Gavin Howe
Intention is a key requirement in contract law. It refers to the intention to create legal relations, which means an intention to enter a legally binding agreement or contract. In other words, it is the mental attitude with which the parties enter into a contract. Intention is determined by the language of the contract, which is interpreted by the courts based on its common meaning. If the language is ambiguous, the courts consider the course of dealing between the parties. The presence of consideration usually indicates intention, but it must be separately proven in each case. In the case of commercial agreements, there is an automatic presumption of intention, whereas domestic or social contracts are presumed not to be made with the intention to create legal relations. However, there are exceptions, such as agreements between spouses at the end of their relationship.
| Characteristics | Values |
|---|---|
| Intention to create legal relations | An intention to enter a legally binding agreement or contract |
| An intention to be serious about agreement significance | |
| An intention to be legally bound | |
| An intention to create a legal relation | |
| Intention to be contractually bound | The presumption is rebutted |
| Intention in contract law | The language of a written contract determines the intention of the parties |
| The mental attitude with which the parties enter into a contract | |
| Determining intent | Courts interpret the used terms based on their common meaning |
| Courts interpret the used terms based on their trade usage | |
| Courts stick to the four corners rule | |
| Courts use external parol evidence to resolve ambiguity | |
| Any ambiguity in drafting is interpreted against the person drafting the contract | |
| Intention in commercial agreements | There is an automatic presumption that they intended to create legal relations |
| The presence of consideration will provide evidence of intention | |
| The agreement is made between spouses at the end of their relationship | |
| The agreement is made between family members and the transaction is essentially commercial in nature | |
| The agreement is made between family members who are about to separate |
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What You'll Learn
Intention to create legal relations
The intention to create legal relations is reflected in the mental attitude with which the parties enter into a contract. It is an important factor used for interpreting a contract. The contracting parties must clearly understand the contents of the contract and the consequences of entering into such an agreement. If there is no agreement by both parties, the contract may be considered void.
Courts determine the intention of the parties by interpreting the language of the contract. Courts usually base their judgment on the lawful intention of the parties behind entering into a contract. If the language used in a contract is clear, the intent can be determined based on the language alone. However, if there is ambiguity in the language, courts try to understand the intent through the course of dealing that took place between the parties. They interpret the terms based on their common meaning unless the words were used in a technical sense, in which case they interpret them based on trade usage.
The presence of consideration usually provides evidence of intention to create legal relations. If the promisor has specified something as the price for the promise, it usually indicates an intention to be bound by the contract. However, intention remains an independent requirement and must be separately demonstrated.
In the case of commercial agreements, there is an automatic presumption that the parties intended to create legal relations. This presumption does not apply to domestic or social contracts, which are usually presumed not to be created with an intention to create legal relations. However, there are exceptions to this presumption, such as when spouses are separated or about to separate, or when the transaction is commercial in nature.
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Determining intent from contract language
The language used in a contract is a key factor in determining the intention of the parties involved. The intention is the mental attitude with which the parties enter into a contract, and it is an important factor used for interpreting a contract.
When determining intent based on the language used, courts interpret the terms based on their common meaning, unless it appears that the words were used in a different sense. If the parties used specific words in a technical sense, the courts interpret those words based on their trade usage, i.e., how they are used in the industry to which the contract pertains.
Courts generally stick to the "four corners rule", where they determine the intent from the text of the contract without considering external factors. They look outside the contract only when a contract term is ambiguous, or when the normal interpretation does not align with the context of the term. In such cases, external parol evidence is used to resolve the ambiguity, and any ambiguity in drafting is generally interpreted against the person who drafted the contract.
The presence of consideration usually provides evidence of intention, as it indicates that the promisor intends to be bound by the contract. However, intention is an independent requirement and must be separately demonstrated.
In some cases, the courts have applied presumptions to different types of contracts. For example, domestic or social contracts were presumed not to be created with the intention to create legal relations, while commercial agreements were presumed to have such an intention. However, in recent years, courts have moved away from using presumptions and instead focus on proving intention without their aid.
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Presumptions and intention
In the past, courts applied presumptions to different types of contracts. For instance, social and domestic contracts were presumed not to be created with the intention to create legal relations, while commercial agreements were presumed to have this intention. However, recent rulings in Australia have indicated that presumptions should not be relied upon when determining intent. Instead, each case must prove intention without the aid of presumptions. This shift aims to avoid assumptions and ensure that intention is established independently, regardless of the nature of the agreement.
