Intention To Create Legal Relations In Contracts Is Essay.

‘The existence of a separate requirement of intention to create legal relations has…been criticised by a number of commentators. It is submitted that there is much force in these criticisms and that it is unnecessary to impose a separate requirement of ‘intention to create legal relations’ over and above those of offer, acceptance and consideration.’ (M Furmstone (ed), The Law of Contract, Butterworth Common Law Series (4^th edn, LexisNexis, 2010) para 2.169).

 Students are to write an essay on the research topic stated above of between 2,300 words (minimum) to 2,700 (maximum) Words (excluding bibliography and footnotes).

The Importance of Intention to Create Legal Relations

The intention to create a legal relation is an essential element of the agreement. This intention to create a legal relationship is describes as the intention to get into a legally binding agreement or a contract. The intention to create a legal relation is a key character in the forming of a contract. The intention to create legal relation is the acceptance made by the parties to enter into an agreement. This intention is the motion that every party that is a part of the contract should have the intention to be a part of the agreement that is legally binding to the parties.

The intention to create a legal relation states that an intention has to be there to be serious about the following:

The minds of the parties to the contract should have the same min d set while entering in a contract- When two parties enter into an agreement they should have a common interest in the contract. If there is no agreement between the parties the contract will be considered void.

When there is no intention to create the legal relation between the agreement it will not be enforceable, legal and binding- The intention for creating a legal relation is an important element in a contract. If no such intention exists in relation to creating a legal relation between the parties the contract will be considered as illegal because of which it will not be enforceable.

When there is no intention to create any legal relation then the parties cannot be liable to sue each other- if there isn’t any intention to create any legal right then the parties to the agreement will not be legally binding. Thus, making the contract enforceable and the contracting parties will have no power to sue each other, give rise to lack in giving justice.

If the parties don’t have an intention to create legal right the contract between them will become a promise- Where there is no intention of creating legal right the contract shall be seen as a promise. Promise is when there is no intention to create any legal right.

The contract will not have any binding effect- Since there is no legal right the contract. The authority due to the parties not having the same mind set for the contract. If the contract does not have any binding effect there will be difficulties for the parties.

Generally, the rules in relation to creating the intention of legal rights with business matters are assumed to have an intention to be legally binding. Otherwise the terms of the exception will be rebuttable. In the case of Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd 1989, the plaintiff that is the bank had agreed to give loan to MMC Metals. The bank asked MMC to give loan. MMC said no to the policy guarantee loans. Hence, it said that no intention to create legally binding.

The Consequences of Not Having Intention to Create Legal Relations

In relation to the rules of social friends there is no assumption made for the intention to create legal right to be legally binding. In the case, Simpkins v Pays 1955 it shows mutuality. The court held that the legally binding relationship is sufficient for the mutuality in the agreements between the parties. When an intention to create legal relation among family arises there is no assumption to be legally binding or it will be rebuttable under its exceptions. In the case of Balfour v Balfour 1919, the husband had taken his wife to England from Sri Lanka.

The husband later returned but the wife had to stay back due to medical reasons. He had promised to pay her certain amount every month until he came back. But he failed to do so, the wife sued her husband. The action of his wife failed due to no consideration and no intention to create legal relation was found. Thus, the court observed that the burden of proof lied with the plaintiff that had the burden of proving the intention to create the intention that has to be legally binding.  

Intention of creating a legal relation is the basic element of a valid agreement in most of the functioning all over the world. It is also observed that consideration is needed as a essential element to prove the validity of a contract that has been formed. Thus in relation to the countries of the common law consideration should have the ability of deal with the intention of the parties and no separate provisions should be made to prove the intention to create the legal rights or the relation.

Consideration is also considered essential element of a contract. Consideration is something that has worth or value such as an item or services. Based on the case Currie v Misa, consideration can be described by involving the rights, the interests as well as the profit and loss of one party that has suffered any kind of loss. Consideration is also considered as executor in relation to when the work had not been done but has to be done within a specific time.

In order to prove the existence of the intention to create a legal relation it is necessary to prove the existence of consideration, which at times becomes very burdensome. Consideration provides for a promise it must be done in relation to the promise. In the case, Tweddle v Atkinson 1861 John had promised to pay a sum to William’s child and the same way William had promised to pay a sum to John’s child at the time of their marriage. However, William failed to do so and was sued for his act. It was observed by the court that the son could not enforce the promise made by his father as he had not given this consideration his father had. This particular rule of consideration formed a part of the privity of contract.

Different Rules for Commercial and Domestic Agreements

Consideration also should have some economic value it cannot be purely based on sentimental or emotional value. This can be explained with the help of the case, White v Bluett 1853 a son had sued his father’s executor but the promise was very abrupt or vague to be considered as a real consideration.

There are two essential elements to make a contract valid they are offer and acceptance. When one person makes a proposal to another person with the intention that the other person may accept it. The person to whom the proposal is made signifies his consent then only the proposal is said to be accepted. Intention in the deceptive issue as the real intention is not known to the interpreter.

