INTENTION TO CREATE LEGAL RELATIONS CONTENT

1.0       Introduction

2.0       Objectives

• Main Content
• Meaning of Intention to create Legal Relations
• Social and Domestic Agreement
• Commercial Agreement
• Collective Agreement

4.0       Conclusion

5.0       Summary

6.0       Tutor-Marked Assignment

7.0       References/Further Reading

INTRODUCTION

Intention to enter into legal relation is essential in the formation of a valid contract. The general rule is that a contract, which is duly formed with valuable consideration, will not be enforced unless there is an intention by the parties to be legally bound. The intention to create legal relation is a necessary independent element in the formation of contract and it is essential in all contracts.

It means the readiness of each to accept the legal consequences if he does not perform his own part of the contract. An offer to be made binding by acceptance, must be one which can reasonably be regarded as having been made in contemplation of legal consequences.

OBJECTIVES

• You should be able to have an understanding of what an intention to create legal relations
• Should be able to explain when there is an intention to create legal relations or not between parties
• Illustrate the most important factors in determining wether or not an intention to create legal relations

 MAIN CONTENT

 Intention To Create Legal Relations

When there is no intention to create legal relations there would be no binding contract at law. This situation is common in the areas of simple contracts that are oral or even when they are in writing. In order to ascertain as to whether there is an intention to create legal relation or not, the Courts have evolved certain guidelines. For instance, where an agreement is of a domestic nature, the courts are prone to assuming, on the face value of it, that there is no intention to create legal relations. On the other hand, where the agreement is of a commercial nature, there is a presumption by the court that the parties intent to create legal relations and the burden of rebutting that presumption is on the parties. Statutory provisions may also act as bar o the enforceability of an agreement. For instance, an engagement to marry may not be an intention to create legal relations.

In Balfour v. Balfour (1919) 2 K.B. 571, a civil servant who was on overseas posting in Ceylon agreed to be sending down subsistence allowance £30 to his wife every month. Later on, they got separated. The husband did not fulfill his promise, the wife sued her husband for unpaid allowance after both of them had separated. It was held that the arrangement was purely a domestic agreement and that the parties did not intend to create

any binding legal relations. However, in Merrit v. Merrit (1970) 2 AER 760 where a husband deserted his wife and agreed to pay her allowance per month and also transferred the title of the house to her name but failed to keep the promise, the Court of Appeal held that the promises were intended to have legal effects.

As for commercial agreements, in Jones v. Venron’s Pools Ltd (1938) 4 UILR 131 the plaintiff played pools and won. The coupon contained a clause which stated the “the transaction should not give rise to any legal relationship”… or be legally enforceable… but binding in honour only. Plaintiff sued the company to claim his winnings. It was held that the exclusion clause on the coupon was a limitation to any successful legal action. See also Atu v. Face to Face Pools Ltd (1974) 4 UILR. 131. Similarity, in Amadi v. Pools House Group and Nigeria Pools Co (1966) 2 All NLR 532, the plaintiff staked pools upon which coupon it was written that the relationship will be “binding in honour only” and that it shall not give rise to any legal relationship nor be the subject of litigation. The Court held that from the circumstances, the contract, though of a commercial nature was not intended to be legally binding.

IF A and B agrees to enter into a carton to eat together, a promising to pay for the soft drinks and B promising to pay for the rice and chicken bills, there is a bargain, (agreement plus consideration) but legal obligation are not created.

In Weekes v. Tybald (1605) Noy. 11. In the case, defendant in a conversation with plaintiff said he would give E 100 to anyone who marries his daughter with his consent. Plaintiff fulfilled this condition but defendant refused to pay him E 100.

He sued. The court held that is not reasonable that the defendant should be bound by general words spoken to excite suitors. This decision was reached based on the fact that an intention to enter in to legal relations was not present. This not all agreements are binding because in some cases there is the absence of an intention to create legal relations. Also in determing whether or not such intention exists, the courts have often conveniently classified agreement into the three categories namely:

1. Social and domestic agreement
2. Commercial agreement

• Collective

  Social and Domestic Agreement

It is very obvious that most social and domestic agreement do not amount to binding contracts. This is because most times it is clear from the nature of such agreement that there was no intention to enter into a binding contract. For instance, if B said to A is hostel mate that, help me fetch water, I will give you plate of rice this is “Prima Facie” not contract that is capable enforceable in the eyes of the law.

Similarly, agreement between husband and wife are mostly to be devoid of any contractual intention. In the case of Balfour v. Balfour (1919) 2 KB 577. In the case, the defendant came to England (on doctor’s advice) while promising to pay her £30 a month for the duration of her stay there. He defaulted in payment of the amount. She sued. Her action failed on the ground that the parties had no intention of creating a legally binding agreement.

