Contract Law: Intention to Create Legal Relations

Posted by Catherine Robinson on October 25, 2023

3-min read

In the realm of UK contract law, one fundamental aspect that underpins the validity of any contract is the intention to create legal relations. This concept is central to understanding when an agreement becomes legally binding and enforceable. To shed light on this, we will explore the principles and cases that illustrate how the intention to create legal relations is established in UK contract law.

How to Get a First in Law

Understanding Intention to Create Legal Relations

The intention to create legal relations is a key component that differentiates a legally binding contract from a mere social or domestic arrangement. It essentially questions whether the parties involved intended their agreement to be legally enforceable. To determine this intention, the courts consider various factors and apply a two-fold test:

Presumption: There is a presumption that commercial agreements are intended to be legally binding, whereas social or domestic agreements are not.
Rebuttal: This presumption can be rebutted by evidence showing that the parties did not intend for their agreement to be legally enforceable.

Establishing the Intention: Principles and Cases

Commercial Agreements:
- In commercial agreements, the courts generally assume that the parties intend to create legal relations. This presumption is illustrated in the case of Edwards v. Skyways Ltd [1964] 1 WLR 349. In this case, an airline employee was promised a retirement payment by his employer. The House of Lords held that in a commercial context, there is a strong presumption of intention to create legal relations, and the promise was legally binding.
- Another landmark case that exemplifies this principle is Esso Petroleum Co. Ltd v. Commissioners of Customs and Excise [1976] 1 WLR 1. In this case, the court emphasized that where commercial interests are involved, there is a presumption of legal intent, and an offer to the public was held to be legally binding.
- However, the presumption may be rebutted by an express term in the contract, per Rose and Frank Co v Crompton Bros – agreement stated that it was ‘not subject to legal jurisdiction’.
Social and Domestic Agreements:
- In contrast, for social or domestic agreements, there is a presumption against the intention to create legal relations. This principle was highlighted in the case of Balfour v. Balfour [1919] 2 KB 571. In this case, a husband promised to pay his wife an allowance while they were living separately, but the court ruled that there was no intention to create a legally binding contract as it was a domestic agreement.
- Similarly, the case of Merritt v. Merritt [1970] 2 All ER 760 provided an exception to the rule. In this case, the court held that an agreement between a separated husband and wife was legally binding because it was made after separation and had a commercial aspect, thus rebutting the presumption against domestic agreements.
Agreements with a Mix of Commercial and Domestic Elements:
- In situations where an agreement contains both commercial and domestic elements, the courts may examine the specific circumstances to determine the intention of the parties. The case of Simmons v. Heathfield [2004] EWCA Civ 118 provides an example of this. In this case, an agreement between siblings was held not to be legally binding as it primarily concerned domestic relations and familial responsibilities.

Hopefully this article cleared up any confusion you might have on establishing the intention to create legal relations. Please feel free to leave a comment if there's anything you'd like clarifying!

Disclaimer:

The information provided in this blog post is based on the research I carried out for my law degree which I completed in 2020. I accept no responsibility for errors or omissions. Legal principles and interpretations may change over time, and the content presented here may not reflect the most current developments in UK contract law. This information is intended for general informational purposes only and should not be considered as legal advice or relied upon as a substitute for professional legal counsel. For the most up-to-date and accurate legal information or advice, it is advisable to consult with a qualified legal professional who is knowledgeable about the latest legal developments and can provide guidance specific to your situation.