Intention to create legal relations, otherwise an "intention to be legally bound", is a
doctrine
Doctrine (from la, doctrina, meaning "teaching, instruction") is a codification of beliefs or a body of teachings or instructions, taught principles or positions, as the essence of teachings in a given branch of knowledge or in a belief system ...
used in
contract law
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
, particularly
English contract law
English contract law is the body of law that regulates legally binding agreements in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries ...
and related
common law
In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omnipresen ...
jurisdictions.
The doctrine establishes whether a court should presume that parties to an agreement wish it to be enforceable at law, and it states that an
agreement Agreement may refer to:
Agreements between people and organizations
* Gentlemen's agreement, not enforceable by law
* Trade agreement, between countries
* Consensus, a decision-making process
* Contract, enforceable in a court of law
** Meeting o ...
is legally enforceable only if the parties are deemed to have intended it to be a binding contract.
Identifying intention to create legal relations
A contract is a legally binding
agreement Agreement may refer to:
Agreements between people and organizations
* Gentlemen's agreement, not enforceable by law
* Trade agreement, between countries
* Consensus, a decision-making process
* Contract, enforceable in a court of law
** Meeting o ...
. Once an offer has been accepted, there is an agreement, but not necessarily a contract. The element that converts any agreement into a true contract is "intention to create legal relations". There must be evidence that the parties intended the agreement to be subject to the law of contract. If evidence of intent is found, the agreement gives rise to legal obligations whereby any party in breach may be sued.
In
English law
English law is the common law legal system of England and Wales, comprising mainly criminal law and civil law, each branch having its own courts and procedures.
Principal elements of English law
Although the common law has, historically, be ...
, there are two judicial devices to help a court to decide whether there is intent: the earlier
objective test
Objective tests are measures in which responses maximize Objectivity (science), objectivity, in the sense that response options are structured such that examinees have only a limited set of options (e.g. Likert scale, true or false). Structuring a ...
, and the later
rebuttable presumption
In common law and civil law, a rebuttable presumption (in Latin, ''praesumptio iuris tantum'') is an assumption made by a court that is taken to be true unless someone proves otherwise. For example, a defendant in a criminal case is presumed inn ...
. Both tests are used together in combination.
The objective test
Counterintuitively, the best way of discovering whether the parties intended to contract is not to ask them, as this "subjective test" would give the rogue an easy loophole to escape liability. (He would reply, "No! I did not intend to be bound".) Instead, just as in ''
Carlill v Carbolic Smoke Ball Company
''Carlill v Carbolic Smoke Ball Company'' 892EWCA Civ 1is an English contract law decision by the English Court of Appeal">Court of Appeal, which held an advertisement containing certain terms to get a reward constituted a binding unilateral of ...
'', the court applies the "objective test" and asks whether the reasonable bystander, after taking into account all the circumstances of the case, thinks that the parties intended to be bound. Since the advertisement (pictured) stated that the company had "deposited £1,000 in the Alliance Bank to show sincerity in the matter", the court held that any objective bystander who read this would presume an intention to contract.
The rebuttable presumption
The rebuttable presumption establishes a burden of proof; but the burden may be rebutted by evidence to the contrary. The civil standard of proof is "a balance of probabilities", while the criminal standard of proof is "beyond reasonable doubt". Here, different presumptions will apply, according to the class of agreement. For these purposes, there are four classes of agreement:
* Family agreements: a presumption of no contract
* Social agreements (i.e. agreements between friends): no presumption (case decided on its merits, using the objective test)
* Commercial agreements: a presumption of a valid contract
* Collective agreements: a presumption of no contract
The four classes
Family agreements
Family agreements are presumed not to give rise to legal relations unless there is clear evidence to the contrary. The courts will dismiss agreements which for policy reasons should not be legally enforceable.
