Intention

This is the final requirement for the formation of a contract. Once offer and acceptance have taken place and an agreement is formed, there must be an intention to create legal relations for a contract to be legally binding.

Key Points

  • Intention to Create Legal Relations: Parties must intend to enter into a legally binding arrangement where the rights and obligations of the agreement are enforceable.

  • Not every agreement leads to a binding contract; moral obligations do not create legal duties. For example, agreements like meeting friends do not generally imply legal enforcement.

  • The law creates two presumptions to determine binding agreements:

    1. In commercial/business agreements, there is a presumption that there is an intention to be bound.

    2. In social/domestic agreements, it is presumed that there is no intention to be bound.

Business Agreements

Presumed Legally Binding:In general, business agreements are presumed to be legally binding.

Key Cases:

  1. Edwards v Skyways (1969):

    • Facts: An airline pilot agreed to withdraw pension contributions for an ex gratia payment but later faced a breach as the company backed out.

    • Outcome: The court recognized it as a binding agreement due to its business context, affirming the presumption of legal relations.

  2. Esso Petroleum Co. Ltd v Commissioners of Customs and Excise (1976):

    • Facts: Esso offered free coins with petrol purchases, leading to a tax question.

    • Outcome: The court held the promotion indicated a legal intention due to the commercial context.

Rebutting the Presumption of Business Agreements

The presumption of a binding business agreement can be rebutted by evidence such as statements indicating that the contract is only binding in honour.

Key Cases:

  1. Jones v Vernons Pools:

    • The coupon stated it was "binding in honour only" which demonstrated no legal intent to be bound.

  2. Kleinwort Benson Ltd v MMC:

    • A comfort letter from a parent company stating financial assurance failed in court, as it did not constitute a guarantee.

Summary of Business Agreements

  • Lead case confirming binding nature: Edwards v Skyways.

  • Exceptions:

    • Gentleman’s agreements or letters of comfort are not legally binding.

    • Promotions and consumer offers (like free gifts) do create legal relations as per Esso Petroleum Co v Commissioners of Customs and Excise.

Social and Domestic Agreements

In contrast, agreements in social or domestic contexts do not presume intent to create legal relations.

Key Cases:

  1. Balfour v Balfour (1919):

    • The husband’s promise to pay his wife £30 per month during their amicable relationship was not enforceable after their marital issues arose.

  2. Merritt v Merritt:

    • Post-separation agreement was enforced due to its written nature, countering the presumption.

  3. Simpkins v Pays:

    • Agreement among family members to share lottery winnings was enforced because it involved a lodger, showing intent.

Rebuttal Evidence for Social Agreements

The presumption may be rebutted through written agreements, the occurrence of payment, or separation context.

Situational Rebuttals:

  1. Parker v Clarke:

    • Agreement between couples to sell their house and live together was enforced due to the substantial change in financial security (selling the house).

  2. Wilson v Burnett:

    • A verbal agreement to share bingo winnings lacked sufficient evidence to rebut the social presumption.

Evaluation

  • Advantages of Intention to Create Legal Relations

    • Ensures parties take their agreements seriously, promoting accountability.

    • Provides clarity in business transactions, fostering trust and transparency.

    • Protects parties by allowing legal recourse in case of breach.

  • Disadvantages of Intention to Create Legal Relations

    • May lead to legal disputes if parties' perceptions of 'intent' differ.

    • In social contexts, the lack of intent may undermine informal agreements.

    • Potential adverse effects on personal relationships due to legal scrutiny.

  • Role of Intention in Business Agreements

    • Presumed to be legally binding, ensuring that commercial dealings are enforceable.

    • Key Cases:

      • Edwards v Skyways (1969): Court affirmed the binding nature of the agreement within a business context.

      • Esso Petroleum Co. Ltd v Commissioners of Customs and Excise (1976): The court ruled that promotional offers indicated legal intent, reinforcing the presumption of binding agreements.

  • Rebutting Presumptions in Business

    • Statements indicating a contract is 'only binding in honour' can negate legal intent.

    • Key Cases:

      • Jones v Vernons Pools: Lack of intent shown through coupon terms.

      • Kleinwort Benson Ltd v MMC: A comfort letter was insufficient to establish a guarantee.

  • Role of Intention in Social and Domestic Agreements

    • Generally, no presumption of intent to create legal relations.

    • Key Cases:

      • Balfour v Balfour (1919): Illustrates the non-enforceability of personal promises.

      • Merritt v Merritt: A written separation agreement was enforced, contradicting social presumption.

      • Simpkins v Pays: Validity of family agreements demonstrated by external involvement (lodger).

  • Rebuttal Evidence for Social Agreements

    • Written agreements, payment occurrences, or specific contexts (e.g., separation) can rebut the lack of intent.

  • Situational Rebuttals:

    • Parker v Clarke: Enforced agreement due to financial changes impacting expectations.

    • Wilson v Burnett: Lack of evidence for social agreement highlights challenges in establishing intent.

Key Cases

  1. Edwards v Skyways (1969)

    • Legal Principle: Affirmed the presumption of intention to create legal relations in business agreements. The court recognized a binding agreement in a commercial context where an airline pilot withdrew pension contributions for a promised payment.

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

    • Legal Principle: Established that promotions and consumer offers indicate legal intent to create binding agreements in a commercial setting, leading to enforceability.

  3. Jones v Vernons Pools

    • Legal Principle: Demonstrated that a statement indicating a contract is "only binding in honour" negates legal intent, thereby rebutting the presumption of a binding agreement in business contexts.

  4. Kleinwort Benson Ltd v MMC

    • Legal Principle: A comfort letter from a parent company lacks the necessary legal binding effect to constitute a guarantee, reinforcing the need for clear contractual intent.