses — specifically, the promise by a husband to provide an allowance to his wife. In Riches v Hogben,[24] Williams J found that in a majority of reported contract disputes between family members who are not married to each other, intention was made out.[25] This suggests that the principle is too widely cast; and that the authority for its extension to the wider class of social and domestic contracts is less than certain. Following Ermogenous, the category of non-commercial agreements now extends to arrangements concerning the ‘engagement’ of ministers of religion.

It might be argued that the requirement that intention, or lack of it (as the case requires), be positively established should be uncontroversial since the party alleging or denying intention can always prove that allegation or denial. We argue that these principles do matter, for three reasons.

First, the parties are most unlikely to have considered the question of enforcement of their agreement at all,[26] so proof of an actual intention, or lack thereof, is impossible in almost all cases. Requiring proof of intention imposes a considerable impediment to the enforcement of non-commercial contracts, which carries with it attendant risks and costs. Although evidence of intention is likely to be non-existent, Hedley has noted that there is an irrebutable presumption ‘that the parties had some common intention’ and has observed that ‘evidence that they did not consider the matter at all is treated simply as something that makes the court’s enquiry more difficult.’[27] The court must, in the absence of positive proof, impute a ‘reasonable’ intention to the parties. In doing so, the fact that the starting point is that there is no intention must inevitably influence the court, even if it is careful not to elevate the requirement of proof to a virtually irrebutable presumption.

Second, the intention principles are based on a fundamental distinction between commercial agreements, which are prima facie enforceable, and family agreements, which are prima facie unenforceable. Thus, the law explicitly privileges certain agreements over others. We explore the justifications for doing so in Part III and find them wanting. An awareness of the distinction, and the difficulties in proving intention in non-commercial cases, are likely to influence practitioners to advise the parties to non-commercial agreements either that their agreements are unlikely to be enforced or that enforcement of the agreement will be expensive. The shared understanding of lawyers that some types of agreements, including family arrangements, are at least presumptively unenforceable may also subconsciously influence judicial decision-making.

Third, behavioural decision theory indicates that the parties are unlikely to depart from status quo default legal principles and, as we argue below, this means that if the parties are aware that the law treats certain agreements as being prima facie unenforceable, they are unlikely to contract around this default.[28]

III A CRITICAL ANALYSIS OF THE CLASSICAL FOUNDATIONS OF INTENTION

The intention principles have remained largely unchanged, and largely unchallenged, throughout the 80 years since they were first expressly incorporated into Anglo-Australian contract law.[29] In this Part, we begin by critically analysing the conventional arguments offered in support of the intention principles. We then draw on relational contract theory and behavioural decision theory to analyse the bases of the intention principles.

A Conventional Arguments in Support of Non-Enforcement of Family Contracts

Three justifications are conventionally offered in support of the presumption of non-enforceability of family agreements. All three justifications are derived from the speech of Atkin LJ in Balfour, the case which established the presumption against enforcement of family contracts.[30] The first justification is that the parties would not have contemplated litigation as a method of dispute resolution at the time the agreement was made, because of the nature of their relationship.[31] As discussed below, this merely observes that most individuals are inclined to overoptimism regarding the future of their contracting relationship. This observation applies equally to commercial arrangements. Therefore, if it is maintained, this justification cannot be confined to non-commercial arrangements. Indeed, if taken to its logical conclusion, this rationale would result in the vast majority of contracts being unenforceable.

The second justification is that, as a matter of policy, it is not socially desirable for the courts to be the arbiters of domestic disputes. There are two aspects to this argument. The first aspect is that domestic disputes are perceived to be more likely to be trivial than non-domestic disputes. Judges and commentators commonly attempt to demonstrate the absurdity of enforcing any family agreements by arguing that some family agreements are trivial and could hardly have been contemplated to give rise to litigable rights. For example, Atkin LJ referred to an agreement ‘to take a walk together’.[32] Greig and Davis give the example of ‘an agreement by which one spouse agreed to do the washing and ironing, if the other would do the cleaning, while the cooking was to be a shared responsibility.’[33] Although some family arrangements may well seem trivial, the cases illustrate that others, such as the agreement in Balfour, are not.[34] Carter and Harland emphasise that ‘the courts must be careful to see that agreements which are intended to be taken seriously are observed.’[35] Procedural rules are available to deal with frivolous claims;[36] these operate effectively in other areas of law and there is no reason why they should not be equally effective to ensure that frivolous claims brought in contract law are struck out.[37]

