Lecture 2 Intention to Create Legal Relations

Intention to create legal relations

In must be shown that the parties to the agreement intended to be legally bound by the agreement.

Types of agreements



Social and domestic agreements

(Presumption – parties do not intend legal relations

Business or commercial agreements(Presumption – parties do intend

to create legal relations

Domestic agreements

Courts will presume that agreements between friends and/or family members are not intended to be legally enforceable.

CASE: Balfour v Balfour (1919)

The presumption can be rebutted.

CASE: Todd v Nicol [1957] CASE: Roufos v Brewster (1971)

Balfour v Balfour (1919) 2 KB 571 Facts:

Mr B promised to pay his wife £30 per month. Mr B had to return to Ceylon. Mrs B was to

remain in England for medical reasons. The couple later separated. Mrs B claimed £30 per month pursuant to Mr

B’s promise.

Balfour v Balfour

Issue: Did this promise by a husband to his wife

amount to a contract?

Balfour v Balfour

Decision: An agreement to pay £30 per month existed. The parties had not intended it to be legally

binding. There is a presumption that domestic

arrangements are not intended to finish up in court.

Todd v Nicol [1957] SASR 72 Facts:

Mrs N resided in South Australia. She wrote to her sister-in-law and niece (the Todds),

in Scotland, inviting them to come and live with her. She promised them free accommodation and that

she would alter her will so that after she died, the house would become theirs.

Mrs T quit her job and she and her daughter moved to Australia.

Later an argument developed and Mrs N told the Todds to leave the house.

Todd v Nicol

Issue: Did the Todds have a contractual right to

stay? Did this family arrangement amount to a contract?

Todd v Nicol

Decision: It was a contract.

Simpkins v Pays [1909] 1 WLR 975 Facts:

Three people lived together in a house and jointly took part in a competition organised by a newspaper.

The entries were made in one name only. One entry won a prize and the defendant, in

whose name the entry was submitted, refused to share it with the other two contributors claiming there was not intention to create legal relations.

Simpkins v Pays

Issue: Was there an understanding between the

parties that their agreement amounted to a contract?

Simpkins v Pays

Decision: It was a joint enterprise to which each

contributed in the expectation of sharing any prize that was won.

There was a contract.

Voluntary agreements

In cases of voluntary agreements, e.g. where a person volunteers their services, the parties do not normally intend to create legal relations.

Important in determining whether the parties in a work situation intended to create an employment contract and therefore be covered by worker’s compensation.

CASE: Teen Ranch v Brown (1995)

Commercial agreements

Courts will presume that agreements arrived at in a commercial context are intended to be legally enforceable.

The presumption can be rebutted.

CASE: Jones v Vernon’s Pools Ltd [1938] CASE: Esso Petroleum Ltd v Commissioners

of Customs and Excise [1976]

Jones v Vernon’s Pools Ltd [1938] 2 All ER 626

Facts: VP ran a football pools operation in the UK. During a dispute the court had to determine

whether a contractual relationship existed between VP and each entrant.

Jones v Vernon’s Pools Ltd

The following appeared on each coupon:

“It is a basic condition of the sending-in and acceptance of this

coupon that it is intended and agreed that the conduct of the pools

and everything done in connection therewith and all arrangements

relating thereto (whether mentioned in these rules or to be implied)

and this coupon and any agreement or transaction entered into or

payment made by or under it shall not be attended by or give rise to

any legal relationship, rights, duties or consequences whatsoever

or be legally enforceable on the subject of litigation, but all such

arrangements, agreements and transactions are binding in honour

only.”


Issue: Is there a commercial contract? Is there a

relationship that is binding?


Decision: Because the relationship is clearly commercial

there is a presumption that the relationship is binding.

However, the court held that the clause in the coupon was sufficient to rebut the presumption.

Therefore, there was no contract between VP and the entrants.

Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117 Facts:

E conducted a trade promotion. E produced coins depicting the members of England’s 1970

World Cup soccer team. Each motorist who purchased four gallons of Esso petrol

received a ‘free’ coin. CCE argued that E should pay tax on the coins as they were

produced ‘for sale’. In other words, CCE argued that the coins were supplied by

E as part of a contract with motorists. E, on the other hand, argued that the coins were not sold as

part of any contract, but rather were given away.

Esso Petroleum v Commissioners of Customs and Excise Issue:

Is there a commercial contract? Is there a relationship that is binding?

Esso Petroleum v Commissioners of Customs and Excise Decision:

A contract for the supply of the coins existed. Everyone who purchased 4 gallons of Esso

petrol had a contractual right to claim a ‘free’ coin.

That is, E and the motorist who bought 4 gallons intended to create legal relations.

Although the coins had little intrinsic value and E used words such as ‘free’ and ‘gift’, this was not sufficient to rebut the presumption of enforceability.

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Lecture 2 Intention to Create Legal Relations