In 1919,
Lord Atkin
James Richard Atkin, Baron Atkin, (28 November 1867 – 25 June 1944), commonly known as Dick Atkin, was an Australian-born British judge, who served as a lord of appeal in ordinary from 1928 until his death in 1944. He is especially remembere ...
held in ''
Balfour v Balfour
''Balfour v Balfour'' 9192 KB 571 is a leading English contract law case. It held that there is a rebuttable presumption against an intention to create a legally enforceable agreement when the agreement is domestic in nature.
Facts
Mr. Balfour ...
'' (where a husband promised his wife to pay maintenance while he worked in
Ceylon
Sri Lanka (, ; si, ශ්රී ලංකා, Śrī Laṅkā, translit-std=ISO (); ta, இலங்கை, Ilaṅkai, translit-std=ISO ()), formerly known as Ceylon and officially the Democratic Socialist Republic of Sri Lanka, is an ...
) that there was no "intention to be legally bound", even though the wife was relying upon the payments. The judge stated that as a general rule, agreements between spouses would not be legally enforceable:
In a more modern case, ''
Jones v Padavatton
{{Infobox Court Case
, name = Jones v Padavatton
, court = Court of Appeal
, image = Lincolns Inn 1.jpg
, date decided = 29 November 1968
, full name =
, citations = _subsequent_actions_=_
.html" ;"title="969">968EWCA Civ 4 [19691 WLR 328; ...
'', the court applied ''Balfour v Balfour'' and declared that a mother's promise to allow her daughter an allowance plus the use of a house provided that she left the USA to study for the English Bar was not an enforceable contract.
However, if there is clear intent to be contractually bound, the presumption is rebutted. In ''Merritt v Merritt'', a separation agreement between estranged spouses was enforceable. In ''
Beswick v Beswick
was a landmark English contract law case on privity of contract and specific performance. The Lords, overruling the decision of Lord Denning in the Court of Appeal, ruled that a person who was not party to a contract had no independent standin ...
'' an uncle's agreement to sell a coal delivery business to his nephew was enforceable. Also, in ''
Errington v Errington'', a father's promise to his son and daughter-in-law that they could live in (and ultimately own) a house if they paid off the balance of the mortgage, was an enforceable
unilateral contract
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
.
Social agreements
With social agreements, there is no presumption, the case being decided solely on its merits.
Although many sources consider "social and domestic agreements" to be a single class, it is better to regard "family agreements" as a class separate from "social agreements", as the latter invokes no presumption, and only the objective test applies.
In ''
Simpkins v Pays
''Simpkins v Pays'' 9551 WLR 975 is a precedent case on intention to create legal relations in the English law of contract.
Decided at Chester assizes in 1955, this case involved an informal syndicate agreement between a grandmother, grand-daughte ...
'', an informal agreement between a grandmother, granddaughter and a lodger to share competition winnings was binding. Sellers J held, applying the objective test, that the facts showed a "mutuality" between the parties, adding:
In ''
Coward v MIB
''Coward v MIB'' was a 1963 Court of Appeal decision on intention to create legal relations, and on the liability of the Motor Insurers Bureau when a passenger in a vehicle is killed or injured through the driver's negligence.
The decision was ...
'', the Court of Appeal held that when a motorcyclist regularly gave a friend a pillion lift in return for some remuneration in cash or in-kind, there was no contract. Soon after, in ''
Connell v MIB
''Coward v MIB'' was a 1963 Court of Appeal decision on intention to create legal relations, and on the liability of the Motor Insurers Bureau when a passenger in a vehicle is killed or injured through the driver's negligence.
The decision was ...
'', a case with materially similar facts,
Lord Denning
Alfred Thompson "Tom" Denning, Baron Denning (23 January 1899 – 5 March 1999) was an English lawyer and judge. He was called to the bar of England and Wales in 1923 and became a King's Counsel in 1938. Denning became a judge in 1944 when ...
