Intention To Create Legal Relations Flashcards
Intention to create legal relations
Intention to create legal relations is where both parties intend to enter a legally binding agreement or contract and is necessary for the formation of contracts. Lord Stowell explained the rationale for intention to create legal relations in Dalrymple v Dalrymple.
Types of agreement
Contract law attempts to compromise by assuming that there is/isn’t intention through distinguishing between two key types of agreement: social/domestic and business/commercial.
Unless there is evidence that proves the rebuttable presumption (a contrary view to what is assumed), in social and domestic agreements, the presumption is that there is no intent and the agreement isn’t binding, and in business and commercial agreements, the presumption is that there is intent and the agreement is binding.
Social and domestic
In domestic scenarios (eg agreements between family and friends), there is an assumption that there is no intention to create legal relations, unless there is clear indication that the parties intended a binding agreement (eg written agreement or specific promise) and the rebuttable presumption that there was intent and reliance is proven
Such agreements are not legally enforceable and not legally biding. Such agreements could be seen as a favour - no clear statement that the agreement should be binding
Business and commercial
There is a presumption that there is intention to create legal relations (unless the rebuttable presumption that there was no intent can be proven). The question is whether the terms are properly agreed upon and specific.
If the contract includes terms of business nature (eg an agreement to supply goods/services) or was formed in a business setting, then it’s highly likely to be legally enforceable and legally binding.
Dalrymple v Dalrymple
Definition
Lord Stowell explained the rationale for intention to create legal relations as: ‘Contracts should not be… sports of the idle hour, mere matter of peasantry and bandage, never intended by the parties to have serious effect whatever’
Merritt v Merritt
Social/domestic - no intent
When parties are separating/are separated, there is a presumption of an intention to create legal relations
Errington v Errington
Social/domestic - no intent
A license was granted under the contract, meaning it cannot be revoked by the grantor and contract is enforceable
Simpkin v Pays
Social/domestic - no intent
There was a binding agreement despite the family connections, as a lodger was also party to the contract
Hardwick v Johnson
Social/domestic - no intent
As the familial relationship of whom the informal agreement was made between broke down, the courts imputed intention into the agreement
Ellis v Chief Adjudication Officer
Social/domestic - no intent
No legally binding contract, as the parties did not intend that to be the case
Balfour v Balfour
Social/domestic - intent
Lord Denning held that as the parties were not ‘living in amity’, it was ‘safely presumed that they intended to create legal relations’
Jones v Padavatton
Social/domestic - intent
As there was no formality in the agreement, there was no intention to create legal relations
MacInnes v Gross
Social/domestic - intent
There was no certainty as to terms in the oral, informal agreement, so the court ruled no intent and no binding agreement
Wilson v Burnett
Social/domestic - intent
The CoA dismissed any binding agreement, as a chat about shared winnings was not an intent
Jones v Vernons Pools
Business/commercial - no intent
The agreement was based purely upon honour of the parties … and the clause ‘binding in honour only’ was inserted into the contract, which the court felt was reasonable and clear to show no intent
Kleinwort Benson v Malaysian Mining Corp
Business/commercial - no intent
The court stated that the ‘comfort letter’ (commercially, an assurance that a contractual obligation will be met) is not a binding agreement and is not evidence of intent
Rose and Frank v Compton
Business/commercial - no intent
The House of Lords allowed, in principle, ‘honour-pledge clauses’, where the presumption of intention can be avoided if the parties expressly state in the agreement that there’s no intent
Edwards v Skyways
Business/commercial - intent
The agreement had been made in a business context, which raised a strong presumption that there was intent and the agreement was legally binding
Wells v Devani
Business/commercial - intent
The Supreme Court held that although the agreement had been ‘vague’, a contract can be interpreted to be complete and binding if it can be naturally understood as including the missing term
Esso Petroleum v Commissioners
Business/commercial - intent
There is a presumption of intention to create legal relations when an agreement is made in a business setting
McGowan v Radio Buxton
Business/commercial - intent
There was intent as the competition and awarding of the prize was a legally binding agreement
Intent to create legal relations plan
Issue - Do the parties intend to be legally bound by the agreement?
Define intention to create legal relations … - Lord Stowell in Dalrymple v Dalrymple
Types of agreement: social/domestic (no intent) and business/commercial (intent)
- Assumed, unless rebuttable presumption is proved
Social/domestic:
- No intent is assumed - Merritt v Merritt, Errington v Errington, Simpkin v Payes, Hardwick v Johnson, Ellis v Chief Adjudication Officer
- Unless the rebuttable presumption that there was intent and reliance is proven - Balfour v Balfour, Jones v Padavatton, MacInnes v Gross, Wilson v Burnett
- Not legally enforceable or legally binding
Business/commercial:
- Intent is assumed - Edwards v Skyways, Esso Petroleum v Commissioners, McGowan v Radio Buxton
- Unless the rebuttable presumption that there was no intent is proven - Jones v Vernons Pools, Kleinwort Benson v Malaysian Mining Corp, Rose and Frank v Compton
- Legally enforceable and binding
- The question of whether terms were properly agreed upon and specific - Wells v Devani
Apply
Conclusion - If it is proven that there was no intent, then there is no contract.
