#4601 - Intention To Create Legal Relation - GDL Contract Law

• Rose & Frank v Crompton Bros: Atkin LJ – ‘to create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly.’

Commercial Agreements: Presumption that parties intend to be legally bound

• Well Barn Farming Lts v Backhouse: “Slight importance” / temporary nature of the agreement didn’t prevent the presumption from operating

  • Onus on the parties to rebut the presumption

• Bunn & Bunn v Rees & Parker: Open to the parties to rebut: Here contract to sell a company-

  • Terms were typical of a share purchase agreement and were not so vague as to suggest there was no intention

  • Defendants failed to discharge evidential burden

• Presumption can be rebutted with term “Binding in honour only”

• Successful ousing in Rose & Frank v Crompton Bros – “honourable pledge clause” – Agreement not legally binding

• Edwards v Skyways: language – “ex gratia” not sufficient to rebut presumption – an employee was still able to enforce a promise to pay

• There will be an objective assessment of the evidence to assess whether there has been a successful rebuttal (Baird Textile Holding v Marks & Spencer

• Statements made in jest or anger – no intention to create legal relations

• Adverts: no intention to create legal relations generally – but note Carbolic Smoke Ball c.f. Pepsico

  • Bowerman v Association of British Travel Agents: “notice” created direct contractual relationship with the public – satisfied criteria for a unilateral contract as was sufficiently clear

• Esso Petroleum v CCE: “world cup coins” – did demonstrate an intention to be legally bound

• Kleinwort v Malaysia: A comfort letter stating the current policy is not evidence of an intention to be legally bound

• Provisions may stipulate no inference of intention to be legally bound – e.g. Trade Unions and Labour Relations (Consolidation) Act 1992 – Agreements between Trade Unions and employees – assumed that there is no intention to create legal relations

“Subject to contract”: Where this is stated there is a strong inference against intention to crate legal relations

• Judicial recognition of this phrase- means prima facie the document is not binding

• Must be careful – if the exact wording isn’t used: Chillingworth v Esche

• Exceptional case where there was rejection of the prima facie meaning – Alpenstow v Regalian Properties

Social and Domestic Agreement: Presumption that there is no intention to create legal relations

• Until recently, pre-nups had little effect

  • Grenatine v Realmacher (2010) – first time pre-nup was upheld

• Family:

  • Balfour v Balfour – promise to pay wife30 per month was not legally binding – the consideration given was that of ‘love and affection

  • Merritt v Merritt: here the husband and wife were not living in amity so the contract was legally bindng

  • Jones v Padavatton: Mother/daughter – here there was no intention to create legal relations when a mother tried to evict her daughter (policy reasons)

• Social:

  • Simkins v Pays: sufficient ‘mutuality’ to rebut presumption

  • Peck v Lateau: Bingo was completed in Lateau’s name – there had been an agreement to share the winnings – here there was intention to create legal relations based on previous conduct

  • Edwards v Lawson: pupil tried to sue chamber – but they were not deemed to be a worker (the Bar regulates relationship

    • Bingham LJ – look at the context / factual matrix

  • Hadley and Others v Kemp: Kemp promised to share the band loyalties, but the agreement was held to be a social arrangement – no intention to be bound

Contractual Capacity

Minors

• Usually one must be over the age of 18

• Exceptions:

1. Necessaries

• Nash v Inman: “fancy waistcoats” were not necessary

2. Employment

• Only if it is for the benefit of the minors-Doyle v White City Stadium; Aylesbury FCv Watford AFC; Proform v Proactive (Rooney’s contract with Everton was fine but not his contract with his agent as he was not providing services essential the player’s livelihood

3. Voidable contracts: will become binding when the minor turns 18 - Steinberg v Scala – if the minor ratifies the contract then the other party has no option to ratify/rescind

Mental incapacity/intoxication

• S2 The Mental Capacity Act 2005: no Intention to create legal relations if unable to: (s3(1))

1. Understand relevant information

2. Retain information

3. Use or weight information

4. Communicate decision

• S3(4): relevant information – the reasonably foreseeable consequences of:

1. Deciding one way or...