Case Facts of The 1969 Case Between Edwards v Skyways
There were a number of pilots facing redundancy due to an airline that was in financial difficulties. As part of the planned redundancies the airline agreed with the Association of British Airline Pilots that they would pay each pilot an “ex gratia payment”. This payment would be the equivalent to the contribution made to the pension fund made by the company upon the redundancies. During a meeting between representatives of the company and the Pilots association these terms were agreed. The claimant (Edwards) decided to leave the company and claim the payment equivalent to that of the company pension contribution. The company (Airways) conceded that there was consideration for this yet held that there was no legally enforceable obligation but a mere moral one.
Issues arose as to whether there was an intention to create legal relations and obligations in the agreement between Airways the airplane company and the Association to pay contributions to the employees.
Decision and Outcome of the case between Edwards v Skyways
The Court held that where an agreement is reached in the course of a business affairs, and not in a domestic or social context, the presumption in the case was that the parties (Skyways and the Pilots Association) have intended to create legal relations and that their legal relations should be affected. The onus Is on the particular party rebutting this presumption to show and prove that they expressly intended to create a mere ‘moral’ agreement with the other party and not a legal obligation.
The company’s use of the words and term “ex gratia” in the promise to pay, do not show nor imply that the agreement is without legal effect. This means that the company’s agreement, reached in a business setting with authorised representatives from both parties and conceded consideration, was an intention to create a legal obligation with legal consequences to that effect.