1.1.3 Intention to create legal relations, certainty and capacity Flashcards
What is the intention to create legal relations?
A key requirement for a legally binding agreement.
The parties to a contract have the intention to be legally bound by the agreement.
What is the position of intention to create legal relations in the social and domestic context?
Presumption that the parties do not have an intention to create legal relations.
This presumption can be rebutted by clear evidence to the contrary.
How can the presumption for the social and domestic context be rebutted re no intention to create legal relations?
Rebuttable factors:
1) Certainty of agreement - the terms of the agreement are certain
2) The parties are not on friendly terms when they make the agreement
3) The agreement is serious
4) One party has relied on the agreement to his detriment
What is the position of intention to create legal relations in the commercial context?
Presumption that the parties HAVE an intention to create legal relations.
This presumption can be rebutted by clear evidence to the contrary.
How can the presumption for the social and domestic context be rebutted re intention to create legal relations?
Rebuttable factors:
1) Clear words that the agreement shall not have legal effect
2) Uncertainty in the agreement terms
What are two key examples of agreements and communications whose names are not conclusive as to whether they have legal effect?
Comfort Letters
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What will happen if an agreement is too uncertain?
The lack of certainty will not make it legally binding. The main reasons for an agreement being held as too uncertain are:
- It is too vague
- It is not complete
- One or both of the parties to the agreement are mistaken
What happens if a contract is made ‘void’?
The term ‘void’ means that the contract has no legal effect
For questions of certainty, what must you check for within a contract?
Check for any evidence that could be used to make the agreement certain enough to be enforceable.
1) Previous transactions under the same agreement;
2) Objective evidence to clarify what an uncertain term means;
3) Option to appoint an independent third party to clarify any terms that are unclear
What 2 tests must be satisfied for a person to escape being bound by a legally binding agreement on the grounds of mental incapacity?
1) Person must prove that he did not have mental capacity at the time he entered into the agreement;
2) A person must prove that the other party to the contract knew, or should have known, that this was the case
If both tests are satisfied, the contract is voidable
What is a ‘voidable’ contract?
The term ‘voidable’ in respect of an agreement means that it is valid and binding… BUT can be set aside at the request of the party that has a remedy
What is the difference between a contract that is void and a contract that is voidable?
A contract that is void has no legal effect.
A contract that is voidable has legal effect until the party / parties choose to set it aside.
Mental capacity - exception
What is the exception to the rule that a person with mental incapacity can exercise the remedy to set the contract aside to not be bound by it?
Necessaries: A person with mental incapacity must pay a reasonable price for goods and services that a person requires at the time they enter the agreement - the legal term is ‘necessaries’.
How are ‘necessaries’ interpreted by the courts?
Covering more than just the bare necessities.
If the person already has a good supply of the goods in question, they are unlikely to fall within the definition of necessaries
Other exceptions
Can an agreement be made voidable if the person does not fall within the definition of MCA 2005 but is unable to understand the nature of his actions, or is intoxicated?
For a person to set aside a contract as voidable, he will need to prove that the other party to a contract knew or ought to have known that he was intoxicated or otherwise unable to understand the nature of his actions at the relevant time.
