⇒ Since the intention to establish a legal relationship is a presumption of the intention of the parties to be legally bound, it is possible that this presumption can be rebutted. In 1919, Lord Atkin in Balfour v Balfour[3] (where a husband promised his wife to pay alimony while working in Ceylon) stated that there was no “intention to be legally bound”, although the wife depended on payments. The judge explained that agreements between spouses are generally not legally enforceable: when the judgment was handed down by the High Court, Justice Leggatt dismissed Mr Blue`s application. This was done on the grounds that the parties did not want Mr. Ashley to be legally bound by the rather extravagant promise he made to Mr. Blue. The judge made a number of remarks; The main reason was that a drinking night at the pub was an unlikely setting for formal contract negotiations. In addition, Mr Blue was unable to achieve the target of raising the share price above GBP 8. After all, it would certainly have been irrelevant to Mr.
Ashley to make such a promise. ⇒ Some other useful legal resources for reaching a contract law agreement: ⇒ The employee`s contract may stipulate that certain conditions depend on the collective agreement of the employer and unions – is there an intention to create legal relationships? In its simplest form, the intention to create legal relationships means that the parties must intend to enter into a legally binding agreement in which the rights and obligations of the agreement are enforceable. Simple as it may seem, the question of whether the negotiating parties intended to establish a legal relationship is very sensitive to the facts. It is relatively certain that representatives of a company who meet in a formal business scenario to negotiate a contract intend to create legal relationships. But what about two people discussing a joint venture over a drink in a pub? This was exactly the question the court faced in the recent Blue v Ashley [2017] EWHC 1928 case. The principle of Balfour v. Balfour[3] was based on an agreement between mother and daughter in Jones v. Padavatton[4]. Ms. Padavatton lived in Washington, D.C.
and her mother in Trinidad. The mother was very interested in her daughter studying law, so she offered to provide her with an apartment and pay for her maintenance if she left her job in Washington, D.C. and moved to London to study law. The girl accepted this offer. After a few years, they fell and the mother claimed her property in the apartment where the girl lived. The girl refused. The court ruled that, in this case, there was no intention to establish a legal relationship, since it was a daughter and a mother. There is a presumption that the parties intend to enter into a legally binding contract, unless otherwise suspected. In the context of ordinary commercial contracts, it is not necessary for the applicant to prove the existence of such an intention. However, the defendant may rebut the presumption by referring to the terms used and the circumstances prevailing in force.
The common law principle states that there is no binding contract unless the parties to the agreement intend to establish such a relationship under the law. ⇒ Balfour v. Balfour (1919) shows that an internal agreement is generally not intended to establish legal relations (and will therefore not be contractual). The following points can be considered as some concepts of intention to create legal relationships: In Carlill v. Carbolic Smoke Ball, the court rejected the defence that advertising was a “mere puff” and not intended to create legal relationships. Filing with the bank was strong evidence that the defendant had contemplated legal liability. In Edwards v. Skyways[8] Skyways was the employer and Mr. Edwards was the employee.
Mr. Edward was dismissed due to a termination of employment. He was promised a voluntary payment by Skyways. He was not paid and sued Skyways. The court agreed that this was a binding agreement with a valid offer and acceptance and the intention to establish a legal relationship. Since it is commercial and commercial in nature. ⇒ In order for a contract to be concluded, the parties must have intended to establish a legal relationship. Parker & Clark[5] involved an uncle and aunt on the one hand, and a niece and her husband on the other.
The uncle wanted his niece and husband to come and live with them. As they grew older and frail, it was helpful for them to have their niece and her husband around them. In order to lure them, the uncle promised to give them the share of the house in which they would all live. The niece and her husband accepted the offer, left their own home and sold it. When they fell, their uncle and aunt denied them a piece of the house. The court concluded that the intention was to establish a legal relationship because the consequences for the niece and husband were very serious. The party claiming the absence of a legal relationship must prove this; and all clauses intended to rebut the presumption must be clear and unambiguous. [16] In Edwards v. Skyways Ltd,[17] an employee was promised a “graceful” bonus, which was found to be legally binding.
He had relied on the promise when he accepted severance pay and his employer could not sufficiently prove that he did not intend his promise to become a contractual clause. [18] The intention to establish a legal relationship demonstrates the intention of the parties to enter into a legally binding agreement. This shows that the parties are ready to accept the legal consequences of the agreement, which means that they are serious. The intention to create legal relationships is one of the most important elements in the conclusion of a contract. It can be defined as an intention to enter into a contract or a legal frenzy agreement. This can be considered as one of the necessary elements when concluding a contract. It shows the willingness of the parties concerned to accept the legal consequences of concluding such an agreement. Each Contracting Party should request the conclusion of a legally binding contract. ⇒ If it is a domestic/family/social agreement, it is generally accepted that it is not contractual, as the parties probably did not think that their dispute could end up in court (i.e. it is unlikely that these parties intended to establish legal relationships).
In this test, also known as the reasonable man test, the court focused on the opinion of a reasonable man. If the promisor did not intend to create a legal relationship, it is not for the promisor to decide, but the court would assume that there is an intention if a reasonable man has the possibility that the intention was to bind the promisor. In Carlill v. Carbolic Smoke Ball Company,[1] the court applied the “class test” and considered whether a reasonable man, knowing all the circumstances of the case, believed that the parties intended to be bound. The defendants in this case had made extravagant statements in an advertisement about the effectiveness of their smokeball in preventing influenza. They promised to pay £100 to anyone who used it and still contracted the flu within a certain period of time. They explained that to “show their sincerity” they had deposited £1,000 with their bankers. The plaintiff purchased the preparation, used it and became ill with influenza. The advertisement published by the company represented the company`s sincerity as it had deposited £1,000 with Alliance Bank. The court ruled that any objective person reading this would imply a contractual intent.
Contrary to intuition, the best way to know if the parties intended to enter into a contract is not to ask them, as this “subjective test” would give the bad guy an easy loophole to avoid liability.
