12 terms

Contract Law - Intention to Create Legal Relations

IATI 1st Year, Contract Law, Intention to Create Legal Relations.
Intention to create legal relations is one of the necessary elements of a contract. The courts must be satisfied that the parties had intended their agreement to have legal consequences.
The Rule.
The rule has a clear purpose - to prevent the courts being clogged up with disputes to which no legal liability should be attached.
The Law.
Therefore, the law distinguishes between agreements needing the support of law and enforceable in the courts and entirely gratuitous promises where the law should not intervene.
Case Law.
Whether an agreement is enforceable or not has been developed through case law using two rebuttable presumptions.
Presumption 1
If agreements are purely domestic or social in nature the presumption is that there is no intention that the agreement should be legally enforceable.
Presumption 2
In a business or commercial context the presumption is that the parties do intend agreements to be legally binding.
Domestic and Social Agreements.
These generally arise in two ways : contracts between husbands and wives and contracts between parents and children.
Balfour v Balfour 1919
In Balfour v Balfour 1919 the Court of Appeal held that family arrangements were not intended to be legally enforceable and if they were the courts would be overwhelmed with work.
Balfour v Balfour 1919.
In this case Mrs. Balfour was suing her husband for non-payment of a promised £30 per month maintenance. The court ruled in favour of the husband.
Jones v Padvatton 1969
Also, in relation to a parent and child contract the court stated that had the parties not been related it would have considered the agreement to have been legally binding.
Jones v Padvatton 1969
The court ruled in this case there was no evidence to suggest that the parties intended this agreement to be legally binding.
Rose and Frank Co v Crompton Bros. 1925. Commercial and Business Agreements.
In Rose and Frank Co v Crompton Bros. 1925 the court ruled there was no breach of contract because the insertion of a clause stating that the contract was not to be legally binding.