Is Irma is liable for Joe’s rental obligations. (10%)?
Contracts between close members of a family are commonly assumed not to be lawfully binding except when a clear intention to the agreement is exhibited (Balfour v Balfour, Jone, Sun Er Jo). Normally, if the contract between family members is basically commercial in nature, then the supposition against contractual intent will most probably be refuted (Fong Huen case, Pearce case, Errington, Snelling). Lacking any formality shall not be fateful even for the far-reaching commercial contract, given that the conditions are ‘reasonably clear’ (New World Development Company vs Sun Hung Kai Securities Ltd). Kong and Joe are brother-in-laws, and this can be classified as a close connection to raise a concern over their purpose to establish a legal connection. Nonetheless, it is improbable that the contract for aim to carry out a business can be taken as domestic, and more possibly to view the contract itself as a commercial character.
The participants ended the oral contract using a handshake, no written documents. The terms, however, turned to be ‘reasonably clear’ and the contracts seem to be important to both parties; business expansion and rent. If Joe seeks to refute the presumption on the basis of intention, he carries a specifically substantial burden and may lack the capacity to prove. Furthermore, it is probable that a rational individual reading the letter by Irma would consider as a present fact’s statement but not a pledge for a future deal.
In conclusion, it is improbable that Joe and Kong’s contract applies the presumption against the intent to establish legal associations. It was, therefore, more probable to be to be taken as a commercial contract. Hence, it is probable that the supposition supporting the contractual intent entailing commercial contract has not been refuted and a binding agreement exists between both parties. Lastly, the statement in the letter written by Irma is not possibly a contractually binding assurance based on the analysis.
What if there was a Written Agreement on 26/10?
If during the period of negotiations, one participant is clear that no enforceable agreement would exist until there is some formality in the agreement, this would be enough to refute a contractual intention despite any significant performance of the presumed contract (World-Food Fair Ltd vs Hong-Kong Island Development Ltd). Also, the presumption in support of contractual intention shall also be refuted if the participants have specified that their agreement is to be put in writing. Any condition by any party or both of them that the agreement is subject to a formal contract’s conclusion defeats contractual intention despite there being a significant performance by the parties (Attorney General of Hong Kong v Humphreys Estate Ltd).
During the event of an agreement, it was clear that no legal binding relations would exist until the finalization of the formal contract. Kong made it clear he requires a written agreement before the sealing of the deal. However, there was no written agreement was ever prepared to seal the contract. Thus, despite the significant execution performance associated with the supposed contract, there is no agreement between Kong and Joe, since no contractual intention exists within those conditions.