(violating the rule that the Court of Appeal was bound by its own decisions) said, "I am not satisfied by the decision in ''Coward''. I think that when one person regularly gives a lift to another in return for money, there is a contract, albeit informal". In a similar "lifts for friends case", ''Albert v MIB'', the
House of Lords
The House of Lords, also known as the House of Peers, is the Bicameralism, upper house of the Parliament of the United Kingdom. Membership is by Life peer, appointment, Hereditary peer, heredity or Lords Spiritual, official function. Like the ...
approved Denning's decision in ''Connell'' (so that ''Coward'' may be considered bad law).
Commercial agreements
Business transactions incur a strong presumption of a valid contract: these agreements where the parties deal as though they were strangers, are presumed to be binding. However, "honour clauses" in "
gentlemen's agreement
A gentlemen's agreement, or gentleman's agreement, is an informal and legally non-binding agreement between two or more parties. It is typically oral, but it may be written or simply understood as part of an unspoken agreement by convention or th ...
s" will be recognised as negating intention to create legal relations, as in ''Jones v Vernons Pools'' (where the clause "this agreement is binding in honour only" was effective). One must be careful not to draft a clause so as to attempt to exclude a court's jurisdiction, as the clause will be void, as in ''Baker v Jones''. If a contract has both an "honour clause" and a clause that attempts to exclude a court's jurisdiction (as in ''
Rose & Frank v Crompton'') the court may apply the ''blue pencil rule'', which strikes out the offending part. The court will then recognise the remainder, provided it still makes sense, and remains in accord with the parties' bargain. The offending clause was:
When the words "and shall not be subject to legal jurisdiction in the Law Courts either of the United States or England," are "blue-pencilled out", the remainder becomes legally acceptable, while staying true to the intended meaning.
The party asserting an absence of legal relations must prove it; and any terms seeking to rebut the presumption must be clear and unambiguous. Where in ''
Edwards v Skyways Ltd Edwards may refer to:
People
* Edwards (surname)
* Edwards family, a prominent family from Chile
* Edwards Barham (1937-2014), a former member of the Louisiana State Senate
* Edwards Pierrepont (1817–1892), an American attorney, jurist, and orat ...
'' a bonus payment, described as '
ex gratia
(; also spelled ''ex-gratia'') is Latin for "by favour", and is most often used in a legal context. When something has been done ''ex gratia'', it has been done voluntarily, out of kindness or grace. In law, an ''ex gratia payment'' is a paymen ...
', was promised to an employee, this was found to be legally binding. He had relied upon the promise in accepting a redundancy package, and his employer could not adequately prove that they had not intended their promise to become a contractual term.
Collective agreements
A
collective agreement
A collective agreement, collective labour agreement (CLA) or collective bargaining agreement (CBA) is a written contract negotiated through collective bargaining for employees by one or more trade unions with the management of a company (or with an ...
is a special type of commercial agreement, such as one negotiated through
collective bargaining
Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights for workers. The i ...
between management and
trade union
A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and benefits ( ...
s. At
common law
In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omnipresen ...
, ''
Ford v Amalgamated Union of Engineering and Foundry Workers
Ford commonly refers to:
* Ford Motor Company, an automobile manufacturer founded by Henry Ford
* Ford (crossing), a shallow crossing on a river
Ford may also refer to:
Ford Motor Company
* Henry Ford, founder of the Ford Motor Company
* Ford F ...
'', the courts held that collective agreements were not binding. The
Industrial Relations Act 1971
The Industrial Relations Act 1971 (c.72) was an Act of the Parliament of the United Kingdom, since repealed. It was based on proposals outlined in the governing Conservative Party's manifesto for the 1970 general election. The goal was to stabil ...
, introduced by
Robert Carr
Leonard Robert Carr, Baron Carr of Hadley, (11 November 1916 – 17 February 2012) was a British Conservative Party politician who served as Home Secretary from 1972 to 1974. He served as a Member of Parliament (MP) for 26 years, and later ser ...
