Intention to Create Legal Relations

Question 1

What is the presumption for commercial agreements?

Answer 1

There is a very strong, rebuttable presumption that the parties intended their agreement to have legal consequences.

Question 2

What is the presumption for domestic agreements?

Answer 2

The rebuttable presumption is that the parties did not intend to create legal relations.

Question 3

When can the presumption of intention to create legal relations in commercial agreements be rebutted?

Answer 3

A clear, express statement that the agreement is not meant to be legally binding (eg a statement to the effect the agreement is ‘binding in honour only’) would work,but not much short of that.

Question 4

When can the presumption of no intention to create legal relations in domestic agreements be rebutted?

Answer 4

Where:

The parties are dealing at arm’s length.

Solicitors are involved

Any agreement will be formalised

A lot of money would be at stake

Express agreement that there will be legal consequences.