Intention to Create Legal Obligation

Question 1

Intention to Create Legal Obligation

Answer 1

-A pre-requisite of a valid contract. Offer, acceptance, certainty, intention to create legal obligation.

-Certain relationships are just not meant to be legally binding, despite the fact that it looks like a legal contract in every other legal sense.
-If there is no legal obligation in an agreement then there is no meeting of the minds in respect that in a conflict both parties can sue.

Question 2

Social context contracts

Answer 2

-Social context contracts:
-Balfour v Balfour.
-In social context there is an automatic presumption that the agreement was not intended to be binding. The onus is on one of the parties to prove that it was binding with evidence.

-Unlike family or spousal agreements, commercial agreements by default have an intent of legal obligations, unless evidence can say otherwise.

Question 3

Intent =

Answer 3

Fundamental meeting of the minds.

Question 4

Balfour v. Balfour [1919] 2 K.B. 571 (Eng. C.A.)
(Contracts Between Spouse/Family)

Issues:
- Did husband have intention to have a legal obligation?

Answer 4

Rules:
- In family or social context there is the presumption that there is no intent to create a legal obligation, unless there is evidence otherwise.
- Objective reasonable person test to determine if they intended to create a legally binding contract by assessing the context:
(1) was it intended to be sued upon?
(2) was it intended to have legal effect?
(3) was it intended to have a contractual rather than moral undertaking.

Question 5

Rose And Frank Co. v. J.R. Crompton And Bros. LTD [1923] 2 K.B. 261 (C.A.)
(Commercial Context Presumes Intent to Create Legal Obligation)

Issues:
- Can a clause in a contract/agreement saying it not to be legally binding hold true?

Answer 5

Rules:
- Unlike family or spousal agreements, commercial agreements by default have an intent of legal obligations, unless evidence can say otherwise.
- Otherwise the party must show evidence demonstrating that this agreement was not binding.
- Commercial agreements can avoid legal obligations when the language in an agreement is so clear as to not have any legal agreement by both parties.

Conclusion:
- No legally enforceable contract.
- No, the parties did not intend to create legal obligations.

Question 6

Toronto Dominion Bank v. Leigh Instruments Ltd. (1999), 178 D.L.R
(Comfort Letters)

Issues:
- Are comfort letters legally binding? No.

Answer 6

Rules:
- Comfort letters are not legally binding, not a contractual undertaking.
- Comfort letter are never intended to be binding, so no intention of legal relations (legal consequences).
Corporations are not liable for their subsidiary companies.

Question 7

Canadian Taxpayers Federation v. Ontario (Minister of Finance) (2004) 73 O.R. (3d) 621 (O.S.C.J.) at [51]-[62]

Issues:
- Did McGuinty have intention to create a legal obligation?

Answer 7

Rules:
- Campaign election promises do not establish intent to create a legal obligation.
- Mutual intent assessed from objective common sense.
- Politicians make statements all the time that are not meant to be legally binding.

Question 8

Family Law Act SBC 2011, ss. 3 and 92

Answer 8

Balfour v Balfour: common law presumption in family context against intention to create legal obligation
Displaced by family law act if the following prerequisites are met between spouses:

1) There is a deal to divide assets and debts

2) They must be spouses, which is defined as married people or people living in a marriage like relationship for 2 years, or were married

3) The deal is signed, written, and witnessed
Basically: there is a deal between spouses or ex-spouses concerning the division of debt or assets – then Balfour v Balfour doesn’t apply

• If it is about anything other than property or division of assets or not a spousal relationship, then Balfour v Balfour applies.