Intention to Create Legal Relations:

Intention to create legal relations is one of the key elements of a contract. For an agreement between two or more parties to be legally enforceable, it must be established that the parties intended to create legal relations. People usually make promises to each other. Whilst it is usually hoped that people will not break their promises, such as when that boyfriend or girlfriend promised to stay forever, people sometimes fail to honour their promises. In a fully formed contract, an action can be brought against people for failing to live up to their commitments. However, one cannot easily bring an action against say a partner for failing to live up to their promise of staying forever. What distinguishes these two types of promises, or commitments, is that in the former case, there is an intention to create legal relations whilst no such intention exists in the latter case.

Definition of "Intention to Create Legal Relations":

Intention to create legal relations can be defined as the intention of the parties to enter into a legally binding agreement such that violations of promises or agreements can be tried in court.

The courts, upon examining the agreement and usually the conduct of the parties, can determine if there was an intention by the parties to create legal relations. Conventionally, two types of agreements are distinguished in contract law as far as intention to create legal relations is concerned. These are agreements in social contexts versus agreements in commercial contexts.

Agreements in domestic/social contexts:

In the domestic context, there is a strong presumption that agreements are not made with the intention to create legal relations. For example, parents make several promises to their children, and spouses enter into several agreements with each other (for example not to cheat hahaha), but these are usually considered not to have been made with the intention to create legal relations. Consequently, breaches of these agreements would not be penalized by the courts.

The burden of disproving the presumption that agreements in domestic contexts are not made with the intention to create legal relations is on the party who claims that an agreement in a domestic context was made with the intention to create legal relations.

Some instances:

Agreement between husband and wife:

An agreement between a husband and wife is usually presumed to have been made without an intention to create legal relations. In the case of Balfour versus Balfour, the court held that the plaintiff’s action to recover a monthly allowance of £30 which was promised to her by her husband, must fail.

However, the context in which an agreement is made between a husband and a wife may indicate that the parties intended to create legal relations. In the case of Merritt versus Merritt, the court held that Mr. and Mrs Merritt were no longer living together and their agreement to have Mr. Merritt transfer a property to the sole ownership of Mrs Merritt if she completes payment on a mortgage was made with the intention of creating legal relations.

Agreements between parent and child:

In agreements between parents and their children, there is also the presumption that such agreements are not made with the intention to create legal relations. In the case of Jones v Padavatton, the court held that Mrs Jones' promise to give a house to Padavatton, her daughter, if Padavatton studied law was not made with the intention to create legal relations.

Domestic agreements considered to have been made with the intention to create legal relations:

When a domestic agreement has commercial aspects to it, it can be deemed to have been made with the intention to create legal relations. For instance, when a domestic agreement involves one party making substantive financial sacrifices or one party likely benefitting financially from the agreement, the court may rule that there was an intention to create legal relations. See the cases of Simpkins v Pays and Parker v Clark.

Agreements in commercial contexts:

In business or professional settings, there is the presumption that the parties involved in an agreement intended to create legal relations. If there is an offer, an acceptance, and consideration amongst the parties in an agreement, the presumption is that the parties intended to create legal relations and their agreement is considered legally binding. The burden of disproving this presumption is usually placed on the party that claims that there was no intention to create legal relations in a particular commercial context.

Determining if there is an Intention to Create Legal Relations in Commercial Settings:

The following are some of the ways to determine if the parties to an agreement intended to create legal relations.

When the parties agreed not to create legal relations:

When parties to an agreement also state that they do not wish for their agreement to create legal relations, then the agreement will not create legal relations and the courts would not enforce the contract. In the case of Rose & Frank versus G.R Crompton Bros, the parties stated in their agreement that the agreement was not meant to be legally enforceable. A suit from one of the parties failed because the court held their agreement was not enforceable.

Inferring the Intention to create legal relations from the circumstances of the case:

Sometimes, the courts upon examination of the agreement between the parties can infer if the parties had intended to create legal relations and for their agreement to be binding. In the case of Hammond versus Ainooson, where although there was no express indication that the parties intended for their agreement to create legal relations, the facts of the case indicated that there was such an intention.