By: Evaristus Oshionebo
PDF Version: When is a Contract between Family Members Enforceable?
Case Commented On: Hole v Hole, 2016 ABCA 34
At common law a contract is not enforceable unless the parties intended the contract to create legal relations. Whether or not the parties intended to create legal relations is determined objectively by examining the circumstances existing at the time of execution of the contract. However, there is a general presumption that contracts between family members are not intended to create legal relations. This presumption “derives from experience of life and human nature which shows that in such circumstances men and women usually do not intend to create legal rights and obligations, but intend to rely solely on family ties of mutual trust and affection” (Jones v Padavatton, [1969] 2 All ER 616 at 621 (CA)). The presumption is equally based on the reality that agreements between family members are usually not bargained or negotiated. However, the presumption is rebuttable by evidence. Thus, a contract between family members is enforceable where there is evidence that the parties intended the contract to create legal relations. The presumption could be rebutted by evidence showing that, although the parties are family members, the contract was reached or executed in commercial circumstances. As Professor John McCamus puts it, “[c]ommercial arrangements between family members may obviously be intended to create enforceable agreements” (John D. McCamus, The Law of Contracts, 2nd ed at 133).
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