The second aspect of the policy against intervention in domestic disputes is based on the view that the home environment, and especially the marriage relationship, is exceedingly intimate and private; therefore, the law’s intervention in that environment is inappropriate. Atkin LJ expressed this point in terms of the courts’ lack of jurisdiction to hear and determine family disputes.[38] He wrote that ‘each house is a domain into which the King’s writ does not seek to run, and to which his officers do not seek to be admitted.’[39] At best, this justification explains the courts’ refusal to entertain disputes between spouses and possibly other relations who live together, but it does not explain why the principle should apply to relations who do not live together, such as in the case of Jones v Padavatton.[40]

The privacy argument is fallacious because family law, and related bodies of law, intervene to a great extent not only in the matrimonial relationship, but also in many other aspects of domestic relations.[41] Moreover, it is now well recognised that this attitude served to legitimise, perpetuate and entrench discrimination against women in many areas, including marital rape and domestic violence, as well as the inability to enforce seriously intended agreements. In some circumstances, the criminal law has recognised this and responded.[42] It long overdue for contract law to follow suit.

Generally, contractual attempts to oust the jurisdiction of the court are void as contrary to public policy.[43] It is therefore odd, to say the least, that the courts’ reluctance to adjudicate disputes between family members is justified on the ground that the parties intended to exclude the court’s jurisdiction.

The intention principles can thus be seen to reflect classical liberal philosophy. Laissez-faire liberals insist on a strict separation between public matters, which are the province of the state and are hence amenable to legal regulation, and private matters, which are outside the province of the state and hence not amenable to legal regulation.[44] Liberals consider that the market is part of the private sphere, and hence that state intervention in the market should be minimised. Obligations within the market are self-imposed through contract, and the only legitimate role for the state, according to adherents of the laissez-faire approach, is to enforce agreements freely entered into.

Like the market, the home is regarded by classical liberals as being within the private sphere. However, the home is even more remote from the state than the market and hence should be more immune from state intervention.[45] It is ironic that contract, treated in the market context as the most appropriate vehicle for regulation of private arrangements between individuals, is not regarded as an enforceable mechanism for regulating private arrangements between individuals within the home. It is difficult to disagree with Wheeler and Shaw’s argument that

the ‘apparent intentions’ of the parties are no more than a smokescreen for policy choices about the relationship between law and the private, domestic sphere, which seem based on unsophisticated assumptions about what is ‘natural’ in that context.[46]

The final justification for the presumption against enforceability of non-commercial agreements is the floodgates argument.[47] This is closely related to the triviality aspect of the second justification referred to above. In Balfour, Atkin LJ referred to the prospect of the courts being overwhelmed by many small contract claims between family members.[48] In what must surely be among the most melodramatic floodgates claims ever made, his Lordship estimated that the number of small courts would have to be ‘multiplied one hundredfold’ to handle the volume of litigation which would be created if family agreements were enforceable.[49] Atkin LJ found this prospect so unacceptable that he thought that no contract claims between spouses should be enforced, even where the claim was substantial, as it was in Balfour.

Atkin LJ’s concern was unfounded, and has become even more so. Existing procedural mechanisms and costs rules deter individuals from litigating unworthy claims. The cost and inconvenience of legal proceedings effectively deter many worthy small claims from being brought. It is unprincipled and unacceptable to exclude recovery for claims merely on the basis that they are small or possibly numerous. Modern policy flatly contradicts this rationale for refusing enforcement of family agreements. Small claims tribunals and various forms of alternative dispute resolution mechanisms have been developed in the last 30 years to address this very problem.[50] These developments clearly demonstrate a policy of taking seriously the need to cater for small claims in the provision of dispute resolution services.