(employment minister in
Edward Heath
Sir Edward Richard George Heath (9 July 191617 July 2005), often known as Ted Heath, was a British politician who served as Prime Minister of the United Kingdom from 1970 to 1974 and Leader of the Conservative Party (UK), Leader of the Conserv ...
's cabinet), provided that collective agreements were binding, unless a contact clause ''in writing'' declared otherwise. After the demise of the
Heath government
Edward Heath of the Conservative Party formed the Heath ministry and was appointed Prime Minister of the United Kingdom by Queen Elizabeth II on 19 June 1970, following the 18 June general election. Heath's ministry ended after the February 19 ...
, the law was reversed.
The law is now contained in the
Trade Union and Labour Relations (Consolidation) Act 1992
The Trade Union and Labour Relations (Consolidation) Act 1992c 52 is a UK Act of Parliament which regulates United Kingdom labour law. The Act applies in full in England and Wales and in Scotland, and partially in Northern Ireland.
The law con ...
s.179:
The civil law approach
In
civil law systems, the concept of intention to create legal relations is closely related to the "will theory" of contracts as espoused by German jurist
Friedrich Carl von Savigny
Friedrich Carl von Savigny (21 February 1779 – 25 October 1861) was a German jurist and historian.
Early life and education
Savigny was born at Frankfurt am Main, of a family recorded in the history of Lorraine, deriving its name from the cast ...
in his nineteenth century work ''
System des heutigen Römischen Rechts''. It had been a prominent concept through the nineteenth century that contracts were based on a
meeting of minds
''Meeting of Minds'' is a television series, created by Steve Allen, which aired on PBS from 1977 to 1981.
The show featured guests who played significant roles in world history. Guests would interact with each other and host Steve Allen, discus ...
between two or more parties, and that their mutual consent to a bargain, or their intention to contract, were paramount. While it is generally true that courts wish to uphold the parties' intentions, courts moved in the later half of the nineteenth century to a more objective stance for interpretation,
[e.g. '']Smith v Hughes
''Smith v Hughes'' (1871) LR 6 QB 597 is an English contract law case. In it, Blackburn J set out his classic statement of the objective interpretation of people's conduct (acceptance by conduct) when entering into a contract. The case regarded ...
'' 871
__NOTOC__
Year 871 ( DCCCLXXI) was a common year starting on Monday (link will display the full calendar) of the Julian calendar.
Events
By place
Europe
* The English retreat onto the Berkshire Downs. The Great Heathen Army, led by the ...
LR 6 QB 597 whereby the emphasis moved to the way in which the parties had manifested their consent to a bargain to the outside world. Given this change, it was still said that "intention to be legally bound" was a necessary element for a contract, but it came to reflect a policy about when to enforce agreements, as well as when not to.
See also
*
Rome I
The Rome I Regulation (Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations) is a regulation which governs the choice of law in the European Union. It is based ...
*
Rome II
Relevant cases
*''
Baird Textile Holdings Ltd v Marks & Spencer plc
''Baird Textile Holdings Ltd v Marks & Spencer plc'' 001EWCA Civ 274is an English contract law case on the possibility of an implied contract after a course of dealings between two businesses.
Facts
Baird Textile Holdings LtdBaird'company pr ...
''
002 002, 0O2, O02, OO2, or 002 may refer to:
Fiction
*002, fictional British 00 Agent
*''002 Operazione Luna'',
*1965 Italian film
*Zero Two, a ''Darling in the Franxx'' character
Airports
*0O2, Baker Airport
*O02, Nervino Airport
Astronomy
*1996 ...
1 All ER (Comm.) 737
*''
Household Fire and Carriage Accident Insurance Co Ltd v Grant
''The Household Fire and Carriage Accident Insurance Company (Limited) v Grant'' (1878–79) LR 4 Ex D 216 is an English contract law case, which concerns the "postal rule". It contains an important dissenting judgment by Bramwell LJ, who wished ...
'' (1879) 4 Ex D 216
Notes
References
Bibliography
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{{English contract law
Contract law
English contract law