intention to create legal relations

• Intention to create legal relations (ITCLR) is the final element needed for a binding contract. The courts need to see legal intent, rather than rely on a general matter of trust. The law is based on presumptions and is split between social/domestic arrangements and business/commercial arrangements.
• The general presumption on social/domestic agreements is that there is no ITCLR, this was illustrated in Balfour v Balfour where the arrangement between husband and wife is not legally binding. Agreements in this situation would not give rise to legal intent as it would open the floodgates of litigation.
• This general presumption on social/domestic situations was also illustrated in Jones v Padavatton where the agreement was merely a family arrangement and was too vague and uncertain to amount to intention. The courts have further extended this to friends Buckpitt v Oates where the arrangement for lifts was purely domestic and not legally binding.
• The presumption may be successfully rebutted. Suppose parties can show clear evidence to the contrary, such as a written agreement (Merritt v Merritt), or where money has been exchanged and there was an exception that winnings would be shared (Simpkins v Pays), or where a party acted to his detriment (Parker v Clark). In that case, the presumption of there not being ITCLR does not apply and parties do intend to be bound.
• Regarding the law on business/commercial arrangements, at least one party must be acting in the course of business. The presumption is that parties do ITCLR and would need very clear evidence to the contrary to rebut this. In Edwards v Skyways, the term ‘ex gratia’ was not enough to rebut the strong presumption of ITCLR. In Esso v Customs and Excise, there was ITCLR regarding a promotional campaign to give ‘free’ gold coins for every petrol purchase. Similarly, in McGowan v Radio Buxton, there was ICTLR to provide a real car as opposed to a toy car in a radio campaign.
• The presumption can be rebutted if there are tightly worded honourable pledge clauses (Jones v Vernon’s Pools) or even comfort letters (Kleinwort Benson v MMC).