Intention to Create Legal Relations notes PDF

Handout 2 - Intention to Create Legal Relations ----------------------------------------------- The mere fact that two parties have made mutual promises, supported by consideration, does not mean that the law will enforce their agreement. People may make agreements without any intention of invoking...

Handout 2 - Intention to Create Legal Relations ----------------------------------------------- The mere fact that two parties have made mutual promises, supported by consideration, does not mean that the law will enforce their agreement. People may make agreements without any intention of invoking the assistance of the courts. "To invite a friend to dinner is not to invite litigation." The final element essential to the formation of a valid contract is the intention to create legal relations. Though the presence of consideration will normally imply an intention to be bound, this will not necessarily be the case in every agreement. When considering the area of intention, agreements may be divided into two types; domestic agreements and commercial agreements. i. **Domestic Agreements** In the case of such agreements there is a presumption that there is no intention to be legally bound. *See **Balfour v Balfour*** \[1919\] 2 KB 571 However, it is important to remember that this is merely a presumption, and may be rebutted if there is evidence to the contrary. *See **Merritt v Merritt*** \[1970\] 2 All ER 760 Agreements between parent and child are also governed by the presumption that there is no intention to create legal relations. *See **Jones v Padavatton*** \[1969\] 2 All ER 616 ***Hardwick v Johnson*** \[1978\] 1 WLR 683 The presumption that domestic arrangements are not intended to be legally binding also applies to friendly agreements made outside the family circle. Again, there can be exceptions. *See **Parker v Clark*** \[1960\] 1 All ER 93 ii. **Commercial Agreements** Where an agreement has a commercial nature it is presumed that there is an intention to create legal relations. This presumption can of course be rebutted by evidence to the contrary. The parties may expressly state in their agreement that it is to have no legal effect whatsoever, as in ***Rose & Frank v Crompton*** \[1925\] AC 445. The onus of proving that a commercial agreement is not legally binding rests on the person who alleges that it has no legal effect. This is a heavy burden to discharge. *See **Edwards v Skyways*** \[1964\] 1 All ER 494 **Additional considerations which may affect whether parties should be taken to have intended to create legal relations** 1. Whether the agreement is very vague or informal. 2. Where the terms of a promise leave its performance entirely to the discretion of the promisor. 3. Whether the promise was made in jest or in anger.