Presumption that Legal Relations Not Intended
Notwithstanding the presence of offer, acceptance, and consideration, the courts in some contexts hold, that there is no intention to create a legal relationship. Most of these cases involve particular circumstances from which the courts draw a presumption that no such intent is present. It is entirely possible, however, that notwithstanding the common presumption about such cases, that in the particular circumstances, an intent to be legally bound may be found.
In the classes of cases mentioned below, the courts in effect, look more thoroughly at whether or not there is an intention, objectively manifested, to be legally bound. This is unlike the general position in most commercial and arm’s length transactions, in which the presence of offer, acceptance, and consideration is readily found and is sufficient.
Arrangements between members of churches, social clubs, and representative bodies are not readily assumed to be contractual in nature. Once again, the ordinary assumption is that most such arrangements are voluntary and involve moral commitment only. In particular circumstances, such as where there are existing legal relations arising out of an alleged or acknowledged contract, an agreement to vary the same will be more readily found to exist.
A number of cases have involved lottery syndicates, where persons had regularly agreed to come together to enter into a lottery or other competition. The courts are willing in an appropriate case, to find an intention to be legally bound, so as to oblige a winner to share price money.
Family and Domestic Setting
It is presumed in many family contexts, that there is no intention to be legally bound. Where steps are taken after an agreement on foot it, at one party’s expense or which affect him to his detriment, then the courts are more likely to decide that the required intention was present.
Agreements during marriage between spouses are presumed not to be intended to have legal effect.Everyday social actions such as agreements in the ordinary course of family life to do things, such as social engagements and family trips, are rarely be found to be intended to create legal obligations.
Agreements between parents and children in a non-commercial context are not readily assumed to be based on an intention to create legal relation. Most such obligations are presumed to be moral in nature. Even where the cases involve where one party acting to his personal detriment in reliance on the agreement, the courts often nonetheless presume that the obligations were intended to be moral.
Family and Domestic Setting; Legal Intention
If the parties are in an existing legal relationship, then agreements which vary that relationship are much more likely to be classified as intended to have legal consequences. Where parties agree to vary their existing legal rights, it will be readily inferred that the agreement is intended to have legal effect. This may occur, for example, where parties have rights under existing family instruments to inherit and they agree to vary those rights.
The courts will consider the particular circumstances and they may be prepared to find an intention to create relationships in some such cases.
In a parent and minor child context, public policy will play a significant role. When children are under age, they lack legal capacity to enter most contracts. Most arrangements regarding the maintenance and welfare of children are subject to the overriding considerations of the child’s best interests. This will be determined by a court in the event of a dispute.
The presumption that legal relations are not intended to be affected in a family setting may be capable of being displaced in circumstances where the child or parent has taken significant steps to his detriment. The onus is relatively high. The courts have tended to hold, that even where one party has taken significant steps to his /her detriment, such as where a child gives up work to look after a parent, that there is no intention to create contractual relations
An agreement to enter a will may be legally binding in exceptional circumstances. There is a very strong presumption that statements made in relation to a will are merely statements of intent, which are not intended to have legal effect. In exceptional circumstances, where a party has acted to his detriment or where an agreement is made, the requisite intent may be found.
Where there is a binding agreement to make or vary a will, the deceased’s estate is bound by the terms of the contract/trust in relation to the disposition of the deceased’s assets. The personal representatives are obliged to perform the contract. If the relevant asset has passed to designated beneficiaries, they will be obliged to hold the legal title to the assets in accordance with the agreement, notwithstanding the terms of the will.
Separation agreements made after termination of a relationship or on cessation of cohabitation, are much more readily upheld. In these cases, public policy plays a significant role. Structured separation agreements are encouraged in the context of separation in lieu of court determination of the parties’ obligations and rights.
Family law limits the extent to which parties may agree to surrender their future rights of support and maintenance. Matters regarding children are determined largely by reference to the best interests of the child, irrespective of any other factors.
Binding in Honour
In a commercial setting, the courts will readily presume an intention to create legal relations. Almost invariably, offer, acceptance, and consideration will suffice.
In some cases, there will not be sufficient certainty for the formation of a contract at all, such as in the case of an agreement to agree. This may give effect to an inference that no legal relationship is intended and a finding that there are insufficiently certain terms, to constitute an offer, capable of acceptance.
In some trades, it is custom to enter agreements on the basis of honour rather than contractual effect. In this case, it may be readily found that there is no intention to create legally binding relations.
Even in commercial cases, it may be possible to show the absence of an intention to create legal relations. In some contexts, parties may enter apparent contracts on the basis of good faith and honour rather than on the basis that the court may enforce it in default. This is the exception. However, if the intention is clearly expressed, the courts will respect it and will not intervene.