B Relational Contract Theory

Relational contract theorists, notably Macaulay and Macneil, have reshaped modern views of contractual arrangements.[51] Relational contract theory is a reaction to the classical contract theory view of contracts as one-shot/one exchange transactions,[52] in which each of the self-interested, rational contracting parties has the single objective of maximising their wealth. Relational contract theorists argue that commercial relationships ‘are not governed by contractual intentions, but reflect a variety of influences, including social norms and the norms of conduct that develop within the relationship.’[53] One-shot bargains are relatively rare. Relational contracts, which make up the vast majority of contractual arrangements, are characterised by a recognition of the uncertainty of future contingencies, and an inability to identify clearly important terms at the time of formation.[54] Parties aim to preserve relationships and uphold social norms rather than simply attempt to maximise wealth or efficiency.[55] Contracting parties often value incompleteness in contractual specification and the flexibility that this gives them.[56] In other words, they intend an incomplete specification of their arrangements, including issues of enforcement as well as the substantive terms. Thus, reference to parties’ intentions at the time of formation is ill-founded. Empirical research, particularly the famous work by Macaulay,[57] shows that commercial parties rarely rely on contract law to resolve disputes or regulate their relationships.[58] Instead, commercial parties seek to preserve their business relationships where possible, rather than to enforce their contractual rights.[59] This is so even if the transaction between the parties fails in some way. This indicates that commercial parties are rarely likely to contemplate the need for contractual enforcement.[60]

When commercial contractual relationships are viewed in this way, there is little justification for the distinction between family and commercial arrangements which is fundamental to the intention principles. Relational contract theory suggests that the similarities between the two categories may outweigh the differences. In both types of arrangements, asking what the parties intended at the time of contracting may be ‘an utterly unreal question, since in all probability the parties did not consider the question at the time of the inception of the agreement’.[61] In addition, the very nature of a relational contract is that the parties consider the evolution of the agreement to be an incremental process. Consequently, asking a question (upon which a decision about entitlement to a contractual remedy rests) that focuses on the point of time that an agreement begins will not give a reliable indication of the parties’ intentions.

In both commercial and family arrangements, relational contract theory indicates that the parties are more concerned with the preservation of ongoing relationships than with the availability of legal sanctions. In both types, at the outset of the arrangements the parties may not subjectively consider it likely that contract law will control or regulate their arrangements. They may instead rely on social or relational norms to do the job. Relational researchers have demonstrated that in business relationships, as well as family relationships, ‘co-operation without reference to legal entitlements is normal’.[62] In both commercial and family agreements, the long-term nature of the relationship and related agreement impedes the ability to settle finally all terms at the time of contract formation. In short, if contracts are viewed through the lens of relational contract theory, the distinction between commercial and family contracts, and the assumption that only family agreements are not ‘intended’ to be contractually enforced, make little sense.[63]

C Behavioural Decision Theory

Behavioural decision theory (‘BDT’) is an increasingly popular area of academic interest.[64] It is an interdisciplinary field, stemming from research in cognitive and social psychology into human decision-making, but also influenced by micro-economics.[65] These insights have recently been applied to the law, including contract law,[66] particularly to the way the law affects human decision-making.[67] BDT investigates the central law and economics assumption of the self-interested, wealth-maximising,[68] ‘rational’ decision-maker.[69] It uses insights from cognitive psychology to explain that human decision-making is a complex and not always rational process, affected by a multitude of influences.[70] It applies experimental findings by cognitive psychologists to identify these influences, demonstrates their effect on decision-making in particular contexts and suggests implications for law.

The application of BDT to contract law undermines the distinction between family and commercial arrangements made using the intention principles. It suggests that human beings, whether involved in family or commercial arrangements, are affected by numerous irrational decision-making processes. These may affect the ability to make a rational choice at the outset about whether an arrangement should be contractually or legally binding. In other words, asking a question that focuses on the ability to form an intention at the outset of an arrangement may itself be irrational. Accordingly, whether an arrangement should be contractually binding should rest on grounds other than whether an intention has been formed by the relevant human decision-makers at the time of formation of the agreement. Some key aspects of BDT as it applies to contract law, particularly the requirement of intention, are discussed below.

1 Uncertainty and Bounded Rationality

BDT theorists use the term ‘bounded rationality’[71] to refer to the concepts that ‘human cognitive abilities are not infinite’[72] and that ‘actors often take short cuts in making decisions that frequently result in choices that fail to satisfy the utility-maximization prediction.’[73] Individuals make boundedly rational decisions because of ‘the costs of obtaining and processing the information necessary to make maximising choices and the cognitive limitations of human beings’.[74] This may arise because of the inherent complexity of the relevant decision or the ambiguity of the consequences of decision alternatives.[75] For example, an apparent choice not to attract contractual or legal consequences at the time of formation in either a family or a commercial arrangement may be a boundedly rational decision — made because the likely future consequences of the arrangement are not known, or cannot easily or cheaply be known at the time the arrangement is made.

