Snelling v John G. Snelling Ltd. and Others [1973] Q.B. 87
Contract – Parties – Whether agreement legally enforceable – Claim by plaintiff against company
Facts:
The plaintiff and his brothers, the second and third defendants were directors of a family business and company, the first defendant. The company owed the brothers large amount of money. The brothers had a falling out and in an effort to make amends, an agreement was drawn up stating that if any of the brother’s resigned as director, they would forfeit the amount of money that was owed to them and that money would be used to pay the company mortgage. Snelling resigned and his director brothers passed a resolution upholding the terms of the agreement. Snelling issued a writ against the company for the monies owed. Proceedings ensued.
Issues:
Whether the agreement between the brothers was intended to create legal relations and whether it could be relied on by the company.
Held:
The appeal was dismissed. Upon consideration of the background in which the agreement between the brothers was made, i.e. that the company was running into financial difficulties, the agreement was intended to apply to the company and be considered legally. Therefore, the plaintiff was entitled to be legally bound by the contract. The case of Balfour v Balfour [1919] 2 K.B. 571, was distinguished on its fact as the family relationship had already been destroyed by arguments. Even though the company was not a party to the contract as the contract was made between the directors, the Snelling company was the beneficiary of the contract, in the event a brother resigned as director. It was at the court’s discretion under s 41 of the Supreme Court of Judicature (Consolidation) Act 1925 to dismiss Snelling’s claim and to honour the agreement even though the defendant company had no defence to the actions of Snelling.
Updated 20 March 2026
This case summary remains accurate as a description of the 1973 decision in Snelling v John G. Snelling Ltd. [1973] Q.B. 87. The core legal principles discussed — intention to create legal relations and the distinction from Balfour v Balfour [1919] 2 K.B. 571 — remain good law.
However, readers should note one important procedural update. The article refers to s.41 of the Supreme Court of Judicature (Consolidation) Act 1925, which gave the court discretion to stay or dismiss proceedings. That Act has since been repealed. The equivalent power is now found in the Senior Courts Act 1981 (as amended), and the court’s general case management powers under the Civil Procedure Rules 1998 (CPR) — in particular CPR r.3.1 — provide the modern procedural framework for staying or dismissing claims in comparable circumstances. This does not affect the substantive outcome or legal reasoning of the case itself, but students should be aware that the statutory hook relied upon in the judgment has been replaced by later legislation.
Additionally, the law on third-party rights in contract has developed significantly since 1973. The Contracts (Rights of Third Parties) Act 1999 now provides a statutory mechanism by which a third party may in certain circumstances enforce a contractual term in their favour, which is directly relevant to the third-party beneficiary point discussed in this case. Ognall J.’s reliance on equitable and procedural discretion to protect the company’s position as beneficiary would today also fall to be considered alongside the 1999 Act. Students should read this case in that broader modern context.
