UNIVERSITY OF GUYANA
FACULTY OF SOCIAL SCIENCES
DEPARTMENT OF LAW
TURKEYEN CAMPUS
CONTRACT 1- LA 12B WORKSHEET
Lecturers: Dylon Bess, Excellence Dazzell, Diane Woolford
INTENTION TO CREATE LEGAL RELATIONS
PRINCIPLES:
1. A legally binding contract only comes into existence if BOTH parties intended to
create legal relations.
2. Intention is assessed objectively- based on the conduct of parties, what would the
reasonable man conclude? EDMONDS v. LAWSON AND OTHERS [2000] Q.B. 501
3. Rebuttable presumption that domestic and social agreements are not intended to
create legal relations.
4. Rebuttable presumption that commercial agreements are intended to create legal
intentions.
Domestic Agreements
• Husband and wife- presumption - no legal intentions once still cohabiting- unless
proven otherwise – Balfour v Balfour (1919) –LOCUS CLASSICUS
Exception to rule- Separating or Divorcing- treated as intending- Merritt v
Merritt- (1970) parties in these circumstances do not rely on honourable
understandings, but bargain keenly.
But Note- Morone v Morone (1980) – unmarried cohabiting couple- no common
law spouse law.
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• Parent and child – Jones v Padavatton (1969) – Mother wanted daughter to study
for Bar in England. Daughter was a Secretary in Washington. Mother offered to
give monthly allowance and pay tuition. Daughter’s living accommodations was
meagre for her and Son. Mother bought a house in the Mother’s name, with rooms
so they could b rented and daughter take rent and pay expenses. They quarreled
and mother wanted possession of house, sent notice to quit.
Social Agreements
Persons not related – Simpkins v Pays (1955)- claimant entering newspapers competition,
wrote defendant’s name on ticket. If win agreed they would share. Defendant won, and
refused to share. Held: valid contract- mutuality in arrangement.
• See also Peck v Lateu (1973) (1973) 117 Sol Jo 185 and Wilson v Burnett (2007)
Commercial Agreements
Strong presumption that there is an intention to create legal relations, unless there is very
clear contrary evidence, the presumption will not be rebutted.
• Esso Petroleum Ltd. v Customs and Excise Commissioners (1976) – locus
classicus
[Link]
• J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd.(1976) – deal made
during courtesy call, legally binding given the prior conduct of the parties.
• Bear Stearns Bank plc v Forum Global Equity Ltd. (2007) - oral arrangement,
price and product agreed, other details left for parties’ lawyers to decide. Legally
binding
EXCEPTIONS to Commercial Agreements presumption
Where the words of a contract or offer suggest that legal relations were not intended.
• It may occur in 3 main situations:
1. Mere puffs
2. Honour clauses
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3. Agreement “subject to contract”
Mere puffs:
Where an offer is very vague or clearly not intended to be taken seriously.
• Weeks v Tybald (1604)
• Carlill v Carbolic Smoke Ball Company
• Lambert v Lewis [1982] AC 225
Honour Clauses:
• Rose and Frank v Crompton Bros (1923)- Honour clause “This agreement is not
entered into… as a formal or legal agreement, and shall not be subject to legal
jurisdiction in the law courts…but it is only a definite expression and record of the
purpose and intention of the parties concerned”. The honour clause was enough to
oust the presumption.
• Home Insurance Co and St Paul Fire and Marine Insurance Co v
Administratia Asigurarilor de Stat [1983] the honour clause was not enough to
oust the presumption.
• Jones v Vernon’s Pools (1938) – football pools coupon states that it is “binding in
honour only”, the pools company cannot be sued for payment by a winner.
Agreements “subject to contract”
Usually means parties do not intend to be legally bound unless/until a written contact is
drawn up and executed by the parties. If parties subsequently act on the agreement their
conduct could evince intention to be legally bound.
• Confetti Records v Warner Music UK Ltd (2003)- claimant owned copyright of
music tract, defendant wanted to use track in a compilation, sent fax containing deal
terms, ‘subject to contract’. Claimant sent a copy of track and invoice. Court held
that this amounted to an offer which defendant accepted when they started to record
the album.
• Rose and Frank v Crompton Bros.
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AMBIGUITY
If words ambiguous courts will find for an intention and thus a contract.
• Edwards v Skyways (1964)- redundancy agreement, ‘ex gratia’ payment. Co.
refused to pay, saying no intention. Court held it was a commercial agreement.
• See also The Mercedes Envoy [1995] 2 Lloyds Rep. 559 - “we are fixed in Good
Faith” did not negative intention in a contract where during negotiations for a
charter party it was said we are fixed in good faith. This amounted to collateral
undertaking.
• Orion Insurance Co. Plc v. Sphere Drake (1990) 1 Lloyd 465 - “the agreement
was a good will agreement”
• The Bay Ridge (1992)2 All ER 306 - “ the parties have not yet concluded
negotiations”
Contract fully Performed/Discharged
• CF Sharp v. Mc Millan (1998) IRLR 632
• Burrowes v. Brent LBC (1996) 1 WLR 1448
Agreements giving wide discretion to one party can negative contractual intention
• Taylor v. Brewer [1813] 1 M&S 290
Letters of Intent
“it is our policy that our subsidiary is at all times in a position to meet its liability in respect
of the loan”
• In Kleinworth Benson Ltd v. Malaysian Mining Corporation 1989 1 WLR 379
the above statement was a statement of a company policy and not an undertaking
that the policy would not change . It did not intend that the policy would take
contractual effect.
Letters of Appointment
Civil Servants who are appointed by letters, do they have contracts?
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• R v. Civil Service Appeal Board exparte Bruce (1988)
• R v. Lord Chancellor’s Department (1991) ICR 140
Vague Statements
• Vaughn v. Vaughn (1953) 1 QB765
Statements made in jest
• Licence Corporation v. Lawson (1896 12 TLR 501
Voluntary agreements
In cases of voluntary agreements, e.g. where a person volunteers their services, the
parties do not normally intend to create legal relations.
Important in determining whether the parties in a work situation intended to create
an employment contract and therefore be covered by workers compensation.
• See Teen Ranch v Brown (1995)
COLLECTIVE BARGAINING AGREEMENTS
EXCEPTION to rule that commercial agreements are presumed to create legal intentions.
See Ford Motor Co Ltd v Amalgamated Union of Engineering and Foundry Workers
(1969)
In Guyana, the Labour Act, Chapter 98:01 section 28A states that collective agreements
are presumed to create legal relations unless there is a clause within the agreement that oust
that presumption.
Thus, this is not an exception to the rule in Guyana.
THE END
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