2 Heuristics and Biases

Boundedly rational decision-making can also be ‘an unintentional consequence of an unconscious use of heuristics’ or biases in decision-making.[76] Heuristics are mental shortcuts in decision-making. Biases are prejudices which influence decisions. The use of heuristics and biases can result in irrational decision-making.[77] For example, a person may form a subjective intention and/or manifest an objective intention at the time of contract formation which may be irrational if it is influenced by unconscious reference to an inappropriate heuristic or bias.

‘Optimism bias’ suggests that human beings are irrationally optimistic and routinely underestimate the nature of risks, particularly low probability risks.[78] For example, in a much cited study, soon to be married respondents correctly estimated that the American divorce rate was 50 per cent, however, 100 per cent of respondents estimated that they personally had no chance of becoming divorced.[79]

The ‘availability heuristic’ suggests that people assess a risk as more serious if it can be called ‘readily to mind.’[80] For example, people tend to overestimate the frequency of well-publicised causes of death such as homicide, and under-estimate the frequency of natural, less publicised causes of death such as asthma, emphysema and diabetes.[81] The related ‘representative bias’ ‘concerns the manner of making judgments concerning the adequacy of search’ whereby ‘actors systematically and erroneously take the small sample of present events as representative, and therefore predictive, of future events.’[82] The ‘status quo bias’ suggests that people like the status quo and will resist departure from it except where there are significant reasons to do so.[83] Behavioural decision theorists are particularly interested in the effect of the legal status quo. Korobkin relates a common illustration of the status quo bias. In the 1980s, the States of New Jersey and Pennsylvania both passed legislation which gave individuals a choice when purchasing motor vehicle insurance. Individuals could either purchase low-cost cover with limited rights to sue for damages, or high-cost cover with more extensive rights to sue. In New Jersey, the default legal rule was low-cost insurance while in Pennsylvania the default was high-cost insurance. A large majority in each State did not depart from the status quo legal rule although there is no ‘obvious reason why residents of the two states would have substantially different tastes in insurance.’[84]

These heuristics and biases may have a bearing upon the rationality of any decision made at the time of the formation of an arrangement about whether it will be enforceable as a contract in litigation. The optimism bias suggests that contracting parties[85] are likely to be overoptimistic about fulfilling their contractual obligations in the future.[86] This overoptimism may lead to an underestimation of the risk of noncompliance, and accordingly, a lack of recognition of the need for legal enforceability. This may at least partly explain why parties to relational contracts fail to engage in detailed contractual planning and rely (at least at the outset) primarily on relational and social norms for contractual enforcement. Overoptimism and underestimation of risk is heightened when family and close relationships are involved.[87] Similarly, the availability heuristic and the representative bias may lead an individual irrationally to base their predictions of the likelihood of the other party’s future compliance with the arrangement upon their own current intention to carry out contractual obligations.[88] This of course neglects the possibility that circumstances and parties’ intentions may change, and accordingly the risks of noncompliance may alter during the course of a long-term relationship.

Korobkin has pointed out a powerful connection between the status quo bias and default rules.[89] According to economic theorists, parties will bargain around a default rule if it produces an inefficient result for their agreement.[90] Consequently, the content of a default rule does not really matter — the parties will contract around it if it is inefficient.[91] However, Korobkin argues that the parties’ selection of a default rule may simply reflect the human predilection for the status quo.[92] A default rule becomes more attractive than alternative rules simply because it is the status quo.[93] This has clear implications for the content of default rules. If, for example, most parties to family arrangements do not objectively or subjectively choose to make their agreement contractually enforceable, this may simply reflect an adoption of the status quo default rule rather than a failure to choose a more appropriate competing rule (ie contractual enforceability).[94] Korobkin also argues that this link between the status quo bias and default rule should cause law-makers and legislators to rethink the content of default rules to ensure that they are justifiable on the basis of policy and efficiency.[95] As we argue elsewhere, the default intention rule in relation to family arrangements clearly needs to be reconsidered as it cannot be justified on modern policy grounds. In addition, the efficiency of the intention default rule must be questioned. The existing default rule only appears ‘efficient’ if the majority of family agreements can be treated as ‘trivial’. As we argue above, the triviality arguments in favour of the existing intention principles are seriously flawed.

