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
Intention to create legal relations

Intention to create legal
relations
Social and domestic Business or

agreements commercial agreements
(Presumption – parties do (Presumption – parties do intend
not intend legal relations 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.

Lecture 2 Intention To Create Legal Relations

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Intention to create legal relations

 In must be shown that the parties to the

Intention to create legal relations

Social and domestic Business or

 CASE: Balfour v Balfour (1919)

 The presumption can be rebutted.

 CASE: Todd v Nicol [1957]

 She wrote to her sister-in-law and niece (the Todds),

in Scotland, inviting them to come and live with her.

stay? Did this family arrangement amount to a

jointly took part in a competition organised by

 One entry won a prize and the defendant, in

 Important in determining whether the parties in a

 CASE: Teen Ranch v Brown (1995)

 Courts will presume that agreements

 The presumption can be rebutted.

 CASE: Jones v Vernon’s Pools Ltd [1938]

 The following appeared on each coupon:

 Everyone who purchased 4 gallons of Esso

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