The degree of reliance and the seriousness of the consequences for each party to an agreement are critical factors in determining intention. Courts interpret the language of the contract, considering the common meaning of terms unless there is evidence of technical usage. If ambiguity arises, external evidence may be used for clarification. The intention behind a contract is also assessed through the course of dealing between the parties.
While the presence of consideration typically indicates intention, it is not always sufficient. The party seeking to prove the contract must demonstrate intention separately from consideration. This intention can be proven through witnesses, subsequent actions, or prior intent in another contract.
In summary, the intention to create legal relations is a crucial aspect of contract law, requiring clear intent and acceptance of legal consequences. Courts interpret contracts based on language and context, moving away from presumptions to focus on specific facts and independent proof of intention.
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Intention and consideration
Intention to create legal relations is a necessary element in the formation of a contract. It refers to the intention of the contracting parties to enter into a legally binding agreement or contract. This intention is demonstrated by the readiness of a party to accept the legal consequences of entering into an agreement.
In English law, there are two judicial devices to determine whether there is intent: the objective test and the rebuttable presumption. The objective test, as seen in Carlill v Carbolic Smoke Ball Company, involves considering whether a reasonable bystander would presume an intention to contract after examining all the circumstances of the case. The rebuttable presumption is used in conjunction with the objective test, and together they help determine the intention to create legal relations.
Consideration is another critical aspect of contract law. It refers to the exchange between two parties, where each party gives or receives something of value. This can take various forms, such as money, an act of service, or an agreement to refrain from doing something. For example, a business owner may offer consideration to a customer who slipped and fell due to improper signage, agreeing to pay them in exchange for their promise not to sue the business.
Consideration must be valid and legally enforceable for a contract to be valid. It should not be contrary to the laws of the jurisdiction or aimed at defeating the purpose of the law. The value of consideration must be fair and sufficient, even if it is not equal in value to the goods or services exchanged. Additionally, moral obligations or past actions are typically insufficient for a binding contract, as seen in Mills v. Wyman, where a promise to reimburse for care provided to an adult son without prior request was deemed unenforceable due to a lack of legal consideration.
In some cases, the presence of consideration can provide evidence of the intention to create legal relations. For instance, in Errington v Errington, a father's promise to his son and daughter-in-law to allow them to own a house if they paid off the mortgage balance was considered an enforceable unilateral contract. However, intention remains an independent requirement and must be separately demonstrated.
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Intention in domestic and social contracts
Intention to create legal relations is a fundamental principle in contract law that determines whether parties involved intend to enter into a legally binding agreement. This intention distinguishes casual agreements, like social arrangements, from enforceable contracts.
In the context of domestic and social contracts, intention to create legal relations can be categorised into three groups: commercial or business relations, social friend relations, and family or domestic relations.
Commercial or business relations typically involve a presumption or intention to be legally binding. For example, in Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd, the plaintiff (a bank) agreed to loan to MMC Metals, a subsidiary of MMC. This case demonstrated the concept of "letters of comfort", where the intention to create legal relations was present.
In social friend relations, agreements are usually informal and made among friends, with no intention to create legal relations. However, there may be exceptions where the presumption is rebutted. For instance, in Simpkins v Pays, an informal agreement between a grandmother, granddaughter, and a lodger to share competition winnings was binding, demonstrating an intention to create legal relations.
Family or domestic relations typically do not carry a presumption to be legally binding. However, there are exceptions where the presumption is rebutted, such as in cases of separation or impending separation, or when the transaction is primarily commercial in nature. For example, in Merritt v Merritt, a separation agreement between estranged spouses was enforceable, indicating an intention to create legal relations.
It is important to note that the context and circumstances of conversations between purported contracting parties play a significant role in determining the intention to create legal relations. Factors such as the informality or vagueness of language, or whether the agreement was made in anger or jest, can influence the interpretation of intention.
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Frequently asked questions
Intention in contract law refers to the intention to create legal relations, or enter into a legally binding agreement or contract. It is one of the necessary elements in the formation of a contract.
Intention is determined by the language of a written contract. Courts base their judgments on the lawful intention of the parties when entering into a contract. If the language used in a contract is clear, intent can be determined from the language alone. If there is ambiguity in the language, courts try to understand the intent through the course of dealing that took place between the parties.
Intent is different from motive. Motive is what causes a person to act in a certain way. For example, A threw a snowball at B to stop B from teasing him; A's intention might be to hit B, while his motive is to stop the teasing.
