Intention Flashcards
Introduction to intention
Not all agreements are contractual and legally enforceable. Therefore, despite a situation whereby there is an agreement and consideration, the courts may feel this should not be enforced because the parties did not intend that it should create legal relations.
Two presumptions for intention
The main approach is based on two presumptions. If an agreement is a domestic agreement, the courts will presume it is not intended to be legally binding. It will be up to the party wishing to enforce to overturn that presumption. If the agreement is commercial, the courts will presume that it is intended to be legally binding. It will be up to the party willing to escape the agreement to prove the presumption should be overturned.
Domestic agreements, case law
Balfour v Balfour
Merritt v Merritt
Coward
Balfour facts
In this case a husband and wife went to live in Sri Lanka. The wife had to return to England due to illness and the husband agreed to pay her £30 per month until she returned to Sri Lanka. The marriage broke down and the wife tried to enforce the agreement. The Court of Appeal held her action must fail. The agreement was not legally enforceable because there had been no intention to create legal relations.
Warrington LJ provided “the matter really reduced itself to an absurdity when one considers it, because it we were to hold that there was a contract in this case we should have to hold that with regard to all the more or less trivial concerns of life where a wife, at the request of her husband, makes a promise to him that is a promise which can be enforced in law. All I can say is that there is no such contract here.”
Merritt v Merritt
Here, the husband left to his wife to live with another woman. He agreed to pay his wife £40 a month which she had to use to pay the mortgage. After the mortgage was repaid, he was to transfer the house into her sole ownership. However the Husband refused to do so. The marriage had already come to an end and this agreement could be considered part of their divorce agreement.
Lord Denning distinguished this from Balfour. “The parties there (in Balfour), were living together in amity. In such cases, their domestic arrangements are ordinarily not intended to create legal relations. It is altogether different when the parties are not living in amity but are separated, or about to separate. They then bargain keenly. They do not rely on honourable understandings. They want everything cut and dried. It may safely be presumed that they intend to create legal relations”. The context in which the agreement was made was such therefore that although it prima facie concerned a domestic matter, the support of a wife by her husband, the presumption, that it was not intended to be binding was rebutted.
Coward
– This case concerned an arrangement between two colleague for one to give the other a lift to work each day in exchange for petrol money. This was found not to intend to create legal relations and was not for “hire or reward”. Driver’s insurance did not cover the accident which resulted in their deaths.
Commercial agreement
This means the presumption is that the agreement is intended to be legal binding (Edwards). This can be seen in Carlill. Carbolic were a commercial entity and therefore there is a presumption of intention.
Case for commercial
This is seen in Bowerman v ABTA. Here the plaintiff booked a holiday with a tour operator. A notice was posted on the window of the office by the tour operator stating that customers would be reimbursed the cost of their holiday if the tour operator went bust. The plaintiff claimed he had relied on the ABTA notice. Court held that the notice was intended to constitute a binding offer, which a customer could accept by booking a holiday.
Honour clauses
The existence of honour clauses can be used to rebut the presumption that commercial agreement intended to create legal relations. This exception rarely occurs. One party makes it very clear in their agreement that there is not intention to create a contract.
Rose and Frank Co v J R Crompton and Bros English company agreed to sell product in USA through an American firm. The agreement contained “honourable pledge clause” which provided that the arrangement entered into was not a formal or legal agreement and shall not be subject to legal jurisdiction to the law courts of either US or England. The English company terminated the agreement a year earlier and failed to give proper notice. The court of appeal held that with respect to selling rights, parties had specifically declared that the document had no legally binding consequence, thus none could exist.
