Under English law there are traditionally three essential elements to the formation of a contract, Offer, Acceptance and supported by Consideration. However, there is another element that needs to be examined and understood as to where it fits into contract law, the intention to create legal relations. Courts are often required to decide whether a contract is enforceable. For the role of umpire to be accomplished it is often felt essential the need to delve further than the three established factors of contract and look at the intention behind the agreement to find out whether the contract will bind a party.
Therefore and agreement will be enforced by judges if it is felt "the parties had an intention to create legal relations, that is if they intended their agreement to give rise to legal consequences"1 The Courts in this area of the law hold a certain amount of discretion since the idea that intention to create legal relations is an objective one. The courts will need to look at the behaviour of the parties, for instance what has been said and what has been done in relation to dealing with each other to make a deduction.
Lord Bingham currently affirmed in recent case "whether the parties intended to enter into legally binding relations is an issue to be determined objectively and not by requiring their respective states of mind. "2 This approach needed to take place, as it is very often hard to prove, or bring forward evidence of a person state of mind; whether at the time of entering into the agreement one or both of the parties had regard to the legal consequences before them.
Therefore, it is necessary to question what a reasonable person in the position of each other the parties would have intended as well as relying on certain presumptions to decide if there is a presence or absence of intention to create legal relations. Such is the courts power in this area it has been insinuated by one particular writer that if a court wishes to hold an agreement unenforceable for any reason it will be able to do so by simply by stating the parties did not anticipate legal relations3.
Some have demonstrated that the doctrine is not as intelligible as this traditional sense. Asserting that there is no need for this separate heading of intention to create legal connections, for the traditional requirements of offer, acceptance and consideration, can be regarded themselves as indications to enter into a legally binding contract. In addition, as long as these elements are present, in whatever form then a contract will be enforced, as there is sufficient intention behind the presence of these formalities.
Normally the presence of consideration is a good indicator that there is "necessary intention"4. This opinion is supported by Hepple, his ideas centre around how consideration is defined and viewed within the law of contract. Hepple obstinately believes Lord Atkin caused the most confusion by interpreting consideration wrongly in Balfour v Balfour5. He characterises consideration to mean "mutual promises" or "benefit received by one party or loss by the other".
Hepple's6 judgement is that there needs to be more than a "mutual" promise to have good consideration, for many social and domestic arrangements give rise to mutual promises but these cannot be "contracts because the promise of one party is not given as the price for the other". This creates the idea of a bargain, offer acceptance and good consideration. Thus, this line of reasoning requires, when determining whether legal intention is existent it is redundant to look for anything else other than these three components of the bargain.
Reinforcing the idea that "a deliberate promise seriously made" (meaning with consideration) "is enforced irrespective of the promisors views regarding his legal liability. "7 It seems that the issue of intention to create legal affairs is an essential element for the law to decide upon for is not a tool for upholding mere promises or for remedying breaches of friendly agreements gone wrong, even if there is agreement and consideration present.
If one party agrees to lunch or walk, clearly, this is an example of an agreement and consideration may be present, but equally clear that is that no legal consequences could possibly be intended. So now, we come across the opposing juxtaposing argument that "an agreement, though supported by consideration, is not binding as a contract if it was made without any intention of creating legal relations. "8 The impact of the influx of litigation would be tremendous, wasting time and money.
Imagine every time a friend let you down on trivial matters such as failure to meet you or forgetting to uphold a small promise of, for example, the washing up, you sued them or vice versa. Lord Stowell pointed out in a very early case that contracts "must not be the sports of idle hour, mere matters of pleasantry…. never intended by the parties to have any serious effect ever. "9 Hence, this is when we come to the first of our presumptions about intention with regard English Law, that social and domestic arrangements will not give rise to legal consequences.
As explained by a leading academic Atiyah, that there certainly are "some circumstances, however in which agreements are made without any thought of creating legal rights and duties, and which agreements are treated as not amounting to legal contracts"10. On the other hand, as we discussed above Hepple would say the promise was not given at a price for another, so the consideration was insufficient for a legally binding agreement, i. e. the factors to create the bargain are not intact. Balfour v Balfour11 is the leading example of an agreement in a domestic context.
This involved a husband who was a civil servant posted to Ceylon, now called Sri Lanka, and his wife to remain in England. He promised to pay her i?? 30 monthly for maintenance for the time they were forced apart. Later the parties separated and were divorced. The wife brought an action against her husband for continued payment of the maintenance. Atkin LJ given leading judgment said that a promise by a husband to pay his wife an allowance, even if could by said that there is a consideration for the promise, is not binding because neither parties intended legal liability to generate from such a promise.
This also fits neatly into our reasonable, objective; test for an assumption that domestic agreements are enforceable would be unreasonable under most circumstances. The academic Pateman argues this presumption, is a key feature of English contract law due to women's role in society when the boundaries of contract were first laid down. As the theories of contract law were initially devised over two hundred years ago, these ideas nowadays can seem a little anachronistic.