Ch25
Intention to Create Legal Relations
Introduction
We regularly make agreements with others, but not all are intended to be legally binding. For
example, if I agree to meet you for a meal and fail to show up, you cannot sue me. Social and
domestic agreements are usually not contracts, though in some cases, they can be. This topic
connects to the key concept of justice, fairness, and morality.
Reason for Requirement
Some agreements are never meant to be legally binding, while others, such as business contracts, are.
Courts have developed two rebuttable presumptions:
• Commercial agreements: Strong presumption of an intention to create legal
relations.
• Social and domestic agreements: Presumed not to be legally binding.
These presumptions can be rebutted based on specific circumstances.
Presumption and Rebuttal in Commercial and Social/Domestic Agreements
Commercial Agreements
Commercial agreements involve significant financial transactions, so courts strongly presume they are
legally binding. This presumption can be rebutted with strong evidence.
For example, if I take my car for servicing, there is a strong presumption that I am entering a legally
binding contract. Even when an agreement appears gratuitous, it can still be legally binding.
Edwards v Skyways Ltd (1964) – A company attempted to deny a redundancy payment by claiming it
was “ex gratia” (a goodwill gesture). However, the court ruled the agreement was binding due to the
business context.
Similarly, promotional offers may indicate an intention to create legal relations:
Esso Petroleum Co. Ltd v Commissioners of Customs and Excise (1976)
Esso gave away World Cup coins with petrol purchases. The court ruled that, since the promotion
aimed to increase sales, the arrangement was legally binding.
However, agreements can avoid legal enforceability if expressly stated:
Rose and Frank Co. v J.R. Crompton and Bros Ltd (1924 & 1925)
A contract contained an “honourable pledge” clause, stating it was not legally binding. The court
upheld this clause, ruling no legal obligation existed.
Additionally, s.1 of the Law Reform (Miscellaneous Provisions) Act 1970 states that engagement to
marry is not legally enforceable.
Social and Domestic Agreements
Most social and domestic agreements lack legal intention. Courts classify these into three categories:
• Husband and wife
• Children and parents
• Other social arrangements
Husband and Wife
Agreements between spouses are usually not legally binding unless made in contemplation of
separation.
Balfour v Balfour (1919)
A husband, working abroad, promised his wife an allowance. When he stopped paying, she sued. The
court ruled the promise was not legally binding, as it was a domestic arrangement.
However, this presumption can be rebutted:
Merritt v Merritt (1970)
A separated husband promised to transfer a house to his wife after she repaid the mortgage. The
court ruled this was legally binding as the agreement occurred post-separation, making it more
formal.
The key distinction: Balfour was based on mutual trust, while Merritt was a negotiated agreement due
to separation. Courts consider all factors in assessing legal intent.
Children and Parents
Contracts between parents and children can be legally binding if they resemble formal agreements.
Jones v Padavatton (1969)
A mother promised her daughter financial support to study law. When the mother tried to reclaim a
house she bought for her, the court ruled the agreement lacked legal intent due to its ambiguous
terms.
Other Social Arrangements
Social agreements generally lack legal intent, but exceptions exist, especially if money is involved.
Simpkins v Pays (1955)
A lodger and two family members jointly entered a newspaper competition and agreed to share
winnings. The lodger later refused to share the £750 prize, claiming the agreement was domestic. The
court ruled the agreement legally binding since money was involved.
However, intent must be clear:
Wilson v Burnett (2007)
Three women attended bingo together and allegedly agreed to share winnings over £10. One woman
won £100,000 but refused to share. The court ruled there was no clear evidence of a binding
agreement.
Conclusion
The intention to create legal relations is a fundamental element of contract law. While commercial
agreements are presumed legally binding, social and domestic agreements are generally not—unless
evidence proves otherwise. Courts assess each case individually to determine whether a legally
enforceable contract exists.
