Balfour v Balfour (1919)

Every element of a contract in Indian law can be traced to a section: offer to s. 2(a), acceptance to s. 2(b), consideration to s. 2(d) and s. 25, capacity to s. 11, consent to s. 14, legality to s. 23. One element cannot: the requirement that the parties intended to create legal relations. There is no such provision in the Act. It enters Indian law entirely through English decisions, and Balfour v Balfour is the decision that gave it its shape.

The case is therefore doubly useful. It supplies the classic authority on domestic agreements, and it raises the harder question whether a doctrine with no statutory foothold should be applied at all in a codified system.

Mr Balfour held a Government post in Ceylon as Director of Irrigation. In November 1915 he came to England on leave with his wife, and the couple spent several months there.

By August 1916 his leave was over and he was due to sail back. His wife, however, had developed rheumatic arthritis, and her doctor advised that the climate of Ceylon would be bad for her and that she should stay in England until she recovered. Before he sailed, Mr Balfour promised to send her £30 a month for her probable expenses of maintenance while she remained behind. There was no writing and no formality — a husband, on the point of departure, telling his wife what he would send her.

He paid for a time. Then the marriage began to fail, and in 1918 the parties agreed to live apart. The wife obtained a decree nisi and an order for alimony. The monthly allowance fell into arrears.

Mrs Balfour sued on the promise for the arrears. At first instance Sargant J held for her, finding consideration in her implied promise to keep within the allowance and support herself out of it. The Court of Appeal reversed him.

1. Was an informal promise by a husband to pay his wife a monthly allowance, made while the two were living in amity, intended to create legal relations?
2. Independently of that, did the wife furnish consideration for the promise?

For the wife it was said that the promise was definite, that it was made in circumstances of some seriousness — the parties were about to be separated by half the world for an indefinite period — and that she gave value by agreeing to remain in England and maintain herself on the allowance rather than looking to her husband's general credit.

For the husband it was answered that a domestic arrangement of this kind is not a bargain at all, that the parties never contemplated a court policing it, and that the wife had promised nothing she was not already doing.

The appeal was allowed and the wife's action dismissed. Warrington LJ and Duke LJ rested chiefly on the absence of consideration. Atkin LJ rested on intention, and it is his judgment that has survived.

His Lordship's passage is worth learning: "There are agreements between parties which do not result in contract within the meaning of that term in our law. The ordinary example is where two parties agree to take a walk together, or where there is an offer and acceptance of hospitality. Nobody would suggest in ordinary circumstances that these arrangements result in what we know as contracts, and one of the most usual forms of agreement which does not constitute a contract appears to be the arrangements which are made between husband and wife. These arrangements do not result in contracts at all, even though there may be what would constitute consideration for the agreement. They are not contracts because parties did not intend that they shall be attended by legal consequences."

Atkin LJ added a practical reason: if such arrangements were actionable the small courts of the country would have to be multiplied many times over to hear the resulting flood of domestic litigation. Spouses settling housekeeping money do not intend to submit their private life to the machinery of the law.

An agreement between spouses living together in amity, concerning the ordinary domestic and financial arrangements of the household, is presumed not to have been made with the intention of creating legal relations, and is therefore not a contract.

Two things must be kept clear. First, the presumption is rebuttable. Atkin LJ did not say spouses cannot contract with each other; McGregor v McGregor (1888) had already held a husband–wife agreement binding where each withdrew a complaint, the husband promising an allowance and the wife promising not to pledge his credit.

Second, the consideration ground is a separate ratio relied on by two of the three judges. The two grounds pull apart: Atkin LJ said expressly that the arrangement is not a contract "even though there may be what would constitute consideration". Asked what Balfour decides, the honest answer is that it decides both, and that later law has kept only the intention limb. Everything Atkin LJ says about walks and hospitality is illustration, and therefore obiter.

The underlying idea is that contract law is a service the state offers to people who want it. Where parties deal in the market, the natural inference is that they want it. Where they are conducting a shared life, the inference is the opposite: they rely on affection and trust, and legal remedies would be corrosive rather than helpful.

