The final step where the law formally recognises the contract; the contract is now legallybinding
Contract law sets out differences between business, domestic and social arrangements / agreements
Intention to Create Legal Relations
When contracting, there is a presumption in business agreements that the contract is legally binding
This presumption is not held in agreements that are of a social and domestic nature
However, these presumptions can be rebutted
Business agreements are presumed to be legally binding
However, these can be rebutted e.g., in 'gentleman's agreements' where the contract is 'binding in honour' only
Business agreements presumed to be legally binding
Jones v Vernons Pools (1938): The agreement was not legally binding as it stated the transaction was 'binding in honour only'
The burden of proof is on the person seeking to establish there is no legal intention (and that the presumption should be rebutted)
Edwards v Skyways Ltd (1969): Arrangements were all made as part of business, and business agreements have a strong presumption that the agreement intends to be legally binding
Gifts and competition prizes that form part of promoting a business
Can still be held to be legallybinding
Gifts and competition prizes that form part of promoting a business
EssoPetroleum Co. Ltd v Commissioners of Customs and Excise (1976): Esso's World Cup coin giveaway was presumed to be legally binding
McGowan v Radio Buxton (2001): Radio Buxton's competition prize of a Renault Clio car was presumed to be legally binding
Letter of Comfort
A letter from a parentcompany, regarding their subsidiary company, to a bank, regarding financial obligations. This letter gives assurance that the subsidiary company will pay but does not place any obligation on the parent company to pay
Letters of comfort, within business arrangements, will not usually be intended to be legallybinding
Letters of comfort not intended to be legally binding
Kleinwort Benson Ltd v Malaysian Mining Corporation (1989): Malaysian Mining Corporation's letter of comfort to Kleinwort was not legally binding
'HalfwayHouse' (Business/Domestic) Agreements
Situations that sit 'halfway' between business and domestic will affect the presumptions made and the burden of proof required
'Halfway House' (Business/Domestic) Agreements
Sadler v Reynolds (2005): The agreement fell 'somewhere between an obviously commercial transaction and a social exchange', so the burden was on the journalist to prove it was a business agreement
Social and domestic arrangements are presumed not to be legally binding
Social and domestic arrangements presumed not to be legally binding
Balfour v Balfour (1919): The husband's promise to pay his wife £30 a month was a domestic arrangement, not a legally enforceable one
The presumption in social and domestic arrangements can be rebutted
Social and domestic arrangements can be legally binding
Merritt v Merritt (1970): The agreement between the separated couple to pay the mortgage was legally binding
The Courts may have to carefully examine social arrangements to check the real purpose of the arrangement
Examining social arrangements to determine intention
Jones v Padavatton (1969): The arrangement between the mother and daughter was purely social, with no intention to create legal relations
Where money is involved, then even if the arrangement is made socially, the Courts are more likely to find it to be a business agreement and therefore legally binding
Monetary social arrangements can be legally binding
Simpkins v Pays (1955): The agreement to share competition winnings was more than just a social arrangement
Without sufficient evidence of a binding agreement, the Courts may be unable to enforce monetary agreements
Lack of evidence for monetary social agreements
Wilson v Burnett (2007): There was no intention to create legal relations as there was no evidence of anything legally binding
If parties put their financial security at risk for an agreement, the Courts will more likely find an intention to create legal relations
Financial risk indicates intention to create legal relations
Parker v Clarke (1960): The agreement between the couples was legally binding due to the financial risks involved