Intention To Create Legal
Relations
LAW 436-CONTRACT 1
SEPTEMBER-JAN 2015
Legally Bound
There are no specific provisions in the CA 1950
relating to intention to create legal relations
(ITCLR), however the courts have applied principles
in cases where this issue have occurred.
ITCLR can be categorised into two :
a)Social and Domestic Agreements
b) Commercial Agreements
Social and Domestic Agreements
Agreements between spouses, siblings, parents and
children – the nature of the relationship
Must be distinguished from other agreements
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Generally, if the agreement is social and domestic in
nature, the courts will construe that there is no
ITCLR.
A.Family Relationships
Choo Ting Hin & Ors v Choo Hock Swee(1959) 25 MLJ
67
-an agreement between a father and his adopted sons
pertaining to acquisition of wealth which will be
administered by the father.
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It was held that this is a private family arrangement –
no ITCLR
Balfour v Balfour[1919]
-Husband agreed to pay wife maintenance £30 during
their temporary separation. On appeal the courts
said that – no ITCLR as this was a domestic
agreement and the H&W were “living in amity”
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Jones v Padavatton [1969]2 All ER 616
-an oral agreement between a mother an daughter
pertaining to maintenance and other monetary
arrangement.
Held: only a family arrangement and the parties had
no intention to CLR.- Lord Dankwert’s statement
referring to Balfour v Balfour
B. Social relationships
Heslop v Burns [1974]
Agreement between ‘friends’ where the defendants
were given property and gifts by the deceased which
were claimed later by the deceased’s executors.
The CA held that the executors were entitled to claim
possession of the property because there was no
ITCLR between the deceased and the defs. –Stamp
LJ’s judgment.
exceptions
Merrit v Merrit[1970]1 WLR 1211
H&W separated, entered into a written agreement for
the wife to pay instalments of the house.
Held: there was ITCLR, wife could take action for
breach of contract. (cf Balfour case – “living in
amity” and written contract)
Petitt v Petitt [1969]
H sought a claim from W for the proceeds of sale of the
house they lived before they divorced.
Held: Lord Hodson- as a rule, H&W do not enter into
contracts because of the special relationship (as long as
living in amity)
His Lordship referred to Balfour v Balfour where Lord
Atkins said that the arrangements made between H&W
were never intended to be sued upon; although the facts
in this case were different, it can be inferred that the
courts were reluctant to infer ITCLR between H&W.
ITCLR in Commercial Agreements
As a general rule ITCLR exists in commercial
agreements.
However this presumption can be rebutted, where
there is evidence that no such intention was agreed
upon.
Eg: there was an express agreement that the parties
agreed not to be legally bound.
The onus or burden of proof to rebut this presumption
lies on the party who denies that there is such
intention.
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Rose and Frank Co v JR Crompton & Bros Ltd [1925]
AC 445
-the agreement contained “Honourable Pledge
Clause”- held that there was an express intention not
to be legally bound.
This decision was followed in Jones v Vernon Pools
Ltd[1938]
Burden of Proof
Edward v Skyways Ltd [1964]- employer tried to use
the term “ex-gratia” in the agreement to show that
there was no ITCLR. The courts said that the words
were not sufficient to rebut the presumption.
Home Insurance Co Ltd & St Paul Fire and Marine
Insurance Co v Administratia Asigurarilor De Stat
[1983]
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There was a clause in the contract which states, …”to
be treated as an honourable agreement rather than
as a legal obligation.” (part of an arbitration clause)
Held: the true construction of the agreement showed
that the parties intend to be legally bound. The
courts distinguished this case from Rose v Frank.
Note the statement of Parker J in this case.
ITCLR derived from circumstances of the case
Esso Petroleum v Comms. Of Customs & Excise[1976]
Ford Motor Co Ltd v Amalgamated Union Eng. And
Foundry Workers [1969]
