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Intention to create legal relations

 
Intro
 
 
The requirement of intention to create legal relations in contract law is aimed at sifting out cases which are not really appropriate for court action. Not every agreement leads to a binding contract which can be enforced through the courts. For example you may have an agreement to meet a friend at a pub. You may have a moral duty to honour that agreement but not a legal duty to do so. This is because in general the parties to such agreements do not intend to be legally bound and the law seeks to mirror the party's wishes. In order to determine which agreements are legally binding and have an intention to create legal relations, the law draws a distinction between social and domestic agreements and agreements made in a commercial context.
 
 
 
 
 
Intention to create legal relations in social and domestic agreements

In social and domestic agreements the law raises a presumption that the parties do not intend to create legal relations:

 
 
 
Balfour v Balfour [1919] 2 KB 571         Case summary

 
 

This presumption may be rebutted by evidence to the contrary. This evidence may consist of:

A written agreement:


 

 
Where the parties have separated:


Merritt v Merritt [1970] 1 WLR 1211          Case summary 

 
 
or where there is a 3rd party to the agreement:


Simpkins v Pays
 [1955] 1 WLR 975            Case summary

 
 
 
Intention to create legal relations in commercial agreements

Where an agreement is made in a commercial context, the law raises a presumption that the parties do intend to create legal relations by the agreement:


Esso Petroleum v Commissioners of Customs & Excise [1976] 1 WLR 1                                                     Case summary
 


 
Edwards v Skyways Ltd [1964] 1 WLR 349     Case summary


 
Again this presumption can be rebutted by evidence to the contrary:


Binding in honour only clauses:


 
 
Ferrera v Littlewoods pools [1998] EWCA Civ 618         
                                                            Case summary        


 
 
Although note the difference with comfort letters:


Kleinwort Benson Ltd v Malaysia Mining Corporation Berhad [1989] 1 W.L.R. 379

                                                              Case summary

 

 
The distinction between social and domestic agreements and commercial agreements can be fine.
 
Compare the case:
 
 
 
Coward v Motor Insurance Bureau [1963] 1 QB 359 
                                                           Case summary
 
 
Albert v Motor Insurance Bureau [1971] 3WLR 291  
                                                          Case summary
 
 
It can be seen that intention to create legal relations therefore seeks to keep agreements between family and friends outside the courts jurisdiction.
 
 
Intention to create legal relations