Reading time: 6 minutes

The 1994 film ‘The Santa Clause’ is a Christmas classic. Tim Allen plays Scott Calvin, a businessman, who startles Santa causing him to fall off his roof on Christmas Eve. Scott then puts on Santa’s suit and finishes delivering the presents.

When Scott arrives at the North Pole, Bernard (Santa’s head elf) greets him and explains the Santa clause. By putting on the Santa suit containing a card with a ‘Santa clause’ in fine print, Scott accepted the terms of the contract to become the new Santa. While the elements of a legal contract are present, this article discusses whether the contract would be considered legally binding under Australian law.

The Terms of the ‘Santa Clause’

The card Scott found in Santa’s suit states that:

‘In putting on the suit and entering the sleigh, the wearer waives any and all rights to any previous identity, real or implied, and fully accepts the duties and responsibilities of Santa Claus in perpetuity until such time that wearer becomes unable to do so by either accident or design.’

The clause was in red fine print around the edge of the card. Bernard also states that Scott has 11 months to get his affairs in order and is due back at the North Pole by Thanksgiving. So under Australian law, would Scott be able to challenge that the contract is not legally binding?

The Elements of a Binding Contract

In Australia, there are five main elements to a contract that help determine whether it is legally binding, namely:

  • offer and acceptance;
  • intention to create a legal relationship;
  • consideration;
  • capacity; and
  • validity and enforceability.

Offer and Acceptance

One party must make an offer setting out the terms for the other party to accept. The other party must expressly accept the offer (for example, making a statement or committing an act consistent with the offer).

In the movie, the offer is for someone to become Santa Claus by putting on the suit and entering the sleigh. When Santa falls off the roof, Scott retrieves the card with the ‘Santa clause’:

‘If something should happen to me, put on my suit. The reindeer will know what to do.’

While Scott and his son Charlie are looking at the reindeer on the roof, Santa vanishes. Charlie then climbs into the sleigh and the reindeer take off. They land on a neighbour’s roof, and Charlie asks Scott to put on the suit and deliver the family’s toys. Not wanting to upset Charlie, Scott puts on the suit.

By putting on the suit and getting into the sleigh, Scott arguably accepts the contract’s terms. However, he did not see the fine print and was not reasonably made aware that putting on the suit and entering the sleigh would mean he was accepting the offer to become Santa permanently.

Intention to Create a Legal Relationship

Parties must intend to enter into a legally binding relationship with one another. A contract should be in writing. However, verbal agreements can be legally binding.

It appears Santa and the elves intended for the terms to be legally binding. A court would likely consider the relationship between Santa and Scott a commercial arrangement since they are not friends or relatives. Again, this would be difficult to prove because Scott was not aware of the terms of the ‘Santa clause’.

Consideration

A party must provide consideration to the other party in exchange for their promise to create a legally binding contract. Essentially, parties must exchange something of value (usually money is consideration). The court is not usually concerned with commercial considerations (i.e. whether or not the value of the consideration is suitable for the exchange), but rather that there has been consideration.

For example, an individual could pay $1 to another party to buy a car, and this would still be consideration as they are exchanging something of value. The terms of the ‘Santa clause’ do not suggest that there is consideration between the parties. Santa and the elves requires Scott to make a promise to undertake the duties and responsibilities of Santa Claus. But, they do not provide him with anything in return within the terms of the agreement.

Capacity

The requirement of capacity refers to the fact that the parties to the contract must be capable of entering into a legally binding relationship. For example, people who have a mental impairment, or are minors, may not have the capacity to enter into a legally binding contract. Capacity refers to the requirement that the parties must have a general understanding of the nature of the contract.

It appears that both Santa and Scott are not minors and do not appear to be suffering from a mental impairment. At least from a cursory understanding, we can consider Santa and Scott to have the capacity to enter into a legally binding contract.

Validity and Enforceability

The final key element to determining whether a contract is legally binding is validity and enforceability. Validity and enforceability refer to when an agreement may have formed a contract, but it is not actually valid or enforceable because of certain circumstances. These can include:

  • Fraud – where one party has made false statements to the other and attempted to deceive the other into entering into the contract.
  • Duress – where one party has threatened the other party with violence or threats to their financial wellbeing to get them to enter into the contract.
  • Undue influence – one party takes advantage of the other through an improper use of the other party’s weakness.
  • Uncertainty – this refers to construction of the contract. A contract needs to include enough terms to provide certainty as to the rights and obligations of the parties. It also needs to contain clear time frames for doing certain actions.
  • An absence of formalities – this is more to do with the enforceability of the contract. For example, in some legislation, certain contracts are required to be in writing. If there is only a verbal agreement in place, the contract will not be enforceable.

The key issues for validity and enforceability concerning the ‘Santa clause’ would likely be the misrepresentation, uncertainty and enforceability of the clause. Santa arguably misrepresented the terms of the contract by having the ‘Santa clause’ in barely readable fine print around the edges of the card.

The actual clause also contains uncertainties and would be unlikely enforceable for many reasons:

  • it does not include time frames;
  • it does not define what is meant by ‘accident’ or ‘design’;
  • it does not set out when and how the wearer is required to waive their rights to their previous identity (e.g. forfeiting identification documents); and
  • it requires the wearer to accept the duties of Santa Claus in perpetuity (meaning that there is no end date or ability to terminate the contract).

Would the ‘Santa Clause’ Be Legally Binding?

The range of issues highlighted in this article suggests that the ‘Santa Clause’ contract would unlikely be binding under Australian law and Scott could return home on Christmas day. Please note that we are unable to comment on how the court would consider the contract under the laws of the North Pole.

Webinars

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Online
Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

Online
If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Online
Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

Online
If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Online
Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Online
Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer