A2 Law

Intention to Create Legal Relations

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Intention to be Legally Bound

If every agreement was enforcable it would;

  • not reflect every contractual situation
  • not all contracts are meant to be enforcable
  • would fill up courts with unneccesary cases

Courts will use sensible approach and looks at facts of each case but can cause confusion

Advertisements

  • For the purpose of attracting custom, tradesmen may make vague exaggerated claims in advertisements. Such statements are merely statements of opinion, or "trade puffs" and are not intended to be binding.
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Domestic Agreements

Agreements between husband and wife living together as one househol are presumed not to be intended to be legally binding unless the agreement states to the contrary

  • Balfour V Balfour: a husband worked abroad without his wife who had to stay in England because of illness, and promised to pay an income of £30 per month. when the wife later petitioned for divord, her claim to the income failed. it had been made at an amicable point in their relationship, not in a comtemplation of divorce. it was a purely domestic arrangement.

However, note that the presumption against contractual liability will not apply where the spouses are not living together

  • Merritt V Merritt: here the husband had deserted his wife for another woman. an agreement that he would pay her an income if she paid the outstanding mortgage was held by the court to be intended to create legally binding obligations.

Agreements between parent and child are likewise presumed not to have legal intent

  • Jones V Padavatton: a mother provided an allowance for her daughter under an agreement for the daughter to give up her highly paid job in NY, study for the bar in England, then return to practice in Trinidad where the mother lived. when the daughter was finding it difficult to live off the allowance, the mother then bought her a house. they later quarrelled and mother sought repossession. the daughters arguement that second agreement was contractual failed.
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Social Agreements

  • The presumption against contractual intent has been applied by the courts in a variety of situations including a golf competition and and arrangement for sharing petrol. In neither case was there held to be a contract: Buckpitt V Oates: the plaintiff and defendant were friends, both 17, and in the habit of riding in each other cars. the plaintiff sustained an injury through the defendants negligence on a journey where he had paid the defendant ten shillings towards petrol. despite the contribution to the fuel, it was held that this was a friendly arrangement to go on the trip. thie gave rise to no legal obligations or benefits. of course this situation would be different today since there is compulsory of passenger insurance.
  • If money has passed hands then it will not matter that the agreement is made socially. It will be held as intended to be legally binding: Simpkins V Pays: a lodger and two members of the household entered competition in the lodgers name but paying equal shares of the entry money and on the understanding that they would share any winnings. so, when the lodger won, he was bound to share the winnings.
  • Also, if parties have acted to their detriment and have put their financial security at risk then it must have been intended that the agreement should be legally binding: Parker V Clarke: a young couple were persuaded by an older souple to seel their house in order to move in with them, with the promise also that they would inherit property on the death of the old couple. when the two couples eventually fell out and the young couple were asked to leave, their action for damages succeeded.
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Commercial Agreements

In commercial agreements there is a strong presumption that the parties intend to be legally bound. this presumption may only be rebutted by 'express words'

  • Rose & Frank V Crompton Brothers: plaintiff had been buying goods from defendant for some time. in 1913, signed agreement saying fixed prices and specified a period of time. 'contained honourable pledge clause'. in 1919, defendants terminated agreement without giving specified time. plaintiffs sued for 2 separate claims. 1st for breach of agreement, that buying and selling would continue for set period. this failed, neither side under any obligation due to wording. 2nd non delivery of goods, which plaintiff ordered before termination of contract, succeeded, each order constituted a new and separate contract

Similarly, football pools stated to be 'binding in honour only' are not legal contracts so that a participant may not recover the winnings

  • Jones V Vernons Pools: the pools company inserted a clause on all coupons stating that 'the transaction should not give rise to any legal relationship.... but binding in honour only' when a punter claimed that the company had lost his winning coupon, claim failed
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The Offer of Free Gifts

Where free gifts are offered to promote the business the contract can still be held to be legally binding

  • Esso V Commissioners: esso gave free world cup coins with every four gallons of petrol purchased. customs and excise wanted to claim purchase tax from the transaction. since esso were clearly trying to gain more business from the promotion there was held to be intention to be bound by the arrangement.

This principle has been further developed to cover such situations where prizes are offered in competitions

  • McGowan V Radio Buxton: the claimant entered a radio competition for which the prize had been stated to be a renault clio car. she was told that she had won the competition but was given a four-inch model of the clio. the defendants argued that there was no legally binding contract. judge held that there had been intention to create legal relations "there was not even a hint that the car would be a toy"
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Letters of Comfort

In Kleinwort Benson V Malaysia Mining Corporation it was held that "a letter of comfort" where a company stated it was policy to ensure that its subsidiary could not meet its liability in respect of loans made to it did not have contractual effect. the words in question were intended as a statement of fact and not as a contractual promise.

COLLECTIVE AGREEMENTS

A collective agreement is an agreement between a trade union and an employer regulating rates of pay and conditions of work. if the terms of such an agreemtn are incorporated into an individual employee's contract of service, they will be legally binding on the parties. with regard to the agreement itself, the position at common law was that collective agreements are not intended to be legally binding between the union and the employer. Ford Motor V AUEFW. The position at common law has now been affirmed by the Trade Union and Labour Relations Act 1992, which states that a collective agreement is presumed not to have been intended by the parties to be legally enforceable unless it is in writing and expressly provides to the contrary.

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