The test is objective, not subjective. What matters is not what a particular husband privately thought but what a reasonable observer would infer from the transaction and its setting. In Simpkins v Pays (1955) a householder, her granddaughter and a lodger jointly entered a newspaper competition in the householder's name, sharing expenses without written rules; the court held a reasonable person would conclude they meant to share the prize, and the householder was bound to divide it.

The presumption is not mechanical. In Jones v Padavatton (1969) a mother persuaded her daughter to give up a good post at the Indian Embassy in Washington and read for the Bar in England at the mother's expense. Danckwerts LJ treated it as a family arrangement resting on good faith rather than a rigid agreement; Salmon LJ thought there was a contract, but one lasting only a period reasonably sufficient for the daughter to finish her studies — five years being more than enough. Two routes, the same order.

Merritt v Merritt (Court of Appeal, 1970) is the case you must pair with Balfour, and it is what MU examiners set as "distinguish".

The husband had left the matrimonial home to live with another woman. He met his wife in his car and they worked out their financial position. He agreed to pay her £40 a month, and at her insistence signed a note recording that in consideration of her paying off the outstanding mortgage on the house he would transfer it into her sole ownership. She paid off the mortgage. He then refused to transfer.

The Court of Appeal held the agreement binding. Lord Denning MR drew the line squarely: the Balfour presumption applies to spouses living in amity. Once the marriage has broken down and the parties are separated or about to separate, they are no longer relying on mutual trust — they are bargaining at arm's length about the division of property, and the inference reverses.

Side by side, the distinguishing factors are: the state of the relationship (harmony vs breakdown); the subject matter (recurring household maintenance vs a once-for-all transfer of the house); the form (oral vs signed writing); and performance in reliance (Mrs Merritt actually discharged the mortgage).

The presumption still cuts both ways after separation. In Gould v Gould (1970) a separation-time promise to pay "so long as he had the means to pay" was held not binding, the vagueness showing no legal obligation was intended.

Should Indian law import this doctrine at all?

This is the part of the answer that earns marks, and it deserves an honest treatment on both sides.

The case against importing it. Section 10 is written as an exhaustive statement of the conditions of enforceability: "All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void." Intention to create legal relations is not among the conditions. In a codified system the courts' task is to apply the code, and adding a fifth requirement drawn from English common law is legislation by another route.

Nor was the legislature unaware of the family-agreement problem. Section 25(1) deals with it directly, and in a different way: an agreement made without consideration is void unless it is expressed in writing and registered, and is made on account of natural love and affection between parties standing in a near relation to each other. In other words, the Indian Act's chosen filter for intra-family promises is a formality — writing plus registration — not an inquiry into the parties' state of mind. Mr Balfour's promise would have failed the s. 25(1) test anyway, because it was oral and unregistered. On this view the Act already contains a complete and more predictable answer, and grafting Balfour onto it duplicates the work while introducing uncertainty.

The case for importing it. Section 10 does not define "agreement"; it presupposes it. Agreement is defined in s. 2(e) as promises forming the consideration for each other, and a promise arises under s. 2(b) only where the offeree "signifies his assent". A person who says over dinner that he will drive a friend to the airport has not, in any meaningful sense, signified assent to a legal obligation. Reading intention into assent is interpretation, not invention.

There is also authority. In CWT v Abdul Hussain Mulla Muhammad Ali (1988) the Supreme Court held that where one partner lends a large sum to another as capital in a partnership venture, the commercial context raises a presumption that legal obligations were intended, the burden lying on the party asserting their absence, the test being objective. The doctrine is part of Indian law whether or not it should have been.

Where that leaves you. The defensible position is that intention operates in India not as an independent fifth requirement bolted onto s. 10, but as an aspect of whether there is an agreement at all under ss. 2(b) and 2(e) — with s. 25(1) doing separate and additional work for gratuitous family promises. Say that, cite CWT v Abdul Hussain, and you have answered the question rather than just recited Balfour.