the importance of existence of intention to create legal relations in a contract?

Question

contracts act 1950 is silent on the question of intention to create legal relations as an essential element forming a valid contract. however, it is a trite law in England that it is a condition to form a valid contract.In view of the above, explain:

1. the importance of its existence in a contract.
2. the arising presumptions from the two situations i.e social, family or other domestic agreements and commercial agreement.

Answer 1

There can be no contract without the requisite intention. As you note, it is trite law. For its importance read the judgement of Atkin LJ in Balfour v Balfour.

In a family context, the presumption is that it is a domestic arrangement, and not binding. This can be rebutted by adducing evidence to the contrary, e.g. the commercial context (Roufos v Brewster is an example of this).

The cases you need to cover are Jones v Padavatton, Balfour v Balfour, Merrit v Merrit.

In a commercial context, the presumption is the other way, that it is legally binding. However you also need to cover the following topics: (1) honour agreements (e.g. those that have a specific clause which say that the agreement is not binding) (see Rose & Frank Co v J R Crompton & Bros). (2) Letters of comfort -- see Kleinwort Benson v Malaysia Mining (3) Government agreements (4) Promotional offers

In English law this is supposedly not an "objective" test due to the use of presumptions. In many other jurisdictions it now is, e.g. Australia, etc. (naturally excluding the US and other strange places like that, since who knows what goes on there).

Answer 2

Intention To Create Legal Relations

Answer 3

I suggest you look at the Uniform Commercial Code and also at the Restatement 2d of Contracts. It is fundamental and determining intent is an OBJECTIVE test:

If a reasonable person would have thought that the party(s) intended to be bound from an examination of the party(s) conduct, then they DID have the requisite intent.

Answer 4

This sounds like a first year contracts question.

Just buy any introductory contracts text - Waddams' "The Law of Contracts" is good - and read it.

Answer 5

this is a second question for business law assignment for this semester.. i also try to find the answer... hahahaha

Answer 6

Great replies, just what I was searching for.