Dr Ryan Cushley-Spendiff, Lecturer at NLS https://www.ntu.ac.uk/staff-profiles/law/ryan-cushley-spendiff
Happy 2024! As many of us recover from the aftereffects of the festive period, suddenly the old tradition of setting, and actioning, New Years Resolutions will be on the to-do list. While approximately fewer than 1-in-5 people engage in New Years Resolutions, over half of 18–34 year-olds will be setting at least one. While historically a quaint tradition, it does seem to have found some popularity within younger generations. Many resolutions will be the predictable ‘more exercise, cut down on alcohol, eat less sugar’ and some more adventurous people may be making resolutions that involve a third party, be it a friend, a loved one, or even just an acquaintance (it would be interesting to see statistics on how many personal trainers get told that a client is coming to them more often!). But, what happens when someone gets the wrong end of the stick and presumes that your resolution that involves them is a contract, with full legal effect?
Such a situation would not be the first time that something which seemed to be harmless actually carries with it a nasty legal bite. Perhaps my favourite example of this is found in US case law with Lucy v Zehmer. Like many good stories, this begins in a bar, in which Zehmer was while heavily intoxicated after consuming almost a full bottle of whiskey. While in a state that would potentially overload a breathalyser, he wrote on the back of a receipt that he would sell his farm to Lucy for $50,000. Why? He thought it was all a joke; banter between friends and nothing more. The effect of contract law was a rude awaking that would become a nightmare. When Lucy tried to assert his legal rights, Zehmer immediately relied on the fact that this was supposedly a joke; that no intention to create legal relations existed. I must convey some empathy with Zehmer’s wife Ida who was a co-signatory on the contract. Being the only sensible person in this story, she initially refused to sign, only relenting after being assured by her husband that the napkin was all just part of the joke. The Supreme Court of Virginia disagreed, deciding that, drunk jest or not, there was a legally binding contract.
While hopefully no-one had such a wild end to 2023 that they promised to sell their house for a peppercorn, it is easy to get into contracts without realising you are in one. Intention to create legal relations may be a standard, however it is an objective, not a subjective, one. English Courts have rarely cared if you genuinely had, or in other instances hadn’t, intention, but rather if a reasonable bystander would say that there was an intention to create a contract. Luckily, those in relationships, be they platonic, familial, or romantic, can usually rely on a rebuttable presumption that there is no intention. Yet, this is never a guarantee and a particularly determined party can potentially scrounge together enough evidence to rebut the presumption if they are so inclined. This can come as particularly nasty shock to those whose idea of a contract involved a litany of pages, numerous clauses, and at least 7 appendixes. It is within the cultural zeitgeist that a contract is an overly-complicated draft of ‘legalese’ and the simplicity of oral contracts can jar with what non-lawyers think a contract is. While fixating on consent has become somewhat of a cultural trope, it would surprise quite a number of lay people to discover that contract law doesn’t care about genuine consent, but rather objective interpretation.
This creates a surprisingly divisive question of what a contract actually is if it is not the ‘willing and voluntary meeting of the minds’ that is typical in liberal rhetoric.
The definition is not as simple as one would expect. If we were to describe a legal contract, we would typically refer to legal rules and standards to see if a relationship snugly fits our legal norms. This seems to be putting the cart before the donkey. The common law of contract was developed to govern contractual relations that were already in existence, in particular of when it is appropriate for legal intervention. Relations where it was not appropriate for reasons of policy or legal certainty were no less contractual merely because the courts cautioned against intervention.
History is resplendent with historical exchange relationships which would not be deemed a contract at law today but which satisfy the basic human need to co-operate through exchange. A great example is ‘the silent trade’ which is documented as far back as the Roman era in which Carthaginians would sail to surrounding areas and place their wares on a beach and light a fire, then leave. The locals of the area would see the smoke, see the wares, and lay out as much gold as they think the goods are worth, and then leave. When the Carthaginians returned, they would either accept the abandoned gold, or reject it as not enough and re-board their ship. The locals would return and, if the gold was not taken, they would not take the wares, only either taking back the gold or adding to it. Without a single word being uttered, a single explicit term, an entire contractual relation would develop. Such a relation was hardly a one off as Perillo recorded this pattern on at least six separate societies, all of which were spread out across the world.
Such a relationship finds no problems within non-legal definitions of contract, for example relational contract theory, which considers all forms of exchange relations some form of contract, enforceable or not. So, why would our court system not accept such a contractual relationship? The simple answer is that contract law is constantly trying to juggle competing values. Procedural fairness, economic efficiency, transparency, and legal certainty are all values which the classical law sought to accommodate. Even long-lasting and fruitful commercial arrangements will not be considered legal contracts because to do so has the potential of undermining legal certainty: the ability of parties to be able to engage with the legal system with confidence that a certain outcome will result. This was a lesson learnt the hard way in Baird Textile Holdings Ltd v Marks and Spencer plc. where a business relationship of 30 years was terminated and, with no valid umbrella contract, there was no remedy. The lesson works in reverse as well. Just as it would be procedurally unfair to generate a contract out of thin air, it would be equally unfair to allow parties to escape contract where it passes the basic legal standards.
To turn back to our New Years Resolutions problem, one may wonder what sort of procedural fairness arises when someone can be bound to a contract they never genuinely consented to, but one must remember that ‘for even the devil does not know what the thought of a man is’ to borrow an overly flowery phrase from Lord Blackburn in Brogden v Metropolitan Railway Co. The legal system does not have the capability to actually know your internal monologue. Faced with the prospect of perjury from opportunistic parties, courts had to quickly move to shut down any notion of a subjective doctrine that encouraged distortion of fact. What the court can do, however, is look at manifestations of belief, as objectively as possible, in order to determine what is the reasonable interpretation of events. The actual state of your mind here is less relevant that its manifestation, and even in situations where there is a presumption you didn’t intend legal relations, your behaviour may well push you into the realm of liability.
You would be forgiven for getting the impression so far that I have essentially posited that you will be martyred with contractual liability for the greater good. To prevent John Rawls returning from the grave to rebuke my heartless utilitarianism, let us be clear on one point. Courts will still not conjure a contractual bunny from their judicial robes. New Years Resolutions, kept to yourself, will not form the basis of any contractual agreement. However, the moment that you communicate a resolution to an involved third party and start behaving as if you are fulfilling a contractual duty, the more in danger of invoking contract law you can become. So, if you intend to be hitting the gym more in 2024, tell your personal trainer that your resolution is to get fitter, not that it is to spend three days a week with them for the rest of the year.
Further Reading:
Baird Textile Holdings Ltd v Marks and Spencer plc. [2001] EWCA Civ 274
Brogden v Metropolitan Railway Co (1877) 2 App Cas 666
Joseph Perillo, 'Exchange, Contract and Law in the Stone Age' (1989) 31(1) Arizona Law Review 17,
Warren Swain, The Law of Contract 1670-1870 (Cambridge University Press 2015)
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