6 Intention to Create Legal Relations
Learning objectives
On completion of this Chapter, you should be able to:
- Explain the need for legal intentions in contracts.
- Explain what intention to create legal relations means.
- Explain how the courts determine intention to create legal relations.
- Distinguish between non-commercial and commercial agreements.
Key terms
Here are some terms you will encounter in this chapter, which will help you to better understand this chapter:
domestic agreements – agreements made between family members and relatives where there is no intention to create legal relations.
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- Objective test: would the words or conduct of the parties lead a reasonable person to believe, on the balance of probabilities, that legal relations were intended.
- Presumption: a belief (as the word is used here it is a reference to what the courts assume).
- Social agreements: agreements made between friends or acquaintances.
- Voluntary agreements: agreements where the parties volunteer their services, usually for no money.
Introduction
Chapter 6 introduces you to the second element that must be present in a simple contract – that is, the question of intention between the parties to create legal relations.
The fact that you have reached an agreement with another party does not necessarily mean that a contract has been created. It is this element of intention that distinguishes a legally binding contract from other types of arrangements. Without intention, you can still have an agreement but it is an agreement that is not enforceable in a court because it is not a contract. The parties will have to rely on moral or social pressure for enforcement.
In this chapter we begin by looking at intention generally (express and implied) and then the two main types of agreement: non-commercial, and commercial or business agreements. In the case of a non-commercial agreement there is a presumption (or a belief) that the parties do not intend to create legal relations while in the case of a commercial or business agreement there is a presumption that legal relations are intended.
Step 2 – Intention to create legal relations
In Step 1 you were concerned with the issue of agreement. Was there an offer? Did the other party accept? Once you are satisfied that an agreement has been reached, you need to think about whether the agreement you entered into was legally enforceable. The fact you and the other party have reached an agreement does not necessarily mean that a contract has been formed.
For an agreement to be legally enforceable as a contract, you both must intend to create legal relations. This can be express (words, writing or conduct) or implied; but if it is not present, there can be no contract.
The question of intention is closely linked to the question of agreement which, together with consideration (see Chapter 7), will determine whether the parties have entered into a simple contract. But note that even at this stage we don’t know whether our