Intention Flashcards
What are the requirements of a valid agreement?
In order to create a valid contract, there must be agreement, consideration and the intention to create legal relations.
What is the definition of an offer?
An offer is ‘an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed.’
What is the presumption for agreements made between in domestic and social settings?
In domestic and social agreements the presumption is that there was no intention to create legal relations.
To rebut this presumption clear evidence will be needed that the parties did intend to be bound. The presumption can be rebutted, the court will look at the certainty of the terms, the seriousness of the agreement and the reliance of the parties to decide whether they intended to be bound.
What is the presumption for married couples?
For married couples, the general rule is that there can be no intention to be bound between married couples because any agreement is based on ‘natural love and affection’.
This can be demonstrated in the case of Balfour v Balfour.
What is the presumption for agreements between families?
Jones v Padavatton demonstrates that the presumption will also apply in family relationships, in this case an agreement between a mother and her daughter.
What is the presumption for agreements between friends and colleagues?
Agreements between friends and colleagues are governed by the same presumption of no intention to be bound. Wilson v Burnett.
When may the presumption for social and domestic agreements be rebutted?
Firstly, where the parties are dealing “at arm’s length” as seen in Merritt v Merritt the presumption was rebutted. The couple had already separated when their agreement was being made. In these circumstances the parties did intend to be legally bound because they were no longer in a domestic situation. Furthermore, the agreement was reduced to writing.
Similarly, where there is an element of mutuality in the bargain, such as in Simpkins v Pays, the presumption may be rebutted.
The presumption can also be rebutted where one party acts upon the agreement, demonstrating that they relied upon it being legally enforceable. This was the case in Parker v Clark.
What is the presumption in commercial agreements?
In commercial agreements the presumption is that the parties did intend to be legally bound (Bunn & Bunn v Rees & Parker).
The presumption can be rebutted but strong evidence will be required and the onus will be on the party attempting to rebut the presumption (Edwards v Skyways).
When can the presumption be rebutted in commercial agreements?
The presumption of intention can be avoided if the parties expressly state in their agreement that there is no intention to be legally bound (Rose & Frank v Crompton Bros).
These are often called honourable pledge clauses or ‘honour clauses’.
In Jones v Vernon’s Pools, the coupons stated that they were ‘binding in honour only’. Jones argued that there was a binding contract but the wording on the coupon meant that there was no intention to be bound.
Is a comfort letter legally binding?
It has also been established that a ‘comfort letter’ does not create a legally binding contract.
Such a letter is one in which a company assumes a moral rather than legal obligation. Kleinwort Benson v Malaysian Mining Corp.
Is a letter of intent legally binding?
In order for a letter of intent to be legally binding, the letters must contain sufficient evidence to rebut the presumption or will otherwise be presumed to have been intended to be legally binding.
What test will the courts use to determine intention?
If necessary, the court will consider the intentions of the parties based on what was communicated between them by words or conduct.
This is an objective, and not a subjective, test.
How can intention be found?
Intention can be evidenced by conduct.
In the case of Anchor 2010 v Midas Construction, the court held that objectively there was a common intention to be bound even though full contractual formalities had not been completed.
The fact that one party had already begun to perform its contractual obligations went towards the finding of intention.
In what circumstances will the courts not be likely to find intention?
The recent cases of Blue v Ashley, and MacInnes v Gross are good examples of where no intention can be found.
In both cases promises of large payments between business associates were made over boozy meals.
Both offerors successfully argued that the social situation, the consumption of alcohol, the lack of any formal written agreement and the over-the-top nature of the offers proved that there was no real intention to be bound.
Summarise intention, by contrast between Social & Domestic & commercial agreements
Overall, the courts have good reason for presuming a lack of intention in social and domestic agreements, if they did not, the courts would be full of people trying to enforce casual promises.
However, where parties wish to create a binding contract despite the domestic context, they will be able to do so by ensuring they act in such a way as to rebut the presumption.
It is clear that the courts will always presume an intention to create legal relations where an agreement is made in a commercial setting.
While it is possible to rebut the presumption, this can only be done on relatively narrow grounds and where the parties make it clear that they do not wish for contract to be legally binding.
