Intention to Create Legal Relations

• Intention to create legal relations is one of the essential elements of a valid contract. It takes an objective approach to the question of legal intention as illustrated in Esso v Customs and Excise.
• The type of agreement that was made is key when deciding if there was ITCLR. There are three different types of agreement: domestic, social and commercial.
• Domestic agreements refer to agreements made between family members. In domestic agreements the presumption (starting point) is that there is no intention so not legally binding. For example, in Balfour v Balfour where there was no ITCLR as the verbal agreement to pay £30 a month to his wife had been made when they were married and together.
• However, the party who is arguing that there was intention needs to rebut the presumption by proving that intention exists and if successful there will be a contract; Merritt v Merritt there was legal intent as a written agreement had been made when the parties were separated. Alternatively, if family members are in business together then this will establish intention as although family, they have entered into a commercial agreement as it is a family business; Snelling v Snelling.
• Social agreements are agreements made between friends, work colleagues and neighbours etc. The presumption for social agreements is that there is no intention as seen in Buckpitt v Oates as the parties shared lifts and petrol money. However, if lifts are given over a long period of time and there is only one designated driver then this is similar to a taxi service and more in-line with a business agreement so the presumption is successfully rebutted; Albert v MIB.
• If money changes hand, it is more likely to be a business agreement and therefore legally binding as in Simkins v Pays, 'casual conversations' alone would not be enough; Wilson v Burnett.
• Additionally, if a party relies on a promise and acts on it then this will establish intention as illustrated in Parker v Clarke where the Parkers had given up their financial security, given money to their daughter on the promise if they looked after the Clarkes then they would own their house. Mr Clarke had also altered his will to indicate this.
• Conversely, the case if Sadler v Reynolds shows that there may be situations which fall into a sort of 'halfway house' between domestic and commercial agreements. If the deal is clearly set out and there is a clear exchange of promises, there could be ITCLR and possibly evidence of a commercial agreement even between friends.
• For commercial/business agreements the presumption is that there is intention and are legally binding; Carlill v Carbolic Smokeball Company. It was held that the pre-nuptial agreements are binding; Radmacher v Grantino. Additionally, businesses who hold promotions giving away a collectable in return for a sale shows intention as in Esso v Customs and Excise if there is 'commercial gain.'
• The party who doesn't want a contract has to rebut the presumption by proving that no intention exists with very clear evidence. It can be rebutted in certain circumstances such as the wording of arrangements. If the business uses very clear wording that excludes itclr such as 'gentleman's agreements' or 'honour only' clauses (Jones v Vernon Pools / Rose & Frank v Corporation) then the courts will accept this.
• The use of words such as 'ex gratia' (out of goodwill) alone will not be sufficient, intention will only be evident if they are used as part of a much bigger formal agreement as in Edwards v Skyways.