In Merit v. Merit (1970) WIR 211, it was shown that some agreement husband and wife can from time to time produce legally binding consequences. In this case, the court of Appeal held that there was an intention to create a legally binding relationship between the husband and wife.

Social agreement between friends do not usually amount to an enforceable contract because parties do not intend to bound by such agreement.

For instance, if A, B, C and D agrees to be fueling E’s car and returned E give them a rid. If E than decided not to give them a rid again they cannot sue E to enforce the agreement.

 Commercial Agreement

There is a strong presumption of contractual intention in commercial agreements. This presumption may generally be rebutted express or implied words. Thus, in Rose and Frank & Co. v. Gompton Bross (1923) 2 KB 261, the parties provided that a sole agency agreement should not be subjected to legal jurisdiction in the courts.

The House of lords stated that the clear words used rebutted the presumption of legal consequence.

However, in commercial agreement there are two instances stand out where defendant have been advanced the plea of absence of contractual intention.

These are:

i. Mere puffs

This is where the parties assert that the promise was a mere puff in such a situation, it is the test of a reasonable man that is applied to determine whether the promise is a mere puff or not.

For instance, advertisement which claims that Cadbury Bournvital will make the drinker the faster runner in the world or those who use respondent toothpaste will became a successful business person. Such claims are mere puffs.

1. Agreement contains a clause that expressly excludes contractual intention. The most common example is to be found in football poll agreement stakers and the pools

There is always a clause in football coupons states:

“It is a basic conditions of the sending in and acceptance of every coupon, that it is intended and agreed that the conduct of the pools and everything done in connection there with and all arrangements relating there to shall not be attended by or give to any legal relation enforceable, or the subjected litigation, but all are binding in honour only”.

In Amadi v. Pool House Group and Nigeria Co. (1966) 2 All NLR 254. Plaintiff stakes the sum of E1.16S in a football poll and claimed that on the basis of his correct entry he had won E50, 009.12S. The second defendant claimed that the plaintiff upon was never received even though they were their agent and disclaim liability in reliance on the honour clause above. The judge held that the “honour clause” operated to exclude any contractual liability. The rationale is given that by the nature of football agreement, if the pools companies were liable to defend themselves in court at the insistence of every stakeholder who though he had won, pandemonium would result pools business cannot be carried on for a day on terms of that kinds. 

The intention was to ensure that the relationship between the parties was to be that of “honour”, in other words, a create a legal relationship.

Collective Agreements

This is an agreement between a trade union and an employer regulating rates of pay and condition of work. It seems that at common law, there is a presumption that the parties do not intend to enter in to legal relation unless it is clearly established that the parties intended a binding contract. The general view is that such collective agreements were prima facie not intended to be legally binding as between trade union and employers.

The position at common law rebutted by statute, thus, section 13 and 15 of wages Boards and industrial council Act 1973, provide that a wages agreements is binding on the employers and works to whom they relate on the order of the master of labour.

Similarly, in section 2(3) of the Trade Dispute Act, 1976, a collective agreement deposited with the minister of labour becomes binding on the employers and workers whom they relate once the minster makes the appropriate order in this situation, a collective agreement is presumed not to have been intended by the parties to be legally enforceable contract unless it is in writing and expressly provides to the contrary.

CONCLUSION

Where it is found that the intention was present, then, of cours, the agreement would be actionable, but where the finding is negative, i.e., that there was no intention, the agreement would not be actionable; the existence of a contract is negated. 

The greatest exponent of the school of thought that intention to enter into legal relations is irrelevant to the formation of a contract is Professor Williston. /His vies may be summarized in this well-known passage:

…the common law does not require any positive intention to create a legal obligation as an element of contract… A debliberate promise seriously made is enforced irrespective of the promisor’s views regarding his legal liability. Williston on Contracts (3^rd Ed.) p21.

SUMMARY

Ultimately, the question of contractual intention is one of fact. The agreement in question must be carefully scrutinised to determine the nature of the parties’ agreement.

Without an intention to create legal relations, there will not be a contract.

 TUTOR-MARKED ASSIGNMENT

1. To what extent are courts examining whether or not the parties intend to take any dispute to a court for resolution? To what extent are the courts determining whether or not the agreement has certain terms?
2. Are courts influenced by the reliance of one party upon the promise of another in determining that a contractual intention is present?

REFERENCES/FURTHER READINGS

OLUSEGUN YEROKUN, Modern Law of Contract, 2^nd ed., Nigerian Revenue Project Publishers (2004)

T.O DADA, General Principles of Law, 3^rd ed., T.O. Dada & Co. (2006)

I.E. SAGAY, Nigerian Law of Contract, 2^nd ed., Spectrum Law Publishing (2001)

EWAN MACINTYRE, Business Law, 1^st ed., Pearson Education Limited (2008)