Nicole and Joel, who just had a baby, decided to take a break from their hectic rock star life style and drive around Queensland once Joel had finished singing with his band. While they were at the Gold Coast, Nicole and Joel stayed at a great house by the beach owned by their friend Sophie. They all agreed that Nicole, Joel and the baby would be at the beach house for four weeks and would pay Sophie $1000 a week for allowing them to stay in her house. Nicole and Joel end up having a terrible time, their baby does not sleep at all and they do not like staying so close to the beach. It is hot and sandy and there is lots of noise from all the people on the beach. After two weeks they pack up and go to Sydney. They don’t pay Sophie any money at all for rent because the holiday was so disappointing. Sophie however, really wants Nicole and Joel to pay her the rent as they had agreed. Sophie had counted on the money to pay for her recent cosmetic surgery. She is hurt by their failure to pay and has come to you to ask whether she can make them pay her the rent that they owe her. Question: Using the four step process discuss whether there is an intention to be legally bound and a contract formed between the parties. Can Sophie enforce the agreement between her and Nicole and Joel?
STEP 1: Identify the principles or issue of law
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© 2013 Curtin Business School Updated semester 2, 2013
Comment [CD1]: Note the brevity of this statement. You don’t need to repeat the question or make general statements here. Comment [CD2]: You may not need to refer to every single case that is listed for each rule of law in the lecture outlines and First Principles of Business Law text book. Please, do not refer to cases from outside of the course. Comment [CD3]: If you are going to have an introductory type paragraph KEEP IT BRIEF. Look at the marking rubric. The marks in Step 2 are awarded based on the quality of your explanation of the law with reference to authority. Sometimes students find it hard to begin writing an answer without a general overview statement, but too often they spend much too long on this type of thing. A simple statement like this does enhance the flow of your answer, provided you have left enough time and words for the important stuff. It’s good to include a definition here of a relevant topic (i.e. offer/acceptance or consideration).
The principle (or issue) of law is that for a valid contract to be formed there must be an intention to be legally bound by both parties.
STEP 2: Explain the rule(s) of law relevant to the principle/area/issue of law identified in step one with reference to authority. There are three main requirements for the formation of a legally enforceable contract, intention, agreement and consideration. The element that requires discussion here is the existence of an intention by the parties to enter into a legally binding agreement.
An agreement is only legally enforceable if the parties intended at the time the agreement is made to be legally bound. Intention is to be judged objectively. The court asks whether, in the circumstances, a reasonable person would regard the agreement as intended to be binding. The test is an objective one however the courts rely on presumptions to assist with ascertaining whether the parties intended to be legally bound by the agreement. Where arrangements are made between family members or friends the court presumes that the parties to these agreements do not intend to be legally bound. “A person who wants to treat an agreement with a close family relation as legally binding will have to prove additional circumstances from which an intention to be legally bound can be inferred” (Lambiris and Griffin 2013 p.68) In the case of Balfour v Balfour  2 KB 571 during their marriage a husband and wife came to an arrangement whereby the husband agreed to pay his wife an amount each month for her maintenance. After the parties