Contract Formation Flashcards
Intention Definition
Intention to create legal intention is a requirement in order for a contract to be legally binding. Intention is the commitment to create a contract which is legally binding. This is decided objectively by examining the nature and the context of the agreement rather than the minds of actual parties during this agreement.
The rules of Intention
Within the rules of intention there are two presumption that the courts use to examine if there in an intention to create legal relations, in a social/domestic agreement there is the presumption that there is no intention to create legal relations and in business/commercial agreement, there is a presumption that there is an intention to create legal relations.
Business/commercial agreements
In business/commercial agreements, the courts always start with the presumption that there was intention to create a legal relationship as it is more formal and there is more at stake. This can be seen in Edwards v Skyways where a promise to pay a redundancy package was binding although it would usually be described as ‘ex gratia’. Furthermore the case of McGowan v Radio Buxton shows that a promise to win a prize in a competition with a business is intended to be legally binding and Esso Petroleum shows that the purpose of the promotion was to gain business so this was a commercial relationship so the courts started with the presumption that there was intention to create legal relations
in social/ domestic agreements
In social agreements the courts take the presumption that there is no intention to create legal relation. This can be seen in the case of Balfour where where an arrangement made by a happily married couple at an amicable point in their relationship was not binding. It can also be seen in the case of Wilson v Burnett which stated “social chatter is not legally binding”.
Rebuttal in social/domestic agreements
The presumption of no intention in social arrangements can be rebutted by various factors such as where financial reliance has been placed on the agreement, as in Parker v Clarke where the presumption was rebutted, or where a cohabiting or married couple are separating and a separation agreement is made, as seen in Merritt v Merritt. Furthermore it can be rebutted if the agreement is business-like as seen in Simpkins v Pays where there was evidence of an agreement to divide the winnings.
Rebuttal in commericial agreements
Furthermore the initial presumption of intention in commercial relationships can be rebutted by “very clear wording” as in the case of Jones v Vernons Pools where it was stated that the agreement was “binding in honour only”.
Offer And acceptance
The moment when a valid offer is accepted and this is communicated , a binding contract comes into existence
What the agreement is for and the issue
This is whether there is a binding contract between … and … for
it is necessary to prove that there was AGREEMENT between the parties
