BETH and Sarah met through a mutual friend.

As their friendship developed, Sarah asks Beth to help with clerical work to assist her prepare documents in relation to a property settlement in the Family Court.

Sarah said to Beth: “If things go well and I get what I want from the property settlement, I’ll buy you a seaside unit.”

Beth was currently renting a small place in the suburbs.

As it happened, Sarah was successful in her property settlement proceedings.

Beth then began her search for a unit.

However, this is where the friendship soured.

Sarah reneged.

Beth, now furious, sought legal action to enforce the promise (contract).

To be legally binding, a contract must have an offer, acceptance, and an intention to create legal relations, accompanied by consideration (a price given in exchange for a promise).

The Court affirmed that not every promise is contractually enforceable, and that a ‘rebuttable presumption’ applies, that no binding legal contract exists between family members or in social relationships unless proven otherwise.

The Court acknowledged there was a promise, which was oral and also backed by email exchanges, but found insufficient evidence that Beth had provided consideration for the promise.

The Court determined that the work done by Beth was disproportionate to the value of a unit in Sydney, estimated to be around $1.2 million.

More importantly, the Court found that there was no intention to create legal relations between the parties. Beth and Sarah were friends, not business partners.

The promise to buy a house, the Court concluded, was intended to be a generous gift, contingent on the successful outcome of the defendant’s Family Court proceedings, rather than a contractual obligation.

Beth lost the case.

This case serves as a stark reminder that the Courts take a nuanced view of social and familial relationships when it comes to contract law, and not all promises may be legally binding.

Thank you to Anthony Fogarty for his assistance with this column.

Email Manny Wood, principal solicitor at TB Law at manny@tblaw.net.au or call him on (02) 66 487 487.

This column is only accurate at today’s date and cannot be relied upon as legal advice.

By Manny WOOD, Solicitor