~ ~
“A mere statement of intention made in the course of conversation will not constitute a binding promise, though acted upon by the party to whom it was made………”
According to this questionit asks whether the mere fact that a statement of intention to createa contract which is formed when an offer by one party is accepted by the other party, how the parties becomes legally bounded to act accordingly to the actions of the agreement? A contract does not exist simply because there is an agreement between people. The parties to the agreement must intend to enter into a agreement. To discuss this first we have to think about the legal capacity of a contract. So then we have to see what’s the difference between a legally binding promise or an agreement and a mere promise which has no legal consequences. For this purpose theremust be a clear view to see what are requirements of an agreement to be a legally binding contract. First the parties must intend the agreement to be legally binding. But the thing is how the courts can find out what’s in the minds of the parties’? As an answer to this, courts have decided that they can get to discover this intention by applying to an objective test and judge the situation by what was said and done.
The law divided agreements commonly into two groups. First is social and domestic agreements and the second one is commercial agreements. The presumption in social and domestic agreements is that the parties do not intent to create legal relations. This group covers agreements between family members, friends, and workmates. As I suggested above, most of the social andcommercial agreements do not amount to binding contacts since they are not intended to be legally enforceable.See for an example, agreements between a husband and wife living together as one household are presumed not to be intended to be legally binding. See the case of Balfour v Balfour (1919),in the case Mr. Balfour who was civil servant based in Srilanka in brought his wife to England. Eventually he had to return to Ceylon but his wife had to stay in England for medical reasons. He agrees to pay her £30 per month maintenance during his absence. When he failed the allowance she sued. But the issue is did this promise by a husband to his wife amount to a contract? Her action failed two grounds; first, she had not provided any consideration for the £30 per month and the parties had not intended to be legally binding. There is a presumption that domestic arrangements are not intended to finish up in court. Lord Justice Atkin said that“there was no "intention to effect legal relations". That was so because it was a domestic agreement between husband and wife, and it meant the onus of proof was on the plaintiff, Mrs. Balfour. She did not rebut the presumption.“”. This statement clearly shows that the rebuttable presumption on social and domestic agreements is that parties do not intend to be legally bound when they enter in to agreements. But as it is meant to be the presumption can be rebutted. Merritt v Merritt (1970) is a best example for such a rebutted presumption. In this case the husband left the matrimonial house to live with another women and he agreed to his wife in writing to pay her £40 per month maintenance from which she had to repay the mortgage and, when the repayment was completed, to transfer the house into a sole ownership. The wife did in fact pay off the mortgage but the husband changed his mind. She sued and succeeded because the court of appeal decided that there was clear intent. Crucially, they were legally separated.So it’s clear in Balfour, on the other hand Merritt case illustrates that the courts want to avoid unwanted litigations rushing in the courts by these social and domestic agreements and the parties had entered a binding contract as the setting of the agreement was commercial and no domestic or social.
