Intention to Create Legal

Relations
Dr Nuhu Yidana
 RECAP OF
OFFER &
ACCEPTANCE

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Intention to create legal relations

a. Domestic agreement

b. Commercial agreements
Lecture
Outline

Certainty

Capacity
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 • In Balfour v Balfour,
• Atkin LJ stated:
• “It is necessary to remember that
there are agreements between
parties which do not result in
Intention contracts within the meaning of
to create that term in our law. The ordinary
legal example is where two parties
agree to take a walk together, or
relations where there is an offer and an
acceptance of hospitality. Nobody
would suggest in ordinary
circumstances that those
agreements result in what we 4

know as a contract.”
 • Blue v Ashley [2017]
• In a conversation in a pub, A said to B that
he would pay him £15 million if B could
get the price of shares in Sports Direct,
which A owned, to £8.
• B alleged that that was a binding offer of a
Social unilateral contract and that, when the
shares did reach £8, A had broken the
agreeme contract by refusing to pay him the £15
million.
nts
• It was held that there was no binding
contract. This was essentially because A
had had no intention to create legal
relations when he made that ‘promise’. No
one present thought that A had made a
serious commitment. What he had said 5

was merely jocular banter.

 • Two main rebuttable
presumptions:

• ✗parties do not intend to create

legal relations in social and
Intention domestic agreements; and
to create
legal • ✓parties do intend to create legal
relations in commercial
relations agreements.

• On its face, this invites an

inquiry into the intention of the
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parties.
DOMESTIC OR SOCIAL
AGREEMENTS
• Presumption: No legal intention in domestic settings.
• Balfour v Balfour [1919] 2 KB 571 – Not enforceable.

• Jones v Padavatton [1969] 1 WLR 328 – Family arrangements not

binding.

• Similarly, in Fleming v Beeves (1994)

• It was held that a parent’s promise to pay an allowance while the child
is at university normally creates a moral, but not a legal, obligation.
 DOMESTIC OR SOCIAL
AGREEMENTS
• Wilson v Burnett (2007) – three freiends as work colleague
regularly attended a bingo session. They agreed to share winnings
over £10.
• Held: the mere chat or talk did not create legal intention

• Further readings:
• MacInnes v Gross cases in 2017
• Jaevee Homes Ltd v Fincham (2025)
 DOMESTIC OR SOCIAL
AGREEMENTS

• Presumption: No legal intention in domestic settings but this can be rebutted.

• Merritt v Merritt [1970] 1 WLR 1211 – Rebutted presumption; legally binding.

• Simpkins v Pays (1955) – An agreement to enter competitions together in the

defendant’s name and then to share the winnings.
• S was able to rebut the presumption of no intention to create legal relations as
she was an outsider, so the agreement was not just a purely family arrangement
Radmacher v Granatino (2009)
Case shows that domestic arrangements can be
converted into commercial

Pre-nuptial agreements are not valid and are

seen at most as domestic agreements

The parties were both foreign nationals, the

wealthy wife German and the husband French
They had signed a pre-nuptial agreement valid
under German law but then divorced in the UK

In the High Court, Baron J awarded the

husband £5.6m even though the pre-nuptial
agreement stated that neither party would
seek maintenance from the other in the event
of divorce.

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 The wife appealed.
Radmacher v
Granatino (2009)
CA allowed the wife's appeal on the grounds that Baron J
had not given sufficient weight to the existence of the pre-
nuptial agreement in her award

At paragraph 53 of the judgment, Thorpe

LJ made the following statement:
"in future cases broadly in line with the present case on the facts,
the judge should give due weight to the marital property regime
into which the parties freely entered. This is not to apply foreign
law, nor is it to give effect to a contract foreign to English
tradition. It is, in my judgment, a legitimate exercise of the very
wide discretion that is conferred on the judges to achieve fairness
between the parties to the ancillary relief proceedings.

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 Radmacher v Granatino [2010] UKSC 42, [2011] 1
AC
This laid down that, in the context of a court exercising its statutory discretion to
make ancillary financial orders on the breakdown of a marriage, an ante-nuptial
or post-nuptial agreement should be given effect provided that the agreement was
entered into with full and free consent and that it is fair in all the circumstances
for the parties to be held to it.

In obiter dicta at [52], the majority of the Supreme Court (Lord Mance and Baroness Hale
dissenting on this) indicated that such an agreement was a binding contract; but the
majority went on to clarify that, in the context of the statutory discretion to make ancillary
orders with which it was dealing, it made no difference whether the agreement had
contractual status or not (at [62]–[63]) (and it is clear that such an agreement cannot
oust the jurisdiction of the courts to make orders about the parties’ financial
arrangements).

