Snelling v John G Snelling Ltd

An agreement between family members about their business can be intended to be legally binding.

Citation
[1973] QB 87
Court
High Court (Queen's Bench Division)
Year
1973
Subject
Contract Law
Topic
Intention to create legal relations

Facts

Three brothers were directors of a family company, to which each had lent money. As part of arrangements for financing the company, they agreed among themselves that if any of them resigned as a director, he would forfeit the money owed to him by the company. One brother resigned and sued the company for repayment of his loan. The other brothers argued that the agreement among them was binding.

Legal principle

Ormrod J held that the agreement between the brothers was intended to create legal relations, even though they were members of the same family. The agreement concerned the financing of a business, was made in a business context and was set out formally. The fact that the parties were related was a factor to consider, but it did not prevent a binding agreement where the context showed that legal effect was intended.

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