Intention to Create Legal Relations

Question 1

Broadly, what are the presumptions around intention to create legal relations in both a social and commercial context?

Answer 1

• In a commercial context, there is a strong presumption that the parties have contractual intention

i) Includes business to private person contracts (buying something online or in a shop; employment contracts) and business to business contracts

• In a domestic context, there is a presumption of no contractual intention

i) Agreements between friends and family are assumed to not have an intention for their agreement to have legal consequences

Question 2

Explain the presumption of intention to create legal relations in a commercial context

Answer 2

1) Very strong presumption of contractual intention

2) The presumption is only rebuttable on very clear wording, such as binding in honour only or subject to contract

• Sometimes businesses won’t want their agreements to have legal consequences
• Heads of terms – initial starting point for later negotiations/agreement

Question 3

Explain the presumption of intention to create legal relations in a domestic context

Answer 3

1) General presumption that parties don’t intend to create legal relations, but it isn’t as strong a presumption

2) Can be rebutted depending on factors such as:

• Amount of money at stake – more money, more inclined the parties will be to have legal consequences
• Closeness of relationship
• Formality – signed and in writing – more likely for there to be legal consequences
• Completeness

Question 4

If 2 or more people agree, in a social context, to buy lottery tickets and split the prize if they win, would there be an intention to create legal relations?

Answer 4

Yes

Question 5

How will decisions made after an agreement affect a finding of intention to create legal relations?

Answer 5

Decisions made after an agreement are irrelevant in making a determination in regards to whether the presumption has been rebutted

Question 6

Who has the burden of proving intention to create legal relations?

Answer 6

The burden of proof will be on the party seeking to rebut the presumption, so:

• Person trying to prove there was intention (domestic)
• Person trying to prove there was no intention (commercial context)