Intention to create legal relations

Question 1

What is an intention to create legal relations?

Answer 1

• An intention to create legal relations is the parties to a contract expressly or impliedly agreed that the contract is legally binding and therefore enforceable in court

Question 2

Is intention based subjectively or objectively?

Answer 2

• The courts use an objective test of what a reasonable man would believe

Question 3

What are the two general presumptions?

Answer 3

1. Social and domestic
2. Commercial

Question 4

What are social and domestic agreements?

Answer 4

• There is a presumption that there is no intention to create legal relations
• This means they are not legally binding

Question 5

What are some examples of a domestic agreement?

Answer 5

• If families have made an arrangement and are very close, it is domestic however if there is money involved it will be a business agreement
• A gentleman’s agreement is not legally binding as it was based on honour as shown in Jones v Vernon Pool
• A letter of comfort sent by a parent company is not legally binding but a moral obligation

Question 6

What is a commercial agreement?

Answer 6

• There is a presumption that there is an intention to create legal relations and therefore legally binding

Question 7

What are examples of a commercial agreement?

Answer 7

• If a free gift is to promote a business, it is legally binding, this is the same for a competition prize (Esso Petroleum v Commissioners of Customs and Exercise and McGowan v Radio Buxton)
• If money is involved, it is likely a business agreement as shown in Simpkins v Pays

Question 8

Can agreements be rebutted?

Answer 8

• To rebut a commercial agreement, it is on the one trying to rebut and a heavy burden shown in Edwards v Skyways

Question 9

Are agreements usually domestic or commercial?

Answer 9

• When it is either a business or domestic, assume it is a domestic agreement and must prove a business agreement