Contract Formation: Intention to Create Legal Relations

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  • Intention to create legal relations
    • Character and purpose of the rule
      • This rule has a clear purpose - to prevent courts being clogged with cases where no legal liability should be attached
      • In Dalrymple v Dalrymple 1811 it was said contracts should not be:
        • mere matters of pleasantry
          • never intended to have any legal effect whatsoever
        • the sport of an idle hour
          • never intended to have any legal effect whatsoever
      • The law distinguishes between agreements needing court enforcement and gratuitous promises in which the law shouldn't intervene
      • 2 rebuttable presumptionshave developed in the case law
        • if agreements are purely domestic or social in nature then the presumption is no intention the agreement is legally enforceable
          • Individuals can challenge these with evidence
        • in a business or commercial context the presumption is that the parties do intend agreements to be legally binding
          • Individuals can challenge these with evidence
    • Social and domestic arrangements
      • Agreements between husbands and wives will not usually create legal relations as the courts are unwilling to interfere in relations of marriage
        • Balfour v Balfour 1919 - a non-enforceable promise to provide maintenance payments
        • This will be different if the couple was estranged before the agreement was reached
          • Merritt v Merritt 1970 - at this point each looking out for their own input
      • Arrangements between parents and children do not usually create legal relations, especially if the agreement is vague or ambiguous
        • Jones v Padavatton 1969 - the case where a daughter gave up her job in America to study for the English Bar due to agreement with her mother who wanted to be with her
      • The domestic arrangements presumption is rebutted if a party suffers obvious detriment because of the domestic agreement
        • In Parker v Clarke 1960 this was the case - the Parkers sold their house and the Clarke changed his will
      • If money is paid more likely to be binding
        • More likely to be foreseeable that it is legally enforceable - Simkins and Pays 1955
      • The courts can accept the agreement is severable with some parts legally enforceable and others not as in Julian v Furby 1982
    • Commercial and business dealings
      • An informal agreement made in a broader business context may still be enforceable
        • Edwards v Skyways Ltd 1964 - context dependent.
      • Giving free gifts may create legally enforceable arrangements where this is actually a way of extending business
        • Esso Petroleum Ltd v Commissioners of Custom and Excise 1976 giving out free World Cup coins with petrol purchases
        • This extends to prizes in competitions as in McGowan v Radio Buxton 2001
      • It is possible to expressly exclude legal enforceability,as when the arrangement is not one enforceable in contract law
        • Jones v Vernon's Pools 1938 stating it was binding in honour only
      • So-called honour pledges which are binding in honour not law also fail
        • Rose and Frank Co v J R Crompton and Bros 1925
      • For policy reasons public bodies have non-enforceable informal arrangements
        • Robinson v Customs and Excise Commissioners 2000


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