INTENTION TO CREATE LEGAL RELATIONS

Question 1

What is meant by intention to create legal relations? (1)

Answer 1

the parties to a contract expressly or impliedly agree that the contract is legally binding and therefore enforceable in court.

Question 2

what are the types of legal intentions? (3)

Answer 2

-business agreements
-social agreements
-domestic agreements

Question 3

what are business agreements? (1)

Answer 3

are presumed to be legally binding but does not take into account the fact that the presumption can be rebutted by showing the opposite is the case.

Question 4

what are exceptions to business agreements? (1)

Answer 4

a gentleman’s agreement or honours agreement.

Question 5

what cases cover the exceptions to business agreements? (1)

Answer 5

Jones v Vernons Pools (1938)

Question 6

who is the burden of proof on in business agreements? (1)

Answer 6

the burden of proof is on the person seeking to establish there is no legal relation

Question 7

what cases cover burden of proof in business agreements? (1)

Answer 7

Edwards v Skyways ltd (1969)

Question 8

what case covers independence of facts of the case? (1)

Answer 8

Edmunds v Lawson (2000)

Question 9

what are the issues of free gifts in terms of business agreements? (1)

Answer 9

free gifts can create problems, where this is to promote a business it can still be held as legally binding.

Question 10

what cases cover free gifts in terms of business agreements? (1)

Answer 10

Esso petroleum co ltd v commissioners of customs and excise (1976)

Question 11

what cases cover prizes in competitions in terms of business agreements? (1)

Answer 11

McGowan v Radio Button (2001)

Question 12

what is a letter of comfort? (2)

Answer 12

a written assurance usually provided by a parent company in respect of its subsidiary financial obligations to a bank. Usually where a parent company wishes to give some assurance to the lender in respect of the subsidiary’s ability to repay the loan but has no obligation to pay on its behalf.

Question 13

what cases cover letter of comfort in terms of business agreements? (1)

Answer 13

Kleinwort Benson ltd v Malaysian mining corporation (1989)

Question 14

when is there a dispute between domestic and business? (1)

Answer 14

there may be situations which fall into a sort of ‘halfway house’ between a domestic and commercial and that in this case the burden of overturning the presumption may be affected.

Question 15

what cases cover confusion between domestic and business agreements? (1)

Answer 15

Sadler v Reynolds (2005)

Question 16

what is a social and domestic arrangement? (1)

Answer 16

there are presumed not to be legally binding but the presumption can be rebutted

Question 17

what cases come under social and domestic disputes? (2)

Answer 17

Balfour v Balfour (1919)
Merritt v Merritt (1970)

Question 18

what cases cover family disputes? (1)

Answer 18

Jones v Padavatton (1969)

Question 19

what occurred in the case of Jones v Vernons pools and give the date (4)

Answer 19

Jones claimed he had the winning football pool coupon, he signed a contract that the transaction was binding in honour only. As agreement was based on honour and therefore was not legally binding (there was no intent to create legal relations). (1938)

Question 20

what occurred in the case of Edwards v Skyways ltd and give the date (4)

Answer 20

negotiation occurred about rights and payments to redundant pilots. Skyways tried to avoid making the agreement ex gratia payment in Edwards redundancy. Failed due to ex gratia suggests voluntary payment with no liability to make. The agreement was a business agreement and therefore was intention to create legal relations. (1969)

Question 21

what occurred in the case of Edmunds v Lawson and give the date (3)

Answer 21

court stated ‘whether the parties intended to enter into legally binding relations … is an issue to be determined objectively’ - means that each case will be decided on its own facts. (2000)

Question 22

what occurred in the case of Esso petroleum co ltd v commissioners of customs and excise and give the date (4)

Answer 22

Esso gave a world cup coin with every 4 gallons of petrol purchased (Should a free gift attract tax?) as Esso was trying to gain more business from the promotion, there was held to be intention to create legal relations, tax was payable. (1976)

Question 23

what occurred in the case of McGowan v Radio Button and give the date (4)

Answer 23

claimant entered a radio competition (prize; Renault Clio car) the winner was given a model of the car instead. Radio argued that there was no intention to create legal relations, the court decided there was in line with previous cases. (2001)

Question 24

what occurred in the case of Kleinwort Benson ltd v Malaysian mining corporation and give the date (4)

Answer 24

Kleinwort lent money to metal ltd, a subsidiary of MMC, MMC could not guarantee that this loan but issued a comfort letter stating its intention to ensure metals had sufficient funds for repayment. Metals went out of business without repaying Kleinwort, a claim based on the comfort letter failed as there was no intention to create legal relations. (1989)

Question 25

what occurred in the case of Sadler v Reynolds and give the date (4)

Answer 25

Contract was between a journalist and a businessman who were friends. The judge suggested that the agreement fell ‘somewhere between an obviously commercial transaction and a social exchange’ burden was on the journalist to prove that there was legal intention and that it was a business agreement not a social one. (2005)

Question 26

what occurred in the case of Balfour v Balfour and give the date (4)

Answer 26

a husband worked abroad, his wife stayed in England and promised her monthly income, the marriage failed and she claimed the income, the agreement had been made at an amenable point in their relationship not in contemplation of divorce, not legally enforceable. (1919)

Question 27

what occurred in the case of Merritt v Merritt and give the date (2)

Answer 27

Mr Merritt left his wife, an agreement to pay the wife an income if she paid the outstanding mortgage was held to be intention to create legal relations, enforced by the court. (1970)