Contract Law Essays Help : Intention

Contract Law Cases referred to in this section:
Balfour v Balfour (1919) 2 KB 571
Banque Brussels Lambert v Australian National Industries Ltd (1989) 21 NSWLR 502, Aust
British Steel Corpn v Cleveland Bridge and Engineering Co Ltd (1984) 1 All ER 504
Buckpitt v Oates (1968) 1 All ER 1145
Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256, CA
Connell v Motor Insurers' Bureau (1969) 2 QB 494, (1969) 3 All ER 572
Kingswood Estate Co Ltd v Anderson (1963) 2 QB 169, (1962) 3 All ER 593, CA
Kleinwort Benson Ltd v Malaysian Mining Corpn Bhd (1989) 1 All ER 785, (1989) 1 WLR 379, CA
Merritt v Merritt (1970) 1 WLR 1211
Pearce v Merriman (1904) 1 KB 80
Rose and Frank Co v JR Crompton & Bros Ltd (1923) 2 KB 261 CA; (1925) AC 445, HL

The general principle is that there must be an intention to create legal relations. There is a presumption of intention in commercial contracts (in the absence of an express rebuttal of such intention) and the onus on rebutting the presumption lies with the party that asserts no legal effect is intended. Although most social and domestic agreements lack sufficient intent to make them legally binding ( Balfour v Balfour (1919) 2 KB 571), a husband and wife can make a binding contract (Pearce v Merriman (1904) 1 KB 80; Merritt v Merritt (1970) 1 WLR 1211).

In many cases there is no doubt that a legal relationship was intended, and for others it will be equally clear that it was not (such as where the agreement is expressed to be ‘subject to contract’ (Rose and Frank Co v JR Crompton & Bros Ltd (1923) 2 KB 261 at 294, CA, obiter per Atkin LJ; decision partially reversed (1925) AC 445, HL; or include an 'honour clause' (Rose and Frank Co, supra) such as is frequently the case in respect of football pools; or letters of comfort or intent*) but there will also be cases where the matter remains in doubt, and the court is then faced with the task of determining the intention of the parties. Ordinarily, the test will be the objective (Connell v Motor Insurers' Bureau (1969) 2 QB 494 at 505, (1969) 3 All ER 572 at 575, CA, per Sachs LJ) – in other words, whether a reasonable person would regard the offer made to him as one which was intended to create legal relations ( Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256, CA; Buckpitt v Oates (1968) 1 All ER 1145); but considerable regard may be had to the importance of the agreement to the parties in deciding whether an intention exists, particularly where one of the parties has performed his side of that agreement (Kingswood Estate Co Ltd v Anderson (1963) 2 QB 169, (1962) 3 All ER 593, CA).

* See British Steel Corpn v Cleveland Bridge and Engineering Co Ltd (1984) 1 All ER 504 ('letter of intent') and Kleinwort Benson Ltd v Malaysian Mining Corpn Bhd (1989) 1 All ER 785, (1989) 1 WLR 379, CA ('letter of comfort'); criticised in Banque Brussels Lambert v Australian National Industries Ltd (1989) 21 NSWLR 502, Aust

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