It seems that the issue of intention to create legal affairs is an essential element for the law to decide upon for is not a tool for upholding mere promises or for remedying breaches of friendly agreements gone wrong, even if there is agreement and consideration present. If one party agrees to lunch or walk, clearly, this is an example of an agreement and consideration may be present, but equally clear that is that no legal consequences could possibly be intended. So now, we come across the opposing juxtaposing argument that “an agreement, though supported by consideration, is not binding as a contract if it was made without any intention of creating legal relations.” The impact of the influx of litigation would be tremendous, wasting time and money. Imagine every time a friend let you down on trivial matters such as failure to meet you or forgetting to uphold a small promise of, for example, the washing up, you sued them or vice versa. Lord Stowell pointed out in a very early case that contracts “must not be the sports of idle hour, mere matters of pleasantry….never intended by the parties to have any serious effect ever.”
Hence, this is when we come to the first of our presumptions about intention with regard English Law, that social and domestic arrangements will not give rise to legal consequences. As explained by a leading academic Atiyah, that there certainly are “some circumstances, however in which agreements are made without any thought of creating legal rights and duties, and which agreements are treated as not amounting to legal contracts”. On the other hand, as we discussed above Hepple would say the promise was not given at a price for another, so the consideration was insufficient for a legally binding agreement, i.e. the factors to create the bargain are not intact. Balfour v Balfour is the leading example of an agreement in a domestic context. This involved a husband who was a civil servant posted to Ceylon, now called Sri Lanka, and his wife to remain in England. He promised to pay her £30 monthly for maintenance for the time they were forced apart. Later the parties separated and were divorced. The wife brought an action against her husband for continued payment of the maintenance. Atkin LJ given leading judgment said that a promise by a husband to pay his wife an allowance, even if could by said that there is a consideration for the promise, is not binding because neither parties intended legal liability to generate from such a promise. This also fits neatly into our reasonable, objective; test for an assumption that domestic agreements are enforceable would be unreasonable under most circumstances. The academic Pateman argues this presumption, is a key feature of English contract law due to women’s role in society when the boundaries of contract were first laid down. As the theories of contract law were initially devised over two hundred years ago, these ideas nowadays can seem a little anachronistic.
Although this is the leading case on domestic arrangements and intention to create legal relations this presumption, of course this can be easily rebutted and as time goes on this is more and more common. For if, we compare the Balfour case with Paper v Clark we can see how the courts deal with this situation. This is an example of where the old social ideas underpinning traditional contract law was beginning to be changed. As we discussed above, can a promise seriously made be enforced? Traditionally this was not the case however; this case is an example where the courts held it could. Recent cases seem to suggest if a promise is relied on to detriment of a party, the presumption that no legal intentions were to occur can be rebutted (back to Hepple’s idea of good consideration). This indicates the attitudes of the courts have moved nearer to a policy that social agreements can be enforced if the parties’ promises were made sincerely enough to depend on. At common law courts are “much more interested in seeing what the parties have done, in an exchange relationship rather what has the promise been.” However some cases could fall either way, the four judges who sat in Jones v Padavatton were split as to whether legal relations were intended. This case highlights the importance of deciding the initial presumption. The mother found it easier to succeed in her argument because of the fact it was a domestic arrangement and the presumption helped her case. If there had been a presumption that in favour of intention to create legal relations in domestic affairs, it would have been up to the mother to rebut this and it is not difficult to see the decision could have swung in the opposite direction. This is the situation in business arrangements that there is a presumption you will be legally bound, for example buying a bus ticket you may not think you are making a contract and becoming legally bound, however unless it is expressly stated there is no contract, then legal sanctions will be available.
Therefore, it seems to point to the conclusion that along with agreement and consideration it is more widely accepted there must be a separate requirement of intention to create legal relations. Whether this is presumed or expressly stated as we have seen above, and if one party or both wish to work outside the sanctions of contract law they must either have that presumption behind their agreement (i.e., social context) or expressly rebutting the presumption in business and commercial sphere. However, is it this simple? Perhaps it is beginning to look like a simple solution would be if the law just imposed restrictions upon contracts i.e., all to be formal and in writing for them to be enforceable. As Treitel says, “English law does recognise, in the deed, a perfectly safe and relatively simple means of making gratuitous promises binding.” In the event of a dispute regarding a contract with no written agreement, the courts could consider it void, as there was no proof of an intention to create legal relations and therefore the contract has no legal effect. Alternatively, we could look back to Hepple’s idea of the formalities becoming offer, acceptance and consideration, to make a binding agreement. Yet, this goes against much of English Law for example, where a verbal agreement can be enforceable and the courts willingness to try to uphold bargains wherever possible if they had intention. A conclusion may be interjected here that the necessary extra element instead of intention to create legal relations, it must be merely an intention to contract. ‘Intention to contract’ could be described as the willingness of the opposing parties to concur with their legal obligations if he does not perform the contract.
