Intention to

create legal
relations
 Intention to create legal
relations

 In must be shown that the parties to the

agreement intended to be legally bound by
the agreement.
 Contracts

For a contract to exist there must be:

1. An agreement between the parties

a. An offer and

b. An acceptance

2. An intention to be bound by the agreement

3. An exchange of consideration (value)

 Intention to contract
What is intention to contract?

Parties must intend their agreement (promises) to be legally

binding.

If the parties did not intend their agreement to have legal

consequences there can be no contract and the Court will
not intervene in a dispute.
Types of agreements

Intention to create legal relations

Intention to create legal

relations

Social and domestic Business or

agreements commercial agreements
(Presumption – parties do (Presumption – parties do intend
not intend legal relations to create legal relations
 Intention to contract
IMPLIED intention
Traditionally:
 Social, family, domestic, voluntary
agreement
 PRESUMED NO INTENTION TO BE
BOUND
 Commercial or business agreement
 PRESUMED INTENTION TO BE BOUND
Intention to contract
 Intention to contract
Social/domestic agreements
 Domestic agreement-Agreements between husband and wife
 Where the husband and wife are living together(good terms) at the time of
the agreement, no intention to create legal relations:
- Balfour v Balfour [1912] 2 KB 571
 Where the husband and wife are separated at the time of the agreement
(not in good terms), intention to create legal relations may exist:

-- Merritt v Merritt [1970] 1WLR 1121

 Domestic agreement -Agreement between parent & child
 Parent’s promise was not enforceable as there was no intention for the
promise to be legally enforceable.
 Choo Tiong Hin v Choo Hock Swee[1959] MLJ67
 Social agreement-Agreement between friends
It depends on the facts of the case, whether there is evidence to show
whether therewas intention or not.
- Simpkins v Pays [1909] 1 WLR 975
 Domestic/social agreements
 Courts will presume that agreements between
friends and/or family members are not
intended to be legally enforceable.

 But however, there are certain exceptions to

this too.

 Todd v Nicol [1957]

 Roufos v Brewster (1971)
 Balfour v Balfour (1919) 2 KB 571
 Facts:
 Mr B promised to pay his wife £30 per month.

 Mr B had to return to Ceylon. Mrs B was to remain in

England for medical reasons.
 The couple later separated.

 Mrs B claimed £30 per month pursuant to Mr B’s promise.

 Issue:
 Did this promise by a husband to his wife amount to a

contract?
 Decision:
 An agreement to pay £30 per month existed.

 The parties had not intended it to be legally binding.

 There is a presumption that domestic arrangements are not

intended to finish up in court.

 Simpkins v Pays [1909] 1 WLR 975
 Facts:
 Three people lived together in a house and jointly took part

in a competition organised by a newspaper.

 The entries were made in one name only.

 One entry won a prize and the defendant, in whose name

the entry was submitted, refused to share it with the other

two contributors claiming there was not intention to create
legal relations.
 Issue:

Was there an understanding between the parties that their

agreement amounted to a contract?
Decision:
 It was a joint enterprise to which each contributed in the

expectation of sharing any prize that was won.

 There was a contract.
 Voluntary agreements

 In cases of voluntary agreements, e.g. where a

person volunteers their services, the parties do
not normally intend to create legal relations.

 Important in determining whether the parties in

a work situation intended to create an
employment contract and therefore be covered
by worker’s compensation.

 Teen Ranch v Brown (1995)

 Commercial or business agreements
General rule:
In business and commercial agreements the courts
assume that there is an intention to create legal
contractual relations
Edwards v Skyways Ltd [1964] 1 WLR 349
Courts will presume that agreements arrived at in
a commercial context are intended to be legally
enforceable.
 Commercial agreements

 But however, there are certain exceptions

to this too.

 Daiman Development vs Mathew Lui

 Esso Petroleum Ltd v Commissioners
of Customs and Excise [1976]