FORMATION OF A CONTRACT

(ELEMENT OF A VALID CONTRACT)

INTENTION TO CREATE LEGAL RELATIONS

LECTURER: MRS. VERA EKUNDAYO

Intention is one of the elements of a valid contract. Without the intention to create legal
relation, one cannot establish the existent of a legally binding contract. Intention to
create legal relation or to be legally bound by the terms of an agreement is crucial, it
goes to the root of any contractual agreement i.e. where other elements of a contract is
vividly present and intention cannot be established, no contract is said to exist.

Intention is not a physical object that can be observed with the natural eyes.
Intention is that element of a contract that show that parties contemplated being bound
by their promises.

In SCOA (Nig) Plc V. Civil Design Const (Nig) Ltd (2001) 9 NWLR (Pt 719) 652 at
767 the CA stated per Oguntade JCA (then) that

“intention can only be ascertained from the terms of the contract into which the
parties freely subscribed their hands”.

There are arguments on whether intention is really a requirement for a valid contract or
if the absence of intention to create a legal relation is sufficient ground to void a
contract.

Some have argued that once the other elements such as offer, acceptance,
consideration and capacity are established, the intention to create a legal relation is
unnecessary. It is our position that the issue of intention to create legal relations is a
requirement for the existence of a valid contract.

Commercial/Business Agreement
Establishing intention in commercial transactions are usually no problem, as there is a
presumption that persons coming together to transact business have the intention to be
legally bound, unless the contrary is proved.

In the case Carllil V Carbolic Smoke Ball the company backed up its promise in the
offer to the world, with a deposit of 1000pounds with their bankers. Their conduct
implies serious intention to be bound.

Under commercial/ business agreement there are two situations in which absence of
intention to enter into legal relation can be established.

 Where in the agreement between the parties there is a clause expressly

excluding the intention to enter into legal relation. Rose V Crompsonan
agreement was entered into with a clause “ not subject to jurisdiction in the law
courts” The court held that the contract was not legally enforceable as no valid
contract existed.
 Where promises are mere puff without an intention to be bound. For example
mountain dew adverts, where parties are promised the ability to ride bicycles in
the air. In the advert of Red horse an energy drink, the drink was portrayed as
having sufficient energy to enable its consumers fly.

Domestic/Social Engagement

The situation is different for domestic/social engagement. It is an onerous task to

establish intention to create legal relation in a domestic/social engagement. Here there
is a presumption that the parties do not intend to enter a legal relation. See Spellman
V. Spellman promise by the husband to buy the wife a car in order to improve their
strained relationship was held not to be legally bounding. Balfour V Balfour (1999) 2
RB 571, 578 where the husband’s promise to pay an allowance of ₤30 to his wife
monthly, was held not with intention to be legally bound..

As a general rule, there is a presumption of no intention to enter into a legal relation

agreement between Parents and Child(Jones V. Padavatton page 115 of Sagay),
Husband and Wife(Balfour V Balfour), Brother and Sister, Uncle and Nephew etc.
Please note that the presumption of no intention to enter legal relation in a
domestic/social engagement is rebuttable. See the case of Parker V Clark (1960) 1
WLR. 286; (1960) 1 All E.R. 93, Page 116, Sagay,where contract between Uncle and
Nephew was held to be legally binding. See also Simpkins V. Pay, where P and his
grand daughter S agreed, that they would jointly enter a weekly competion in a
newspaper using P’s name as the competitor. S sued for one-third share of the money
after winning the competition, but P claimed that there was no intention to create a legal
relation with the joint weekly entry. The court held that an intention to create legal
relation was contemplated.

The presumption of no intention to enter into legal relation can also be rebutted where
agreement is entered into between a man and a woman before marriage, after or during
divorce, and during legal separation. See the following cases: McGregor V McGregor
(1888) 21 Q.B.D. 424, an agreement for husband to pay the wife weekly sum for
maintenance of herself and the children in exchange for the couple withdrawing the
cross-summonses against each other in court was held to be legally binding. In Merritt
V. Merritt an agreement entered into by a husband and wife after their separation was
held to be legally binding, see page 117.

Intermediate Situation

Intermediate situation occur when the relationship between persons cannot be

described as domestic/ Social or commercial. The presumption under this heading is
uncertain, i.e. it differs depending on the fact and peculiarity of each case.See Coward
V. Moto Insurers Bureau, page 122 Sagay, where it was held that a court of law will be
reluctant to declare as legally binding, an agreement of daily carriage (car pool) by one
another to work upon payment of certain sum weekly. The exception is only possible if
there is sufficient evidence to establish that the parties intend to be legally bound.

Collective Agreement also falls under the intermediate situation category. Collective
bargaining agreements between employer and employee are generally not regarded as
legally binding except, where the agreement is incorporated into the individual letter of
employment of the employees or where it is clearly stated in the agreement reached by
the employers and employees, that they intend to be legally bound by the agreement.