CHAPTER 2B

Intention

(Intention to be legally
bound)
 INTENTION
What is intention?
 The purpose in relation to act/activity

Relevance of intention in matters of law

 Defamation/Employer’s liability
 Murder/Manslaughter/Death from unsuccessful surgery
 Contract
• Breach of contract
• Formation of contract

Importance of intention
 For an agreement to be a contract, the parties must have
the intention to be bound when they make the agreement.
Without an intention to be bound, contract will be held
invalid.
 INTENTION

 A contract is a legally binding agreement. Once an offer

has been accepted, there is an agreement, but not
necessarily a contract.
 The element that converts any agreement into a true
contract is "intention to create legal relations". The courts
seek evidence that the parties to the agreement intended
that it should be governed by, and subject to, the law of
contract; so that the agreement gives rise to legal
consequences.
 Each party thus adopts a legal obligation, and each may
seek a remedy in the event of breach.

 References: https://en.wikipedia.org/wiki/Intention_to_be_legally_bound
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 Intention is Crucial in Agreements
1. The intention to marry is crucial – without this
intention, a couple making an agreement to be
married will not have a valid marriage

2. Just as in the case of a marriage (which is actually a

contract between a husband and a wife), the intention
to make a contract in all other cases is also crucial

3. Without the intention to make a contract, persons

making an agreement will not have made a valid
contract
 How is Intention Established?
The intentions of the parties may be established from the
following:
1. Evidence in the written agreement
2. Evidence in the verbal agreement
3. The nature of the agreement
4. The quality of the relationship of the parties
5. The conduct of the parties in the agreement
6. Other relevant matters
 Written Evidence of Intention
1. If there is a written document relating to an agreement and there
is indication of the parties’ intention, then their intention will be
interpreted from what is indicated
2. Examples: (a) This agreement is (is not) a contract
(b) This is agreement is (is not) legally binding
(c) The laws of Malaysia shall be applied
(d) This agreement is a matter of gentlemen’s
honour
(e) Parties reserve the right to refer disputes to a
court of law
(f) The decision of the organiser is final and cannot
be disputed.
Written communication of intention

• Appleson v. Littlewood (1939)

Appleson supposedly won the money on the football

pool of Littlewoods. However, Littlewoods failed to
pay the money to Appleson. Littlewoods when sued,
claimed that there was no contract between them
and Appleson on the ground that a term of the
agreement was that it was not to be attended by
or give rise to any legal relationship or
whatsoever.

HELD: there was no contractual obligation to pay the

money because there was no contract, there being
no intention to be bound
 Verbal Evidence of Intention
1. Verbal evidence is relevant if there is no written agreement or
the written agreement does not contain any indication of the
intention of the parties

2. What is said during negotiation and agreed on may be accepted

as evidence of the parties intention

3. Example: (a) Parties shaking hands and declaring that they will
keep to their agreement as a matter of gentlemen’s honour
(b) A party stating that he has the right to sue if the
agreement is broken and the other replying that he
also has same right
 Intention – Nature of Agreement

1. In the absence of written and verbal evidence of

intention, the parties intention may be based on
the nature of their agreement

2. In this regards, agreements may be grouped

into 3 categories
 Domestic agreement
 Social agreement
 Business agreement
 Intention – Nature of Agreement
1. Domestic agreement
 Domestic matters & family members
 Presumption of no intention to be bound
 Case: Balfour v Balfour (1919)

2. Social agreement
 Social matters (usually involving friends and persons with
community of interest in common).
 Presumption of no intention to be bound
 Case: Buckpitt v Oates (1968)
• Balfour v. Balfour (1919)
Mr. Balfour promised Mrs. Balfour that he
would send her a monthly allowance of £30
before he left her in England to go to Ceylon
(now Sri Lanka). Mrs. Balfour sued Mr.
Balfour when she did not receive the
allowance as promised.

HELD : the wife was not entitled to succeed

as the promise made by Mr. Balfour was an
ordinary domestic arrangement and not
based on any contract.
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• Buckpitt v. Oates (1968)
two friends was in the habit of carpooling. On
a day when Oates was driving his car with
Buckpitt as his passenger, an accident
occurred. Buckpitt sued Oates for his injury.
The issue of whether there was a contract
between Buckpitt and Oates was relevant.

HELD: There was no contract between

them as the agreement to the carpool
agreement was a social arrangement .
 Intention – Nature of Agreement

3. Business agreement
 Business matters (relating to sale
etc.)
 Presumption of intention to be bound
 Carlill v Carbolic Smoke Balls (1893)
• Carlill v. Carbolic Smoke Ball Co. (1893)
Carbolic Smoke Ball Co. agreed to pay £100 to
anyone who contracted influenza after buying
and using their smoke balls as prescribed.
Carlill, who bought a smoke balls, contracted
influenza after using it as prescribed. When
Carbolic Smoke Ball refused to pay Carlill the
£100 as promised, they were sued.
HELD: there was an intention to be bound
and as such, Carbolic Smoke had duty under
contract to make the payment.
 Intention – Quality of Relationship
1. Separation agreement
 Presumption of intention to be bound
 Merritt v Merritt (1970)

2. Reconciliatory agreement
 Presumption of no intention to be bound
 Spellman v Spellman (1961)
• Merritt vs. Merritt (1970)
A husband decided to leave his wife and a meeting
was held. The husband signed a document
agreeing to transfer his share of the house which he
jointly owned with the wife to the wife as sole
owner, if the wife agreed to be responsible for the
mortgage repayments. Later the husband refused
to do so.

HELD: there was a contract between Mr. and Mrs.

Merritt. Although the agreement involved domestic
matter, the presumption that the couple did not
intent to be bound was displayed by evidence of
their estranged relationship and the execution of the
document containing by the husband’s agreement.
• Spellman v. Spellman (1961)
A husband and wife were having some
matrimonial difficulties. The husband bought a car
and promised to let her have it to make her
happy. In spite of the efforts by the husband, the
couple failed to get over their difficulties and
decided to separate. The husband claimed that
the car rightly belonged to him, but his wife
disagreed.

HELD: The promise by the husband was not

based on any contract. The wife did not have any
enforceable right. It was a domestic arrangement
and there was no intention to be bound.
 Intention – Conduct of Parties
The presumptions of the parties’ intention can also be
affected by the way in which parties go about in connection
with their agreement

1. Reliance on legal expertise

 Consulting a lawyer on the agreement to be signed
off
 Discussion in the presence of lawyers
2. Use of formalities
 Agreement in writing
 Signing (and sealing, if used) of agreement
 Intention – Conduct of Parties

3. Associated transactions
 Depositing of money (or setting up a fund)
 Drawing up a will as part of agreement

4. Other related matters

 Details of agreement
 Employment of professionals (e.g., for
valuation)
Refer: Parker v Clarke (1960)
 Parker v Clarke (1960)
 An old couple promised a young couple: if you sell your
cottage and come to live with us in our house we will
make a will that we leave you this house and its contents
when we die.
The young couple sold their cottage and moved into the
house.
The old man tore up his will; the Parkers moved out and
sued.
 The Parkers got damages to buy a new house because
of breach of contract.
 THANK YOU

INS 533 CONTRACT LAW & INSURANCE

 REFERENCES
 Legal principle (2015), The Malaysian Insurance Institute, 1 st Edition.

INS 533 CONTRACT LAW & INSURANCE