4th Element of Contract: 1

INTENTION TO CREATE A LEGAL

RELATION
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OBJECTIVES

At the end of this lesson the students should be

able to:.

▪Understand the importance of intention in

determining a valid legal contract

▪ Describe the rule of law used to ascertain the

presence of intention
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▪The law requires that the parties to an

agreement prove that they intend to have
the agreement legally enforced.

▪ In other words, they must prove that

there’s an intention to create legal
relations. Such intentions may be either
express or implied from the
circumstances.
▪Although the element of intention is
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not mentioned under the Contracts

Act for a valid contract, nevertheless it
is an essential element of a contract.

▪ Since the Act is silent on the issue, it

appears that the English Common
Law principles will apply.
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▪ Under the Common Law principles, in

order for the court to ascertain whether
there is an intention to create legal
relations or not between the parties to an
agreement, all agreements are classified
into 2 main categories of agreements:

i. Business/Commercial Agreements.

ii. Social, Domestic or Family Agreements

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▪ Once the court had ascertained to

which category the agreement belongs
to, then the court will apply a form of
rebuttable presumption.

▪ (Andaian Yang Boleh Disangkal)

according to each category of
agreement.
 4. How The Court Determines Whether There Is An ITCLR Between Parties?
4th Element of a valid contract : The court will apply the English Common Law principles since the Contracts Act is silent on the
1. BUSINESS/ COMMERCIAL
AGREEMENTS
2. Presumption:
Parties HAVE an intention
to create legal relations,
unless it is proven
otherwise.
3. Rebuttal of Presumption
There was a written agreement between
parties for lease of house. But there was a
clause mentioned ""subject to and is
dependant upona formal contract being
prepared ".
Held: No enforceable contract.
Winn v. Bull
Low Kar Yit v. Mohd Isa
7
issue.
1st Step: The court will classify
1. SOCIAL/ DOMESTIC/
the agreements into 2 categories: FAMILY AGREEMENTS
2nd Step: Once the court has ascertained 2. Presumption:
which category the agreements belongs to, Parties DON’T HAVE any
the court will apply rebuttable presumption intention to create legal
relations, unless it is proven
otherwise.
Balfour v. Balfour
Choo Tiong Hin v. Choo
Hock Swee
Parker v. Clarker
3rd Step: How to rebut the
presumption?
3. Rebuttal of Presumption
If the agreement is recorded in
writing and signed by both parties
Merrit v. Merrit (1970)
 i. Business or 8

Commercial Agreements

▪For business or commercial

agreements, there is a
presumption that the parties
have the intention to
create legal relations,
unless the parties specify
otherwise.
▪ (Andaian bahawa wujud niat
untuk mengadakan
hubungan di sisi undang-
undang, kecuali dapat
dibuktikan sebaliknya).
 Rebuttal of presumption (disprove) 9

How to rebut the presumption?

▪ If there is a “subject to contract” agreement.

Winn v Bull (1877)

There was a written agreement between Pf and Df for
the lease of the house subject to the clause, “subject
to the preparation and approval of a formal contract,”
but there was no formal contract entered into. It was
held that there was no enforceable contract.
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ii. Social, Domestic/Family Agreements

▪For social, domestic or family

agreements, there is a
presumption that the parties
do not intend to have any legal
relations, unless the parties
specify otherwise.
▪ (Andaian bahawa tidak wujud niat untuk
mengadakan hubungan di sisi undang-undang,
kecuali dapat dibuktikan sebaliknya)
 Social and family agreements 12

Agreement is not intended to be

legally enforceable.

Balfour v Balfour (1919)

Df was a civil servant stationed in Ceylon and while on

leave in England, he has promised to pay his wife a
monthly allowance as maintenance. Df then defaulted the
promised i.e payment so the wife sued him. It was held
that there was no legally binding agreement because
parties did not intend they should be attended by legal
consequences.
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Rebuttal of presumption (disprove)

How to rebut the presumption?

Case: Merrit v. Merrit (1970)

■The husband and wife in this case jointly bought a house,

which was subject to a mortgage. Husband later left this
house but agreed to pay the wife 40 pounds a month out
of which she will pay the outstanding mortgage
payments. He also agreed that when such payments had
been completed, he would transfer the property to her
sole ownership.

■The agreement was recorded in writing on a piece of

paper and signed by the husband. However, upon
completion of the payment, he refused to transfer the
house.
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Held:

■The Court of Appeal decided that

in the light of the circumstances of
the case, the parties had intended
to create legal relations and
accordingly ordered that the house
be transferred to the wife.
 4. How The Court Determines Whether There Is An ITCLR Between Parties?15
4th Element of a valid contract : The court will apply the English Common Law principles since the Contracts Act is silent
1. BUSINESS/ COMMERCIAL
AGREEMENTS
2. Presumption:
Parties HAVE an
intention to create legal
relations, unless it is
proven otherwise.
3. Rebuttal of Presumption
There was a written agreement
between parties for lease of house. But
there was a clause mentioned ""subject
to and is dependent upon a formal
contract being prepared ".
Held: No enforceable contract.
Winn v. Bull
Low Kar Yit v. Mohd Isa
on the issue.
1st Step: The court will classify
1. SOCIAL/ DOMESTIC/
the agreements into 2 categories: FAMILY AGREEMENTS
2nd Step: Once the court has ascertained 2. Presumption:
which category the agreements belongs to, Parties DON’T HAVE any
the court will apply rebuttable presumption intention to create legal
relations, unless it is
proven otherwise.
Balfour v. Balfour
Choo Tiong Hin v. Choo
Hock Swee
Parker v. Clarker
3rd Step: How to rebut the
presumption?
3. Rebuttal of Presumption
If the agreement is recorded in
writing and signed by both parties
Merrit v. Merrit (1970)
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Please drop your question in the comment area, thank you!

Prepared by: Dr. Anie Farahida Omar