Apart from the offer acceptance and the consideration for a valid contract there also has to be an intention to create legal relations that are binding in its nature. The need of the intention to create legal relation in an agreement aims at shifting the case that is not appropriate for the court to take actions on. Not all the agreements have the sufficient ingredients that can be enforced by the courts. For example, a person may have an agreement to meet a friend at a restaurant. It becomes moral duty to oblige to it and not a legal duty to do so. This happens because the parties to such an agreement do not have any intention to be legally bound to each other. To determine whether an agreement has an intention to legally bind its rights and have an intention to create its legal relations can be observed by law. It is law that will then draw a line between the domestic agreements and the commercial agreements.

In a domestic agreement it can assumed it can be easily proved that the parties that are in a familiar relation in the contract can be false. Such parties that are involved in a domestic relationship they usually do not have any legal intention to follow the consequences in relation to their arrangements being made. Thus, the contract will not be enforceable for example in the case Balfour v Balfour, the husband worked overseas and had promised his wife maintenance while he was away. Later the husband had stopped sending the maintenance and the wife asked for legal enforcement in relation to the agreement. The court observed that the agreement is domestic in nature and therefore it is said that the parties did not have any intention to be legally binding to each other.

The courts have observed the in an agreement based on domestic agreements that state that the parties that do not have the intention to be legally binding to the agreement. There is no evidence to rebut this presumption.

In a commercial agreement law raises the presumption that the parties in an agreement do not have any intention to be legally bound to each other. Parties in this agreement negotiate and agree to carry out a certain business it is then believed that these parties have the intention to bare the legal consequences of the agreement. This can be seen in the case of, Esso Petroleum Co Ltd. V Customs & Excise. In this case it was seen that Esso had a promotion in which any individual who wanted to purchase four gallons of petrol would get a free coin from their World Cup Coins Collection. The question that was being controversial here was that if Esso was subject to any tax. He therefore, argued that these coins were simply a free gift for the promotion of his sale that had no legal effects attached to it. The court observed that there has been no legal intention to create any legal relations. These coins had been offered were in commercial context and were not bound to any intention. However, the coins were not exchanged for any kind of money or other consideration and therefore, the coins were not for resale.

It can be seen that the intention to create the legal relations and therefore, it seeks to keep the agreements between the family and the friends outside the jurisdictions of the court. The requirements for the formation in a legal contract are the offer, the acceptable and the parties that have the legal intention to enter into the contract. Offer is the promise that has terms and conditions attached to it. It is considered as the willingness or the intention to enter into a bargain made with another party. Any offer must consist of a statement that has to be presented in the contract. It should be definite proposal have the terms and the conditions and the offer is communicated to the offeree. If any of these elements are missing there can be no offer to form the base of the contract.

Acceptance of an offer is the expression of consent to the terms and conditions of the offer. It should be made by the offeree in a way that is requested by the offerer. Acceptance can only be valid if the offeree has full knowledge about the offer; in that case the offeree makes an intention to accept the offer being made this kind of acceptance will be unconditional and is liable according to the terms and the conditions of the contract.

To determine the valid acceptance it can be seen with the help of the promise or an act done by the offeree that was bargained for response. Acceptance is considered as a unilateral contract that requires having an act rather than the promise. But if the offeree believes that the offeror will not learn about the acceptance with promptness then it will become the duty of the person making the offer. In a bilateral contract the offer is effective when the offeree receives the offer. The person that has to accept the offer may accept it before the revocation of the offer. Most of the states don’t recognize the moral obligations as consideration, since there is no method to accept the method to bind the parameters of the moral duties.

As it has been specified before that various countries have recognized the intention to create the legal relation as a separate requirement to enforce the valid contract. The best example of this is the English Law. The separation of the consideration being made from the agreement has resulted in the fundamental issues that have been ignored. This is considered at the common law at a beginning stage when the parties to a contract do not state their intentions to be a part of the contract and legal relations. Therefore, the fact that they have agreed to a particular contract with respect to the “offer, acceptance and consideration” is provided to be extremely practical test in relation to intention.

In the case, Ford Motors Co Ltd v AEF the intention is needed to manifest the object of the intention. This argument introduces the rules for the framing of the contract. The formal requirement is not in writing or in signature but the “offer, acceptance and the consideration”. The parties to the contract that fulfill the requirements of the elements will be considered to make a bargain unless it is proved otherwise.

The term intention is considered to be essential ingredients of a contract that is considered to be valid which has been argued by not only the scholars but the court also. This essay strongly highlights the part to abandon the proving of the intention to create legal relation in relation to those countries that need consideration to exist to form a part of the valid as well as enforceable contract. In the case of common law countries when a consideration is essential part of the valid contract there is need to prove the intention to create the legal relations. Consideration itself can be seen as the evidence to indicate the presence or the intention to prove that will be legally binding. It is highlighted that in relation to the common laws it is not required for any intention to be created by a legal obligation as a key character of the contract or an agreement.

Primary Sources:

Esso Petroleum Co Ltd. V Customs & Excise 1976

Ford Motor Co. Ltd. v. AEF, 1 WLR 339, 1969.

Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd 1989

Tweddle v Atkinson [1861] EWHC QB J57

White v Bluett 1853

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