Define: Intention To Enter Into A Legally Binding Agreement

The intention to enter into a legally binding agreement is a crucial element in contract law, indicating the parties’ seriousness and commitment to be bound by the terms of the agreement. In order for a contract to be valid, both parties must have the genuine intention to create legal relations. This means that they must intend for their agreement to have legal consequences and to be enforceable by law. The presence or absence of intention to create legal relations is determined objectively, based on the circumstances surrounding the formation of the contract. Factors such as the language used in negotiations, the nature of the agreement, and the parties’ conduct may be considered in assessing whether the parties intended to be legally bound. If it is found that the parties lacked the necessary intention to enter into a legally binding agreement, the contract may be deemed void or unenforceable. Therefore, parties should be mindful of expressing their intentions clearly and ensure that they understand the legal implications of their agreements.

A fundamental principle of contract law is that the contracting parties must actively intend to enter into an arrangement that creates legal obligations. For common-sense reasons, domestic arrangements are assumed not to create a contract, while commercial arrangements are assumed to create one, unless clearly specified otherwise.

As far as domestic arrangements are concerned, it is clearly contrary to public policy to have routine domestic disputes tie up the courts. In Balfour v. Balfour, Atkins LJ said that a husband’s offer to pay money to his wife was outside the realm of contracts altogether (see Balfour v. Balfour (1919)). Similar assumptions have been made for other family agreements (e.g., see Jones v. Padavatton (1969)) and even for social organisations.

There are some exceptions to this assumption. For example, agreements made by divorced or separated couples over the disposition of property are likely to be considered contracts (see Merritt v. Merritt (1970)). In these cases, the arrangements are no longer really domestic. In addition, an arrangement that significantly affects the lives of any party is likely to be taken as a contract (see Parker v. Clark (1960)).

For commercial arrangements, the opposite assumption applies. In commercial dealings, it is extremely difficult to evade the obligations of an agreement by claiming that it was never intended to be legally binding (see Edwards v. Skyways Ltd. (1964) and Esso v. Customs and Excise Commissioners (1976)). To create this effect, the wording of the agreement must be very clear (see Rose and Frank Co. v. Crompton (1925)).

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 11th April, 2024.