Law de facto relationship

Alexander and Susan were in a de facto relationship. They had been living together for 3 years and typically made all household decisions together, including what apartment to live in, what groceries to buy and how the rent was paid. There was never any written agreement between the two and neither party thought twice about trusting the other.

Alexander thought of himself as a bit of an entrepreneur and had stumbled across a business deal three months ago to sell household furniture, requiring an initial outlay of $50,000 and estimated ongoing costs of $20,000 per year for the first few years. Alexander, excited by the prospects of leaving his mundane job as a checkout attendant, told Susan about all the benefits of running his own business and asked Susan if she would be willing to help out with some of the costs. Susan agreed to contribute $15,000 now and $10,000 when the business was ready to open to cover the first few months of stock and operating expenses. Susan also agreed to be paid back whenever it was convenient for Alexander, who would primarily be in charge of the running of the business. In return, Alexander agreed to do all the household chores until the business opens and promised to attempt to find an extra job to generate enough capital to cover a few unprofitable periods whilst the business takes off.

Alexander has purchased the business with a combination of his own savings, a bank loan and Susan’s contribution, and preparations have begun to open the business in 2 months’ time.

Last week Alexander and Susan had a major falling out and Susan has moved back in with his parents, refusing to pay any rent on the apartment he shared with Alexander. Alexander is in your office, scared that Susan will not provide the extra $10,000 when the business opens. Alexander has also received a letter from Susan’s lawyers demanding that Alexander repay the $15,000 within 28 days.

a) Advise Alexander and discuss the 3 elements of a simple contract, concentrating on the element that is particularly raised by these facts.
(13 marks)

b) On the above facts, would your answer be any different if the two had reduced their agreements to writing?
(2 marks)

c) Would your answer be different again if there was an express exclusion of an intention to create legal relations in the written agreements?
(2 marks)

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