Law of Contracts – Intention to Create Legal Relations
The requirement of intention to create legal relations in contract law is aimed at fishing
out cases which are not really appropriate for court action. Not every agreement leads to a binding contract which can be enforced through the court
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 parties' wishes. In order to determine which agreements are legally binding
the law draws a distinction between social and domestic agreements and agreements made in a commercial context
The distinction between social and domestic agreements and commercial agreements can be found
The case of Howard V. Motor Insurance Bureau concerns a person giving his work colleague a lift to work on his motorcycle
in return for a small fee to cover the petrol cost. This was held to be a social and domestic agreement and not binding
Whereas in Albert V. Motor Insurance Bureau which also concerns giving a co-worker a lift to work in return for petrol money
the court held it was a commercial agreement. This was because the lift was given in a car
so he was able to give lifts to more than one person and to different people over a period of time
In social and domestic agreements, the law raises a presumption that the parties do not intend to create legal relations
Joan C. Padigotton concerned an agreement between a mother and daughter. The mother purchased a house for her daughter to live in
In return, the daughter promised to come to England and to study to become a barrister
The daughter did not complete her studies and the mother was able to evict her of their agreement with the social and domestic agreements
Similarly, the agreement between husband and wife was not enforceable in Balfour v. Balfour
as they were happily married when he agreed to send home the payment
This presumption of no intention may be rebutted by evidence to the contrary
That is if it can be shown the parties did intend their agreement to be legally enforceable
This could be where the parties have put their agreement in writing
showing that they wish it to be enforced. This was seen in Errington v. Errington Woods
where an agreement between a father, his son, and daughter-in-law was enforceable as it was in writing
Whereas husband and wife agreements would normally raise a presumption of no intention
where the parties are separated, this may not apply. In Merritt v. Merritt, an agreement to make maintenance payments was binding
as the parties were separated at the time of the agreement. A further way in which a social and domestic agreement can be binding
is where there is a third party to the agreement. In Simpkins v. Page, the agreement to share lottery winnings between a grandmother and granddaughter was binding
as the lodger was also party to the agreement. In commercial agreements, the law raises a presumption that the parties do intend to create legal relations by the agreement
This was seen in Otto Petroleum v. Commissioners of Customs and Oxides
where Esso offered three world cut coins with every four gallons of petrol purchased
This offer was an enforceable part of the contract since it was made in a commercial context
and aimed at increasing the sales of petrol. Similarly, in Odwards v. Skyways, a payment described as ex gratia, a dip
was enforceable as it was given in a commercial context of employer and employee
Again, this presumption can be rebutted by evidence to the contrary. For example, where there is a binding and honour-only clause that prefers to pay in gambling contracts
In Jay v. Vernon Pools, the claimant sent in a winning entry for the football pools
The defendant claimed they did not receive it. The court held it did not matter whether they received it or not
as they were not obliged to pay out even if they had received it
In summary, it is presumed that the parties do not intend to create legal relations in social and domestic agreements
but this presumption can be disposed where there is evidence the parties did intend their agreement to be binding
The position is reversed in commercial contracts where it is presumed the parties do intend to create legal relations
unless there is evidence to show they did not. This video is part of a series of videos on contract law from www.egaslawsources.co.uk
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