INTENTION TO CREATE LEGAL RELATIONS - CASES

Cases and their corresponding slides

Intention - General

RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH (2010), Clarke LJ

Objective Test

Destiny 1 Ltd v Lloyds TSB Bank Plc (2011) EWCA Civ 831 - Held (CA): No binding contract. The guarantee was only part of a wider package. A reasonable person in the position of the recipient would have concluded that parties had no intention to create legal relations when terms are only part of ongoing negotiations.

Family Arrangements - Husband and Wife

Balfour v Balfour (1919), Merritt v Merritt (1970)

Family Arrangements - Parent and Child

Jones v Padavatton (1968) - Balfour v Balfour applied as this was a domestic arrangement

Social Arrangements

Simpkins v Pays (1955) - Held - ‘sufficient mutuality in the arrangements’ between the parties to establish a legally binding agreement to share any prize that might be won

Social/Domestic Agreements - Rebutting the Presumption

Parker v Clark (1960) - Held - language of the correspondence + surrounding circumstances + precise details or arrangement pointed to parties’ intending to create legal relations

Social/Domestic Agreements - Rebutting the Presumption II

Rogers v Wills (2025) EWHC 1367 (Ch) - Held - A binding contract existed despite the family relationship. The mother’s clear promise to pay and the long-term, full-time nature of care showed intention to create legal relations.

Intention - Burden of Proof

Coward v Motor Insurer’s Bureau (1963) 1 QB 259 - Held (CA) - No contract existed between friends. Social not commercial agreement

Commercial Agreements - General

Bowerman v Association of British Travel Agents Ltd (1996) - presumption of legal relationship must be expressly excluded to have that effect

Commercial Negotiations

Pretoria Energy Co (Chittering) Ltd v Blankney Estates Ltd (2014) EWHC 1288 (Ch) - Held - No binding contract. The parties were still negotiating and did not intend to be bound until a written contract signed.

Presumption in Favour of Intention to Be Bound

Edwards v Skyways Ltd (1964) - Held - the agreement with Pilots Association made in context of business relations and the co.’s behaviour suggested intention to be bound

Edwards v Skyways Ltd (1964), Megaw J., p. 355

‘[When] the subject matter of the agreement is business relations, […] the onus is on the party who asserts that no legal effect was intended, and the onus is a heavy one’

Presumption in Favour of Intention to Be Bound

Snelling v John G. Snelling Ltd (1973) - Held - this was a business agreement among the brothers i.e. a commercial agreement

Presumption in Favour of Intention to Be Bound II

Esso Petroleum Ltd v Commissioners of Customs and Excise (1976)

Commercial Agreements - Advertising

Carlill v Carbolic Smoke Ball Co. (1893), Bowerman v ABTA Ltd (1996)

Comfort Letters

Kleinwort Benson Ltd v Malaysia Mining Corporation Berhad (1989) - Held - in comfort letters a company assumes moral rather than legal obligations

Letters of Intent

RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co (2010)

Trade Union Agreements

Ford Motor Co. Ltd v Amalgamated Union of Engineering and Foundry Workers (1969), National Coal Board v National Union of Mineworkers (1986) 6 W.L.U.K. 214

Honour Clauses

Rose & Frank Co. v J. R. Crompton & Bros Ltd (1925)

Borderline Cases

Blue v Ashely (2017) - Held - statement no more than ‘banter’ inconsistent with intention to create legal relations for transactions concerning large sums

Borderline Cases II - Edmonds v Lawson (2000) QB 501

Held (CA) - There was a contract. Although unpaid, the pupillage involved mutual obligations and professional structure. Intention to create legal relations existed because it was a professional, not social, arrangement.

Borderline Cases III

Sadler v Reynolds (2005) - Held - C able to prove that the promise meant to be binding and specific enough to be enforceable

Borderline Cases IV

Moorgate Capital v Sun European Partners LLP (2020) EWHC 593 (Comm) - Held - C unable to prove that agreement was reached and that it was not merely a proposal