Intention to Create Legal Relations Flashcards
What is required for a contract to be legally binding?
A. Intention to create legal relations
B. The agreement must be in writing
C. The parties must be family members
D. The agreement must be fair
A. Intention to create legal relations
Explanation: A valid contract needs offer and acceptance, consideration, and intention to create legal relations. Writing is not always required.
What is the test used by the courts to determine if parties intended legal consequences?
A. Internal belief test
B. Subjective test
C. Objective test
D. Hypothetical test
C. Objective test
Explanation: Courts apply an objective test: Would a reasonable person believe the agreement was meant to be legally binding?
A husband agrees to pay his wife a monthly allowance while they are happily married. Is this agreement likely legally enforceable?
A. Yes, because it involves financial support
B. No, because it is a domestic agreement made during marriage
C. Yes, because she relied on the agreement
D. No, because it was not in writing
B. No, because it is a domestic agreement made during marriage
Explanation: In Balfour v Balfour, courts held there was no intention to create legal relations in this type of domestic arrangement.
In which of the following cases was an advertisement held to create legal relations?
A. Merritt v Merritt
B. Jones v Padavatton
C. Balfour v Balfour
D. Carlill v Carbolic Smoke Ball Co
D. Carlill v Carbolic Smoke Ball Co
Explanation: The deposit of £1,000 showed serious intent, making the advert legally enforceable as a unilateral offer.
A shopkeeper says to a customer: “Free coin with every 4 gallons of petrol.” Is this likely legally enforceable?
A. No, because the coin has no value
B. Yes, because it’s in a commercial context
C. No, because it’s a domestic agreement
D. Yes, because verbal agreements are always binding
B. Yes, because it’s in a commercial context
Explanation: In Esso v Customs & Excise, the court found presumed intention due to commercial gain.
What is the effect of the phrase “subject to contract” in negotiations?
A. It means the parties are immediately bound
B. It has no legal impact
C. It delays legal binding until a formal contract is signed
D. It indicates a domestic agreement
C. It delays legal binding until a formal contract is signed
Explanation: “Subject to contract” means no legal obligations arise until the full contract is executed.
Two friends open a small business and verbally agree to split profits. One sues the other. Is there likely a contract?
A. Yes, because it’s a commercial agreement
B. No, because they are friends
C. No, because it’s not written
D. Yes, because they were both employed
A. Yes, because it’s a commercial agreement
Explanation: Even if the parties are friends, the commercial context creates a presumption of legal intention.
What is the effect of the phrase “subject to contract” in negotiations?
A. It means the parties are immediately bound
B. It has no legal impact
C. It indicates a domestic agreement
D. It delays legal binding until a formal contract is signed
D. It delays legal binding until a formal contract is signed
Explanation: “Subject to contract” means no legal obligations arise until the full contract is executed.
A company states in its contract that the agreement is “not legally binding.” What is the likely legal effect?
A. The agreement is presumed binding because it’s commercial
B. The wording is irrelevant
C. The agreement is not binding if the language is clear
D. The agreement is void due to lack of consideration
C. The agreement is not binding if the language is clear
Explanation: Commercial agreements are presumed binding, but this can be rebutted by clear language stating the opposite.
A client asks you whether a signed collective agreement between a trade union and employer is legally enforceable. What must be present?
A. A written and signed agreement
B. An oral promise from both parties
C. A provision stating it is intended to be legally enforceable
D. A judge’s approval
C. A provision stating it is intended to be legally enforceable
Explanation: Under section 179 TULRCA 1992, collective agreements are not binding unless expressly stated.
A woman separates from her husband, and they sign a written agreement about maintenance. Is this likely binding?
A. Yes, because it’s post-separation and written
B. No, because it’s a family matter
C. No, because it’s not in court
D. Yes, because it was agreed during marriage
A. Yes, because it’s post-separation and written
Explanation: In Merritt v Merritt, courts found a binding contract because the couple were separated and the agreement was formal.
Which of the following would not usually result in a legally enforceable agreement?
A. A contract between two companies
B. A written agreement between separated spouses
C. A social promise to meet for dinner
D. A signed sale agreement marked “subject to contract”
D. A signed sale agreement marked “subject to contract”
Explanation: “Subject to contract” signals no intention to be bound until formal execution, even if signed.