3 The Effect of Context

BDT also recognises the effect of the context in which human decision-making occurs. There is a relationship between past behaviours and choices and present behaviours and choices. Korobkin and Ulen characterise these phenomena as habits, traditions and addictions.[96] Habits may reduce the cost of decision-making by using the same decision in the same circumstances,[97] while behaviours driven by tradition reflect conformity to ‘shared family, group or community practice’.[98] This insight into human decision-making may be linked to relational contract theory: the desire to conform to family, group and community practice emphasises the need of human beings to maintain relationships and ties. Could this explain why (according to relational contract theory) parties at the outset of their arrangements foresee social and group norms as the main method of regulation and enforcement for their arrangements? If so, this is yet another reason why focusing on a requirement that the parties intend to be contractually bound at the time of contract formation is irrational. In addition, if human beings are driven by habit, then is it likely that parties who enter into repeat arrangements (whether commercial or family) will ever subjectively or objectively manifest an intention to be contractually or legally bound?

IV ENFORCING FAMILY CONTRACTS?

While contract law continues to treat family arrangements as prima facie unenforceable, other areas of law have recognised and enforced agreements made within the context of the family. These developments should cause us to question why contract law continues to treat family agreements as less enforceable than other types of agreement. In this part, we consider equitable and legislative developments which recognise, and often enforce, family agreements. The two examples to which we refer do not support the existence of any general policy against the enforcement of family agreements. Rather, they show that in some circumstances, the law regards family agreements as enforceable, if not desirable. Modern developments in equitable estoppel allow the enforcement of agreements made between family members, effectively nullifying contract law’s reluctance to enforce such arrangements.[99] The Family Law Act 1975 (Cth), following recent amendments,[100] now permits the enforcement of contracts made between spouses on the most contentious of topics; namely the division of property between them on the breakdown of relationships.[101] Contract is promoted in this context as being a desirable, and perhaps the most desirable, method of allocating resources between the parties. It is ironic that legislation and the common law of contract take completely opposite views on this issue.

A Estoppel

The significance of intention as a barrier to enforcement of family agreements has been undermined by developments in the law of estoppel.[102] We will confine our discussion to equitable estoppel, which would have provided remedies in cases such as Todd v Nicol[103] and Wakeling v Ripley,[104] and possibly also in Balfour.[105] The focus of equitable estoppel is on the existence of detrimental reliance and unconscionable conduct on the part of the promisor.[106] In establishing both requirements, the promisor’s intentions at the time the promise was made, in terms of affecting the behaviour of the promisee, are relevant. It must be shown that the promisor reasonably expected that the promise would ‘induce action or forbearance by the promisee’.[107] Unlike contract law, the type of intention which is relevant in establishing entitlement to relief via estoppel is substantive and not formalistic.

The modern law of equitable estoppel does not distinguish between family and commercial relations in determining entitlement to relief. It is hardly an impediment to the availability of an equitable remedy that the parties are related to each other,[108] or that they may not have contemplated the need for litigation in the event of the agreement failing in some way.

The availability of estoppel casts doubt on the relevance of making it difficult to enforce family contracts, because in cases of this kind the appropriate estoppel remedy will often be effectively to enforce the contractual promise.[109] In Commonwealth v Verwayen, Mason CJ stated that where estoppel is made out, the appropriate remedy avoids the detriment, and noted that sometimes this will require ‘that the party estopped be held to the assumption created, even if that means the effective enforcement of a voluntary promise.’[110] Given that estoppel may therefore be relied on in order to enforce the promise made, the common law’s continued reluctance to enforce family agreements is formalistic and rather pointless.[111]