It should be questioned at this point that even if the contract were broken, would the innocent party use their legal sanctions and go to court. In addition, just because one party decides not to enforce its legal remedies; this should not be seen as a conclusive answer to whether there was intention to create legal relations. There are numerous minor commercial agreements where when there is a breach parties involved would be unlikely to consider it worth involving the courts. However, such agreements are clearly intended by the parties when entering them to effect their legal relations and to create a legally binding contract. Even in some very substantial commercial arrangements, parties wish to settle their disputes outside contact law, but this does not mean they do not intend their agreements to be binding. It would be a mistake however to assume that contract law has very little relevance. It is true that generally in business there is a very relaxed and “harmonious nature of the majority of business relations”. However it must be acknowledged that, it is always in the background: contract law may not have been mentioned but the parties probably know in general what the legal position is and may adjust their attitudes accordingly.” Macneil describes this type of new commercial contracts as “relational contracts.” The parties within these contracts “never intend or expect to see the whole future of the relation as presented at any single time, but view the relation as an ongoing integration of behaviour to grow and vary with events in a largely unforeseeable future”.
It is very easy to see the similarities between this new type of business contract and the relaxed social agreements that the courts previously wanted prohibit. If business people are often not overly concerned with the niceties of offer and acceptance, it follows that their contracts may not be all embracing and complete in every respect. “Not every businessman necessarily ‘uses’ contract law even in the planning sense when making an agreement. So little may be planned that the agreement is unenforceable for uncertainty and if an enforceable contract is created the parties may not adhere to it thereafter”. Even after this planning stage the parties may have reached an agreement in principle and then prefer to rely on the experience of previous dealings, business practice and goodwill. It has been said that “Co-operation and fairness” have become key roles and “values of the twentieth century” contract law. What tends to keep businessmen in check is the
“desire to maintain reputation or profitable relationships, the concern for standing among peers, and the force of contract-induce the promisor to keep his commitments”, as opposed to contract law. The law’s overall policy is to uphold bargains wherever possible and although business people tend to record, their agreements in “crude and summary fashion” the law should not be “too astute or subtle in finding defects”
The role of intention to create legal relations could be said was originally used as a tool by the courts to differentiate between the commercial arrangements that the courts wanted to uphold bargains in and the social and domestic arrangements that they did not. Nonetheless due to the courts discretion is such matters intention is a difficult doctrine to anticipate. Not only this, additionally in the passing years, attitudes of society as a whole have changed and in reflection so have the attitudes of the courts to this strict assumption. It is no longer possible to for the courts to make this blanket presumption that social agreements will not give rise to legal obligations. Along side this there has been an equally significant shift in commercial practices and research suggests they have taken on and more fluid and relaxed style of contracting, mirroring what is seen in private arrangements. Also, the courts have significantly retreated from modifying the role of the doctrine to include this new wave of commercial contracts. Therefore, it must be deduced that the intention to create legal relations only serves to reinforce the traditional and perhaps anachronistic notions of contract and does not sufficiently protect the modern agreement, be that social or business, and it is easy to see why contracting parties progressively relying on the non-legal methods discussed to protect their contracts.
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Furmston, Norisada, Poole, Contract formation and letters of Intent (John Wiley and Sons Ltd 1998)
Edmonds v Lawson [2000] 2 WLR 1091
Stephen Hedley, Keeping Contract in its Place-Balfour v Balfour and the Enforceability of informal agreements, Oxford Journal Of Legal Studies vol 5 no. 3 1985, pg 395
Furmston, Norisada, Poole, Contract formation and letters of Intent (John Wiley and Sons Ltd 1998
Hepple, Intention to create legal relations, (1970) CLJ122, pg 128
Willison on Contract (3rd ed) s 21
Treitel, The Law of Contract (1995) 150
Dralrymple v Dralrymple [1811] 2Hag Con 54 at 105
P.S. Atiyah, An Introduction to the Law of Contract, 5th ed. Pg 155 (Oxford 1995)
Cooke & Oughton, The Common Law of Obligations, 3rd ed. (Butterworths 2000) p 63
Ibid, see note 59, Treitel p147
See Davies, Contract, 5th ed. (London Sweet & Maxwell 1986) pg 48
Peter Vincent-Jones, Contract Litigation in England and Wales 1975-1991 A transformation in Business Disputing?, [1993] Civil Justice Quarterly pg337
Beale and Dugdale,Contract between Businessmen; Planning and the use of Contractual remedies, (1975) 2 BJL&S 48
Macneil, Contract: exchange transactions and relations, 2nd ed, (Foundation Press 1978) pg 13
Beale and Dugdale, Contract between Businessmen; Planning and the use of Contractual remedies, (1975) 2 BJL&S 45
Cooke & Oughton, The Common Law of Obligations, 3rd ed. (Butterworths 2000) p 63
Charny, Non legal Sanctions in Commercial Relationships, (1990) 104 Harvard LR 375
Hillas & Co. Ltd v Arcos Ltd (1932) 147 LT 503,514, Lord Wright