Intention to create legal relations

• Business Agreements

  • All business agreements are presumed to be legally binding
  • The presumption can be rebutted by showing the opposite was such as in a gentleman's agreements
  • Jones v Vernons Pools - J claimed he had winning football pool coupon, coupon stated that transaction binding in honour only. As agreement was not legally binding there was no intention.
• Business Agreements

  • Burden of proof is on the person seeking to establish there is no legal intention seen in Edwards v Skyways Ltd - C airline pilot working for D. He was to be made redundant. D said if he withdrew his contributions to company pension fund they would pay him the equivalents of company contributions in an ex gratis payment. C agreed. Then company refused to pay but agreement has been made in business context so its legally binding.
• Business Agreements

  Edmunds v Lawson - courts said whether the parties intended to enter legally binding relations is an issue to be determined objectively. Each case decided on its own facts.

  Esso Petrolum Co Ltd v Commissioners of Customs and Excise - Esso gave a World Cup coin with every four gallons of petrol. should this attract tax? Since they were trying to gain business promotion, there had held to be intention. CASE TELLS US : where there is a gift promised to promote a business it can still be legally binding.
• Business Agreements

  If prizes are offered in a competition, just as a free gift promotes the company can still be legally binding - McGowan v Radio Buxton. Th prize was a car but they were given a 4 inch scale model of a Renault Clio . Court decided there was legal intention
• Business Agreements - letters of comfort 


  A business document that is intended to assure the recipient that a financial or contractual agreement with a party can and will be met.

  Kleinwort Benson Ltd v Malaysian Mining Corporation - K lent 10 million to metals ltd a subsidiary of MMC. MMC wouldn't guarantee this loan but issued a comfort letter. When metals went out of business a claim based on comfort letter failed. CASE TELLS US : letters of comfort merely moral responsibility.
• Business or Domestic Agreement?

  In this instance the burden is on the claimant to prove there was intention to create legal relations and that it was a business agreement. Sadler v Reynolds - alleged contract between journalist and business man who were friends.
• Social or Domestic Agreement

  These arrangements are presumed not to be legally binding , this assumption can be rebutted like in :

  Balfour v Balfour - husband worked abroad. Promised wife income of £30 per month. Marriage failed, she petitioned for divorce and £30 per month. However this was purely domestic arrangement and not enforceable.

  Merrit v Merritt - left wife, arrangement to pay wife if she paid outstanding mortgage was held to be legally binding.
• Social and Domestic Arrangement Exceptions

  1. where families make arrangements that appear to be business arrangements - mother persuaded daughter to come to England study for Bar, years later daughter hadn't passed exams. They fell out and either wanted to evict her. Daughter said they had a contract, however when arrangement was made, they were close so court was satisfied that neither party intended to enter contract
• Social and Domestic Arrangement Exceptions

  2. where money has been exchanged even if engagement is social

  Simpkin's v Pays - lodger and 2 members of household entered competitions. Lodger filled in form in landlady name. Claim made by lodger on basis they would share any winnings, held to be more than a social arrangement.

  Wilson v Burnett - 3 friend attended bingo. One won £153 and £100,000, when they were waiting to hear national result they repeatedly asked if she was going to share indicating a legal relationship didn't exist. TELLS US- social chatter insufficient evidence
• Social and Domestic Arrangement Exceptions

  3. where the parties put their financial security at risk

  Parker V Clarke -young couple persuaded by older couple to sell their house and move in with them with the promise they would inherit the property. They fell out and younger couple asked to leave, young couple successfully argues they had a legally binding contract by giving up their security.