BUSN7052 Chap.6 Intention, Capacity and Equitable Estoppel
Intention, Capacity and Equitable Estoppel
Agreement and consideration are not enough unless the parties meant to be legally bound and had capacity to contract. This chapter explains intention to create legal relations after Ermogenous, which replaced rigid presumptions with an objective look at the relationship, the seriousness of the promise, payments and language.
It sets out capacity rules for minors, companies and people who are mentally impaired or intoxicated, and then explains equitable estoppel, which can hold a party to an assumption it induced even where no contract exists.
What this chapter covers
- 01
Objective intention after Ermogenous
- 02
Family arrangements in Balfour, Todd v Nicol and Woodward
- 03
Minors: necessaries and beneficial contracts of service
- 04
Corporate capacity under s 124 and mental incapacity
- 05
Waltons Stores v Maher and Brennan J's six elements
- 06
Clear representations in Crown Melbourne and reliance in Sidhu
Worked example · free
A volunteer treasurer and the choir's van
- +1A social or voluntary setting is relevant context pointing away from intention to create legal relations, not a rigid presumption.
- +1After Ermogenous the court looks objectively at the whole context: the relationship, the seriousness of the promise and whether anything was paid.
- +1Here every contextual fact points the same way: a thank-you at a dinner, no writing, no payment and no sacrifice in reliance.
- +1There was no intention to be legally bound, so no contract; she also gave no consideration.
Key terms
- Intention to create legal relations
- The parties' objectively assessed intention that their agreement be legally enforceable.
- Necessaries
- Goods and services suited to a minor's condition in life and actual needs, for which the minor must pay a reasonable price.
- Beneficial contract of service
- A contract involving education or instruction that, on balance, benefits the minor.
- Detrimental reliance
- Action taken on an induced assumption that would cause loss if the other party resiled.
Intention, Capacity and Equitable Estoppel FAQ
Are agreements between family members ever enforceable?
Yes. Ermogenous removed rigid presumptions, so courts examine the whole context: payment, formality, the seriousness of the promise and what each party gave up. In Todd v Nicol a domestic arrangement became binding because one party made a significant sacrifice in reliance, while in Woodward v Johnston a promised business share stayed a family understanding.
What is the difference between a contract and equitable estoppel?
A contract enforces a bargain supported by consideration. Estoppel enforces no bargain; it prevents a party unconscionably departing from an assumption it induced and knew the other relied on, with relief aimed at avoiding the resulting detriment. Waltons Stores v Maher is the leading example where no lease was ever signed.
Can a minor be sued for lying about their age?
At common law, no: Leslie v Sheill holds that a minor is not liable in tort for a misrepresentation connected with the contract, because that would undo the protection contract law gives minors. The slides note this applies in the ACT, while New South Wales has displaced it by statute.
Why did the tenants lose in Crown Melbourne v Cosmopolitan Hotel?
The High Court held that an assurance of looking after the tenants when renewal came was not clear enough to convey that a further lease would be offered, and there was no evidence of detrimental reliance. An estoppel requires a clear representation, so vague reassurance cannot support one.
Exam move
Intention questions reward argument on both sides, so practise writing two short paragraphs for every scenario: one building the case for an enforceable contract from payment, formality, sacrifice and commercial context, and one building the case against from family setting, informality and honour language. Then decide on balance.
The course's IRAC notes show that markers credit either conclusion if the reasoning supports it. For capacity, memorise the sorting order for minors: necessaries, beneficial service contracts, continuing contracts that can be repudiated, then everything else unenforceable against the minor. Attach De Francesco v Barnum to the beneficial-contract test so you remember that unreasonable terms defeat it.
For estoppel, write Brennan J's six elements on a card and practise applying them in order to invented fit-out or lease scenarios, marking which fact satisfies each element. Contrast Waltons with Crown Melbourne so you can explain why a clear inducement succeeds and vague comfort fails.
Finally, remember where estoppel fits in an answer: raise it when formation or consideration has failed, not as a first argument when a valid contract is available.
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