B Financial Agreements between Spouses

Until recently, contractual attempts by spouses to determine in advance their respective entitlements to property or maintenance by agreement upon separation or divorce were regarded as unenforceable, because the parties were not able to oust the jurisdiction of the court to order property adjustments under legislation.[112] In recent amendments to the Family Law Act 1975 (Cth), the device of contract is employed in order to promote private resolution of matrimonial property and maintenance disputes.[113] Under the new provisions, financial agreements — agreements dealing with the parties’ property and maintenance entitlements[114] — are enforceable if certain minimal formal requirements are observed. The agreement must be signed and must contain a statement that each party has received independent legal advice as to the effect of the agreement, as to whether it was to the advantage of the party to make the agreement, as to whether it was prudent to make the agreement, and as to whether its terms were fair and reasonable.[115] The independent legal advisor’s certificate must be annexed to the contract and each party must receive a copy of the contract.[116] The court has the power to set aside a financial agreement in certain circumstances, including where the agreement was obtained through fraudulent or unconscionable conduct, or where the circumstances of one party have changed between the time of making the agreement and its attempted enforcement, for instance because of their responsibility for the care of a child.[117]

Fehlberg and Smyth summarise the four policies which evidently motivated these provisions.[118] First, the provisions were intended to give the parties greater control over property, especially the ability to preserve specific assets such as businesses and family farms. By implication, the court’s control over the division of property is to be diminished. Second, the provisions aim to give parties greater choice about their own financial affairs; in effect, the court is to have less discretion to intervene in the parties’ financial affairs. Third, the legislation is intended to reduce conflict on the breakdown of relationships. This assumes that the parties will not dispute the application of their agreement as the basis of property distribution, or at least that resolution of property disputes is rendered less complex if the court can simply enforce the parties’ agreement.[119] Finally, the amendments are justified on the basis that the Act should ‘reflect changed community attitudes and needs.’[120] Evidently, these changed attitudes and needs were gauged from the tenor of public submissions on the legislation to the Senate Legal and Constitutional Legislation Committee, although only one submission to that Committee was unqualified in its support for the enforcement of financial agreements.[121]

What is interesting about these justifications of the legislation is that, in true libertarian fashion, they ordain contract as an appropriate, perhaps the most appropriate, vehicle for resolving property disputes between the parties. They explicitly extend justifications for enforcing market transactions — in particular, a wariness of judges’ ability to make wise allocations of resources between the parties and a strong preference for consumer sovereignty — to family transactions.[122] The policies which motivated the legislation apply to other types of family contract,[123] and hence should be taken into account in evaluating and reforming the present rules of intention in contract law.

Critics of this legislation have pointed out its quite serious shortcomings, in particular the likelihood that it will result in women suffering further relative financial disadvantage following relationship breakdown.[124] We agree that the provisions do not sufficiently take into account the circumstances in which such agreements are likely to be reached and to be enforced, and the difficulties women often experience in using contracts to protect their own interests.[125] Consequently, the provisions are likely to lead to significant injustice in their application. This is a real cause for concern. However, we disagree with criticisms that contract is necessarily an inappropriate method of determining entitlement to property between married persons.[126]

V CONCLUSION

The legal requirement of the parties’ intention to be contractually bound continues to impede the enforcement of family contracts. We have argued that the distinction between commercial contracts, which are presumptively enforceable, and family contracts, in which intention must be proved, cannot be justified. Reference to the intentions of the parties in order to determine the enforceability of an agreement, as we have shown, makes no sense as the parties are unlikely to have considered this question. Quite clearly, the requirement of intention is based on a judicial policy that contract is ‘unfamiliar and undesirable’ in the family context.[127] The law’s policy of non-intervention in the family has been rejected in other areas of law and is not reflected in areas closely related to contract, namely estoppel and family law. The rejection of this policy in contract law is long overdue. If the requirements of consideration and agreement are thought to be inadequate to distinguish enforceable from unenforceable arrangements, then a more appropriate method needs to be devised to achieve this purpose than one which is ostensibly focused on a fictitious inquiry as to party intention, and which actually masks an anachronistic and inappropriate judicial sentiment.


[*] 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.

[22] [1919] 2 KB 571.

[23] [1929] HCA 15; (1929) 42 CLR 91, 96.

[24] [1986] 1 Qd R 315.

[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.

[62] Hedley, above n 17, 396.

[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.

[65] Rostain, above n 64.

[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 867. 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).

[115] Section 90G(1).

[116] Section 90G(1).

[117] Section 90K(1).

[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.

[125] 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.

[127] Hedley, above n 123, 76.


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