(BLUE) Intention to Create Legal Relations

Question 1

How do we know what the parties intended?

Answer 1

It will depend on what the reasonable person looking at the circumstances would think.

Question 2

What is the presumption for social/ domestic agreements and why?

Answer 2

That there was no intention to create legal relations. This is because these agreements are made frequently and informally and because the agreement was due to the relationship not a fear of being sued.

Question 3

What are the factors to consider for social/ domestic agreements to see if the presumption can be rebutted?

Answer 3

-How and when the agreement was made
-How close the relationship was
-Any financial involvement

Question 4

How does how and when the agreement is made affect the likelihood that there was intention to create legal relations?

Answer 4

An informal verbal agreement like in Balfour v Balfour will not rebut the presumption but a formal written agreement like in Merritt v Merritt might.

Question 5

How does the closeness of the relationship affect the likelihood there was intention to create legal relations?

Answer 5

Jones v Padavatton says a close relationship at the time of the agreement means it is unlikely there is intention because the agreement was probably made because of the relationship rather than a fear of being sued.

Question 6

Which case says that a financial contribution can rebut the presumption in social/ domestic cases?

Answer 6

Simpkin v Pays

Question 7

Why was there still intention to create legal relations in Parker v Clarke?

Answer 7

The young couple had risked their financial security on the expectation they would inherit the house.

Question 8

What is the presumption for commercial agreements and why?

Answer 8

There is intention to create legal relations because there is an expectation that the agreement is binding and both parties will likely want a legally binding agreement.

Question 9

Why is it harder to rebut the presumption of a commercial agreement?

Answer 9

Contracts are usually written and more formal. There is equal bargaining power between businesses so this means they likely intend to create legal relations. Agreements between individuals and companies where there is an inequality of bargaining power will likely have intention to stop businesses escaping binding contracts.

Question 10

What are the factors to consider for rebutting the commercial presumption?

Answer 10

-The agreement was going to benefit the company’s business
-There is evidence the parties didn’t want to be bound by the agreement

Question 11

How does the agreement benefitting the company’s business affect the likelihood that there was intention to create legal relations?

Answer 11

Esso v CCE- if the business gains a commercial benefit from the agreement then it is even more likely there was intention because it is undesirable to allow a business to make false promises.

Question 12

What happened in the case of Rose and Frank v Crompton Bros?

Answer 12

Both parties had agreed the contract was not legally binding and was merely an honourable pledge. This was done in writing so the court allowed there to be no intention.

Question 13

Which case seems more unfair than Rose and Frank v Crompton Bros but where the same outcome was reached? What does it show about evidence the parties didn’t want to be legally bound?

Answer 13

Jones v Vernon’s Pools. There was a clear inequality of bargaining power between the individual and the business but the court stuck to the writing on the coupon saying the coupon was not legally binding. It shows that even where there is a clear inequality in bargaining power, the court will stick to the words of the agreement.

Question 14

What happened in Kleinwort Benson v MMC?

Answer 14

MMC refused to be guarantors so the letter of comfort was not legally binding because it was clear they were trying to get out of a binding contract. (Evidence of trying to escape a binding contract can rebut the presumption).

Question 15

What happens if the words of a commercial agreement are unclear?

Answer 15

Edwards v Skyways- the court will go in favour of the presumption that there is intention to create legal relations.

Question 16

What happens if it is unclear whether the agreement is social/ domestic or commercial?

Answer 16

Sadler v Reynolds says the person who wants the agreement to be commercial and therefore binding has the responsibility of proving that.

Question 17

What is good about the fact that there are presumptions for each type of agreement?

Answer 17

This creates certainty by allowing parties to have a reasonable idea of whether their promises will be legally binding. The distinction between cases also makes sense because social agreements are less formal than commercial ones.

Question 18

What is bad about the fact that there are presumptions for each type of agreement?

Answer 18

There can be uncertainty in cases like Sadler v Reynolds where it would be hard to know which presumption applies and the parties would not know the likely outcome of their case. This makes it harder for the parties to prepare their case and can lead to unfairness if different judges disagree on which presumption should apply.

Question 19

What is good about the fact that presumptions can be rebutted?

Answer 19

It means that no matter which type of agreement cases like Sadler v Reynolds fall under, injustice can be avoided based on the evidence. This is because various factors are considered for each type of agreement to help determine if the agreement should be legally binding.

Question 20

What is bad about the fact that presumptions can be rebutted?

Answer 20

It creates uncertainty because parties can never know whether their contract will not be binding just based on the type of agreement.

Question 21

What is good about the fact that the courts look at evidence of no intention in commercial agreements?

Answer 21

This respects freedom of contract. For instance in Rose and Frank v Crompton Bros, the parties clearly didn’t agree to their contract being legally binding and the court respected this, despite the contrary presumption. This means parties are not forced into contracts unwillingly.

Question 22

What is bad about the fact that the courts look at evidence of no intention in commercial agreements?

Answer 22

It can be a problem in cases with an inequality of bargaining power such as in Jones v Vernon’s Pools where the business was able to get out of paying a customer despite it being unlikely the customer knew the bet was not legally binding. This can lead to unfairness for the party with weaker bargaining power.

Question 23

What is good about the fact that companies are sometimes forced into honouring their agreements?

Answer 23

The decision in Esso v CCE clearly protects the weaker party and prevents companies from exploiting customers with false promises. Therefore having a more flexible approach prevents unfair decisions being made.

Question 24

What is bad about the fact that companies are sometimes forced into honouring their agreements?

Answer 24

By having different decisions in Esso v CCE and Jones v Vernon’s Pools, the rules around when a company clearly does not want to be in a contract is somewhat uncertain and it may be hard to know when a company will have to fulfil their promises.