intention to create legal relations & capacity

Question 1

Define an intention to create legal relations.

Answer 1

An intention to enter into an agreement that has legal ramifications

Question 2

How is intention tested?

Answer 2

Objective test- by what the party’s actions suggest, not what was on their mind

Question 3

What is the difference between intention for commercial and domestic agreements?

Answer 3

commercial= presumed that there IS an intention to create
domestic= presumed there IS NOT an intention to create

Question 4

What does ‘subject to contract’ mean?

Answer 4

That the parties do not intend to be bound until the formal execution of a contract.
- prima facie not binding

Question 5

Why are domestic agreements presumed to NOT have the intention to create?

Answer 5

(family and friends)- None of the parties would reasonably envisage the right to sue the other for failure to honour the commitment.

Question 6

What persons have full capacity to enter into contracts?

Answer 6

Persons over the age of 18 have full contractual capacity if they are of sound mind and not suffering from a factor ruling out capacity, such as drunkenness.

Question 7

What are the 2 exceptions of minors not being bound by a contract?

Answer 7

• necessaries
• Employment, apprentice or education contracts (only for their benefit)

Question 8

What do ‘necessaries’ mean in relation to a minor being bound in a contract?

Answer 8

= Suitable to the condition in life of the minor or other person concerned and to their actual requirements at the time of the sale and delivery. SGA 1979

• minor must pay a reasonable price for these goods

Question 9

What is the effect of mental incapacity and intoxication on contracts?

Answer 9

Where a person has mental incapacity or intoxication, he is unable to make a decision for himself in relation to the matter

Question 10

What is the effect of entering into a contract with a person who lacks mental capacity?

Answer 10

• person without capacity still remains liable to pay a reasonable price for ‘necessaries’.
• incapacity= contract is binding UNLESS incapacity person can establish they did not understand what they were doing and other party was aware of this
  (applies to drunkness and intoxication from other substances also)