Intention to Create Legal Relations Lecture Notes PDF

[Law of Contract] [Intention to create legal relations] NB. Possible criticism- Regard must be given to the actual Intention of the parties as appose to purely circumstances surrounding the formation of the agreement. There is a presumption for commercial agreements that parties intended to b...

[Law of Contract] [Intention to create legal relations] NB. Possible criticism- Regard must be given to the actual Intention of the parties as appose to purely circumstances surrounding the formation of the agreement. There is a presumption for commercial agreements that parties intended to be legally bound (**unless the parties expressly state that they do not want to be in which case the presumption is rebutted**). On the other hand, many kinds of social and domestic agreements are unenforceable on the basis of public policy (unless rebutted by evidence of the contrary). Domestic\\Social Agreements (4 cases) Balfour v Balfour Using contract like terms, Mr. Balfour had agreed to give his wife a certain sum of money per month as maintenance while he was living in Sri Lanka. Once he left they separated and Mr. Balfour stopped payments. Mrs. Balfour brought an action against him to enforce payments The court held: There was no enforceable agreement as there was not enough evidence to suggest that they were intended to be legally bounded by the promise. **Vs** Merritt vs Merritt Notwithstanding the domestic context and although married, the couple were estranged at the time the agreement was made. Therefore, any agreement between was made with the intention to create legal relations (commercial agreement). [Jones v Padavatton (1969)] A mother and daughter came to an arrangement whereby the mother agreed to **maintain** her daughter if she agreed to study for the bar. The daughter commenced her studies and the mother paid her an allowance. The **arrangement was later altered** and the mother agreed to **provide a house** in which her daughter could reside **whilst she studied**. Mother and daughter fell into dispute as to the occupancy of the house, and the mother sought possession. It was held the daughter was entitled to remain in possession and the mother appealed. The mother's appeal was successful and she was awarded possession. There is a presumption that family arrangements are based on mutual trust, family ties and affection, and that there is no intention to create legally binding contracts capable of enforcement in the courts. This presumption can be rebutted, but the lack of formality regarding the agreement between mother and daughter strongly indicated there was no such intention and the daughter had no defence to her mother's claim for the house. Parker v Clarke The defendants invited the plaintiffs to live with them. There was a detailed agreement about household expenses and that the defendants would leave the plaintiffs a share of their property in their will. On the strength of their agreement, the plaintiffs sold their own home and lent money to their daughter. It was held that there was an intention to create legal relations. Simkins v Pays A woman, her granddaughter and a paying boarder all took part in a weekly competition organized by a Sunday newspaper. The agreements over postage were informal and the entries were made in the grandmother's name. One week they won 750 pounds. The paying boarder was derived a third share by the two. The question arose as to whether there was an intention to create legal relations in the informal arrangement between the Parties so as to constitute a legal agreement to distribute the shares. The court held: There was a legally binding agreement that any prize should be shared between all three. It was held that the presence of the outsider rebutted the presumption that it was family arrangement and not intended to be binding. The mutual arrangement was a joint enterprise to which cash was contributed in the expectation of sharing any prize. Commercial Agreements Rose & Frank vs Crompton Bros A commercial agreement by which A appointed B to be its distributer in the USA expressly stated that it was "Not subjected to any legal jurisdiction" in either country. A terminated the contract they had without giving notice as required, and refused to deliver goods. Held: Although this was clearly a business agreement which appeared to be a contract, the express statements that there should be no legal consequences was enough to show that this was not intended to be a contract. Edwards vs Skyways In a case involving an "ex gratia" payment. Megan J emphasized that there is a strong presumption that commercial agreements are meant to be legally binding. In which types of cases the burden of proof is on the person seeking to rebut the presumption. Sound File Intention to create legal relation is judged is judged objectively through the use of two presumptions which are capable of being rebutted. When one considers commercial agreements, it is presumed that the parties intended to be legally bound, unless there are clear words indicating the absence of a promise or that the parties intend to be bound in honour only. In *[Jones v Vernon]* it was held where a contract is binding in honour only or the honour clause is used this meant there was no contract. **N.B**. The fact of a breakdown of the relationship takes agreement outside the scope of the domestic agreement. In *[Merrit vs Merrit]* Denning LJ said that it's all together different when the parties are not living in amity but are separated or about to separate they then bargain keenly, they do not rely on honorable understanding, they want everything 'cut and dried'. And it may safely be presumed that they intend to create legal relations. In order to rebut the presumption against intention to create legal relations, it is unlikely that the court will find any express statement of the parties to be conclusive since it is here that the policy element of the doctrine is at its strongest. Notwithstanding the policy driven position, the courts have always been willing to find social/domestic agreements enforceable in certain cases. It is not always easy to identify the evidence which cause the presumption to be rebutted, but factors such as: i) certainty of terms ii) seriousness and iii) reliance (all three can be seen in Parker vs Clarke). [Commercial Agreements] One may find a company who advertises may seek to reply on the absence of intention to create legal relations, in order to avoid being held to be exact words of an advertisement. In *[Batman v Raptor Insurances]* (1886) the plaintiff had booked a holiday through a tour operator, the tour operator was a member Raptor, the operator had become insolvent. The issue was whether the **raptor notice display on the tour operator premises amounted to a binding offer of protection**, so that the customers were entitled to be reimbursed the full cost of the holiday. The court rejected the argument that this promise was not allowed. The majority said that the notice was intended to be binding and would be read by customers constituting a binding offer which a customer could accept by booking a holiday with the tour operator. In *[Ford Motor company v A.V.E.F.W]* The court faced the question of whether a collective bargaining agreement between union and management was legally binding. It was clearly a commercial matter and therefore it ought to have been legally binding. The burden of proof is on laid on the union which sought to deny the contractual intention and the court found in the union\'s favour. In doing so the court relied on evidence from the industrial relations expert, which was general rather than relevant to the particular agreement and so the courts from a policy standpoint found that there was no contract in terms of intentions to create legal relations. *[The problem with this area of law is that differences can exist in identifying the type of contract (commercial/social) for the purposes of the application of presumptions ]* The difficulty is illustrated in [Sadler vs Reynolds] , in this case the claimant was a journalistic and professional ghost worker, who sought damages for breach of an alleged oral contract to ghost write the autobiography of a well-known business man, that the agreement had been made following a number of meetings including one at which their wives had been present, and the claimant had been charged with securing a reputable publisher that the parties had agreed to share proceedings and that he had came up with a number of ideas in writing this \"agreement\". The evidence was that after an agreement had been advance with the publisher, the defendant had entered into an agreement with another writer for the writing and publication of the autobiography. [The judge consider that given the context and nature of the party dealing this agreement fell somewhere between a transaction that was obviously commercial and a social agreement.] On the facts the judge considered that the claimant had the onus of establishing an intention to create legal relation. Although this onus was heavy as in the case of a purely social contract. Interestingly in the case it was held that the claimant had discharge his burden of proof that there was intention to create legal relations the defendant knew that the claimant was an experience journalist and had been previously employed as a ghost writer, they had met to discuss the possibility of the claimant ghost writing his autobiography and plan to make money from the transaction. It means therefore that it is evident that in the case of a contract that is clearly commercial the starting point will be the application of a presumption in favour of an existence of an intention to be legally bound and it seems difficult to justify the conclusion in [Sadler vs Reynolds], that the agreement was anything other than a commercial agreement for profit.