As regards the intention to create legal relations, it is particularly significant that at

[70] the majority said that the assumption was that the parties to an ante-nuptial (or,
presumably in the light of the reasoning elsewhere in the judgment, post-nuptial)
agreement intended that effect should be given to it.

Matrimonial Property Needs and Agreements (Law Com No

12 343, 2014)
Commercial Agreements…

Commercial agreements – it is presumed that the parties

intended to create legal relations – the onus is on the
party claiming there was no such intention to prove that
there was no such intention

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Edwards v Skyways (1964)

• Airline pilot made redundant.

• The company paid a bonus as part of the package, which it described as an ‘ex
gratia’ payment. The package was accepted by the pilot.

• The company realised more expensive than thought and so denied having to
pay it: not contractual; no binding obligation to pay

• Held: bound to pay

• “Ex gratia” did not mean “not legally binding” but “no obligation to pay”

• So once made part of a commercial package and accepted, they were bound

• The company could not prove that they had not intended their promise to
become a contractual term

• Note: burden of proof in commercial relations is on the party claiming that there
was no intention to create legal relations.
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Other Commercial Cases

•In Moorgate Capital v Sun European

Partners (2020), the claimant was seeking a
£1m fee from an alleged oral agreement for
financial advice allegedly concluded over the
phone.

•Held: The judge held that it was inherently

unlikely that such a substantial, complex
contract would be formed in a 10-minute
phone call, and held that the presumption
was rebutted.
 Other Commercial Cases
The contract said it was not binding until signed
RTS v Molkerei But started work before signing and
the court held provision waived

honour pledge clause

agency agreement stated expressly not to be
Rose & Frank v Crompton a formal/legal agreement
not legally binding therefore terminate at
will

not employed (spiritual position) but

Ministers of Religion could have a contract for services

Trade Union Collective Agreements no legal intentions unless they are

in writing and expressly provide to the contrary (Ford Motor Co
Ltd v AEF (1969)).

Now codified under s179, Trade Union and Labour Relations

(Consolidation) Act 1992. 16
 CERTAINTY I
• No contract if terms too vague/incomplete
Scammell v Ouston [1941]
agreement to sell van “on hire purchase terms”
held too vague; no standard terms existed

May and Butcher v R [1934]

agreement to buy tents from government and “price or pricies…shall be
agreed upon from time to time between the parties”

Viscount Dunedin: “To be a good contract there must be a concluded bargain,

and a concluded bargain is one which settles everything that is necessary to be
settled and leaves nothing to be settled by agreement between the parties. Of course it
may leave something which still has to be determined, but the determination must be a
determination which does not depend upon an agreement between the parties…”

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CERTAINTY II
• An agreement to enter a contract is not enforceable as being too vague
• An agreement to negotiate in good faith is not a valid contract

Courtney & Fairbairn Ltd v Tolaini Bros (Hotels) Ltd [1975] 1 All ER 716, CA
Lord Denning said:
“If the law does not recognise a contract to enter into a contract (when there is a
fundamental term yet to be agreed) it seems to me it cannot recognise a contract to
[Link] reason is because it is too uncertain to have any binding force… It
seems to me that a contract to negotiate, like a contract to enter into a contract, is not
a contract known to the law… I think we must apply the general principle that when
there is a fundamental matter left undecided and to be the subject of negotiation,
there is no contract.”

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CERTAINTY III
• But courts will do their best to preserve contract without making contracts for
the parties
• There can be a valid contract for a third party to agree a price by reference to
present market value as determined by an external valuer
• Even if the mechanism for appointment fails
• If parties have entered into contract without a price/essential element and then
informally organised a price/essential element then the courts will not say it is
invalid
• Courts will ignore/sever meaningless clauses
Nicolene v Simmonds [1953]
“we are in agreement that the usual conditions of acceptance
apply”
there were no such conditions therefore held to be meaningless
surplusage which could be severed

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 CAPACITY TO ENTER CONTRACT I
• Not generally much of a problem today
Persons attained majority of sound mind full right to enter contract
Classical theory: minors, lunatics and married women all needed consent of
others
Married women’s incapacity removed in 1883 (Married Women’s Property
Act 1883)
• Minors
Minors Contracts Act 1987
Minors not bound by their contracts although person contracting with the
minor will be; minor can ratify on attaining majority
Contract for necessaries is valid if for benefit (food, drink, clothing and
education)
• Mental incapacity
Mental Capacity Act 2005
If assessed as incapable of giving consent, then the Court of Protection can
appoint a Deputy to act on a person’s behalf (eg in making a contract on their
behalf).
The decision of a Deputy can be challenged and the court then decides if it is
in the best interests of the incapable person 20
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