8 Intention to create legal relations

1 Introduction

1.1 Parties who enter into a contract must have an intention that it will be legally binding.

2 Express intention

2.1 Where the parties make clear (by words or writing) that such intention exists or that they exclude the jurisdiction of the courts: Rose and Frank v JR Crompton & Bros.

3 Implied intention

This is usually implied from the circumstances. The courts are assisted by ‘presumptions’.

3.1 Domestic agreements:

(a) Contracts between non-separated spouses are presumed to be made without the intention to enter into legal relations and are therefore not enforceable: Balfour v Balfour.

(b) Presumptions are rebuttable. eg: if the spouses are separated there will be a greater intention to have recourse to the law: Merritt v Merritt.

(c) Other domestic agreements: Depends on the court finding a mutuality of intention: Simpkins v Pays.

3.2 Commercial agreements:

Business contracts are presumed to be binding unless the parties state otherwise: Edwards v Skyways.

3.3 Acceptance in contracts may be ‘subject to contract’.

3.4 Some commercial agreements will not be enforceable for example:

(a) agreements re football pools coupons, these are stated to be 'binding in honour only'

(b) collective agreements between employers and trade unions

(c) comfort letters are merely statements of intent and are not legally binding