Merritt v Merritt

The presumption that domestic arrangements between spouses lack contractual intent applies while they live together in amity. It does not apply after their relationship has broken down and they negotiate at arm’s length.

Contractual intention is assessed objectively from the parties’ situation and surrounding circumstances. The court asks whether reasonable people would regard the agreement as binding. A spouse’s performance of an agreed obligation supplies consideration even where money received from the other spouse may have helped fund that performance.

After their marriage had broken down, the husband left the matrimonial home. The spouses agreed in writing that the wife would pay the remaining mortgage and other house-related charges, after which the husband would transfer the property into her sole ownership.

The wife discharged the mortgage, but the husband refused to transfer the house. She obtained a declaration and conveyance order from Stamp J in the Chancery Division. The husband appealed, disputing contractual intention, certainty, consideration and the wife’s sole beneficial entitlement.

1. Appeal dismissed unanimously. Lord Denning MR, Widgery LJ and Karminski LJ agreed that the written agreement was enforceable and that no criticism could be made of Stamp J’s conclusion.

2. Lord Denning MR held that domestic arrangements made while spouses live together in amity are ordinarily presumed not to create legal relations. The position is materially different where the spouses are separated or about to separate and bargain at arm’s length. Contractual intention is determined objectively by examining their situation and asking whether reasonable people would regard the agreement as binding.

   Widgery LJ adopted the narrower formulation that marital breakdown removes the factual presumption against legal relations. He found it unnecessary to recognise a positive presumption in favour of contractual intention. Karminski LJ likewise emphasised that the surrounding circumstances were essential. The husband had chosen to leave, the wife had potential legal remedies, and the parties negotiated a definite financial arrangement.

3. Balfour v Balfour [1919] 2 KB 571 was distinguishable because its arrangement was made amicably during an involuntary separation. The family arrangement considered in Jones v Padavatton [1969] 1 WLR 328 did not establish a presumption of law. It reflected a factual inference arising from family trust and affection, which was absent here. Gould v Gould [1969] 3 WLR 490 was also distinguishable because its promise was qualified by uncertain words concerning the husband’s ability to pay.

4. The agreement was sufficiently certain. The separate arrangement for monthly maintenance did not make the promise to transfer the house uncertain.

5. The wife provided ample consideration by paying the outstanding mortgage. Her performance remained good consideration even if she used some of the husband’s monthly payments to discharge it.

6. The written agreement governed the beneficial ownership of the house. Once the wife had performed her obligation, the property was intended to belong entirely to her. The husband’s argument based on Section 17 of the 1882 Act therefore failed. He was ordered personally to pay £50 towards the wife’s costs.

• Court of Appeal: Dismissed the husband’s appeal and affirmed Stamp J’s order.
• Chancery Division: Stamp J declared that the house belonged to the wife and ordered the husband to convey it to her.