Overview of Intentions to Create Legal Relations

A summary of this topic as so eloquently put by Lord Stowell in Darymple v Darymple (1911) 2 Hag Con 54:

“[Contracts] must not be the sports of an idle hour, mere matters of pleasantry and bandinage, never intended by the parties to have any serious effect whatever. "

The law does not hold the existence of a contract merely because of the presence of an agreement by the parties. Mutual promises made every day in domestic and social life do not invite litigation. Hence, a father's promise to his son to buy him a toy if the son eats his greens could not be legally enforced if the father goes back on his words. This is because the parties do not intend for the courts to intervene if the promises are broken or dishonoured.

Therefore in addition to the existence of an agreement and the presence of consideration, a further contractual element is required - the intention of the parties to create legal relations.

The criteria of looking at the "intention" are elusive, as Brian CJ. puts it; "Even the devil knoweth not the mind of man."

To assist the formidable task of discovering the presence or absence of an intention to create legal relations, the courts seem to apply presumptions. These presumptions are based on the nature of the agreement. On the one hand there are social, family or other domestic agreements which gives rise to a presumption of no intention to create legal relations. On the other hand, there are commercial agreements which raises the presumption of an intention to create legal relations.

NOTE: The presumption is objectively ascertained.


A. Domestic / Social Agreements

There is a presumption of no intention to create legal relations. This means that the courts must infer from the language used by the parties and the circumstances in which the parties use it, to rebut the presumption. If the presumption is rebutted, the parties would have the intention to create legal relations.

a. Agreements between husbands and wife

Many agreements are made between husband and wife in the course of family life. These agreements could not be the subject to the court's intervention. It is unlikely for a husband who promises to take his wife to dinner to contemplate legal relations. On the other hand, it could not be said that a husband cannot form a contract with the wife at all, that is to say that both husband and wife might in certain circumstances indicate a clear intention to be legally bound.
The task of finding this intention is not always easy. This might be illustrated by two contrasting cases.





Balfour v Balfour [1919] 2 KB 571.

Facts: The husband was a civil servant working in Ceylon. He and his wife went to England for a holiday. While they were there, the wife fell ill. It became clear that the wife could not accompany the husband back to Ceylon for health reasons. The husband had promised to pay her £30 a month as maintenance during the time they were forced to live apart. The wife sued for breach of the promise agreed upon.

Held [CA]: No legal relations had been intended. The wife's action must fail.

Atkin LJ stated

“The defence to this action on the alleged contract is that the defendant, the husband, entered into no contact with his wife, and for the determination of that is necessary to remember that there are agreements between parties which do not result in contracts within the meaning of that term in our law. The ordinary example is where two parties agree to take a walk together, or where there is an offer and an acceptance of hospitality. Nobody would suggest in ordinary circumstances that those agreements result in what we know as a contract…”

But contrast this with;

Merritt v Merritt [1970] 2 All ER 760, [1970] 1 WLR 121 1.

Facts: The husband left the matrimonial home, which was in the joint names of the husband and wife. The house was subject to a mortgage. The couple was on the verge of separation. During a conversation in a car, the husband promised to pay the wife £ 40 a month. In return, the wife must pay the outstanding mortgage payments on the house. The wife refused to get out of the car until the husband recorded his promise in writing. The husband then wrote and put down his signature on a piece of paper which read 'in consideration of the fact that you would pay all charges in connection with the house ... until such time as the mortgage repayment has been completed I will agree to transfer the property in your sole ownership.' After the wife had paid, the husband refused to transfer the house to her.

Held [CA]: The parties had intended legal relations. The husband was liable under the action for breach of contract.

Comment:

It would seem that the contrasting decisions could be reconciled in the light of four factors which was present in Merritt v Merritt that successfully rebutted the presumption of no intention to create legal relations. They are:

1. The husband and wife in Merritt v Merritt were not living in amity but are separated or on the verge of separation. Lord Denning MR clearly stressed this point. Couples in this situation "bargain keenly. They do not rely on honourable understanding. They want everything cut and dried."

2. The promise was put down in writing. This indicates the seriousness of the parties. We could safely infer that the parties intended the court's intervention. This is because one of the main reasons people reduce statements into writing is for the purposes of tendering it as documentary evidence in court.

3. The terms of the agreement in Merritt v Merritt were sufficiently certain to enable it to be enforced .

4. The fact that the wife in Merritt v Merritt paid the mortgage repayments is an additional reason why the Court of Appeal held there to be an intention to create legal relations. The presence of consideration by the wife here imbues the contract with reciprocity. This reason is controversial. Atkin LJ. in Balfour v Balfour clearly stresses that the presence of consideration itself is not sufficient to find an intention to create legal relations. His lordship views that both requirements are necessary.