Where the contract terms expressly exclude legally binding obligations, this will be respected. The exclusion may appear or be incorporated in terms and conditions. The general tests for the incorporation of terms and conditions will apply. More difficult are cases where it is argued that the exclusion of the intention is implied in the circumstances.
Letters of Comfort / Letters of Intent
Letters of comfort are sometimes offered in place of formal guarantees or sureties. Sometimes the principal company within a group will offer support for its subsidiary. The letter of comfort may expressly declare the intention is not to be legally binding. They bind the head company on a reputational basis.
It does not follow that the labelling of a document as a letter of comfort, negates the possibility of a legal effect. If there are offer, acceptance, and consideration in the circumstances, a contract may be held to exist.
A letter of intent may be entered prior to engagement in contractual negotiations. As with other arrangements, its effect will depend on the particular circumstances. In many contexts, it will not be a contractual document, being merely a declaration of intent to negotiate and often being indicative of an absence of a final agreement.
In some contexts, such as where a building contract proceeds on the basis of a letter of intent, the later circumstance may be sufficient of themselves to constitute a contract by way of an offer and acceptance by conduct, in respect of which the letter of intent may incorporate standard industry terms. Commonly, the letter of intent will itself disclaim an intention to create legal relationships. This is likely to be conclusive of the position.
Industrial Relations and Collective Agreements
The issue of intention to create legal relationship may arise in the industrial relations sphere. Agreements entered by trade unions and employers or their respective representatives may be legally binding in appropriate circumstances. However, where the agreement is ad hoc, not considered and in vague terms, it is less likely to be enforceable. The custom and practice of the industry will be relevant.
In most cases, the agreement is binding in the industrial relations sense only. The sanction for failure of compliance is likely to be industrial action on the employees’ side. The courts are less likely than in commercial settings, to find an intention to create legal relations. The presumption is more easily displaced than in the case of family relations.
In some cases, the issue is whether the terms of the collective agreements have been incorporated into an individual employee’s contract.
There is statutory provision for registration of binding collective agreements. In such cases, the terms of the collective agreement are incorporated in individual employee’s contracts by law.
References and Sources
Irish Textbooks and Casebooks
Clark, R. Contract Law in Ireland 8th Ed. (2016) Ch 3
Friel, R. The Law of Contract 2nd Ed, (2000)
McDermott, P. Contract Law (2001) 2nd Ed (2017) Ch.3
Enright, M. Principles of Irish Contract Law (2007)
Clark and Clarke Contract Cases and Materials 4th Ed (2008)
English Textbooks and Casebooks
Poole, J. Casebook on contract law. (2014) 12th edition
Stone and Devenney, The Modern Law of Contract 10th Ed (2015)
McKendrick, Contract Law 10th Ed (2013)
Chen-Wishart, Contract Law 5th Ed (2015)
Anson, Reynell, Beatson, J., Burrows, Cartwright, Anson’s law of contract. 29th Ed (2010)
Atiyah and Smith, Atiyah’s introduction to the law of contract. 6th Ed.
Chen-Wishart, M. (2015) Contract law. 5th Ed.
Cheshire, Fifoot and Furmstons, Furmstons and Fifoot Cheshire, Fifoot and Furmston’s law of contract. OUP.
Duxbury, Robert (2011) Contract law. 2nd Ed.
Halson, Roger (2012) Contract law. 2nd Ed.
Koffman & Macdonald’s Law of Contract. 8th Ed. (2014)
O’Sullivan, Hilliard, The law of contract. 6th Ed. (2014)
Peel, and Treitel, The law of contract. 13th Ed. (2011).
Poole, J.Casebook on contract law. 12th Ed. (2014).
Poole, J. Textbook on contract law. 12th Ed. (2014)
Richards, P Law of contract. 10th Ed. (2011)
Stone, R. The Modern law of Contract. 10th Ed. (2013)
Treitel, G. H. An outline of the law of contract. 6th Ed (2014).
Turner, C Unlocking contract law. 4th Ed. (2014).
Upex, R. V., Bennett, G Chuah, J, Davies, F. R. Davies on contract. 10th Ed. (2008).
Stone,Devenney, Text, Cases and Materials on Contract Law 3rd Ed (2014)
McKendrick, Contract Law Text, Cases and Materials 6th Ed (2014)
Stone, R, Devenney, J Cunnington, R Text, cases and materials on contract law. 3rd Ed (2014)
Burrows, A. S. A Casebook on Contract. 4th Ed.
Beale, H. G., Bishop, W. D. and Furmston, M. P. Contract: cases and materials. 5th ed. (2008)
Blackstone’s Statutes on Contract, Tort & Restitution 2017 (Blackstone’s Statute Series)
UK Practitioners Texts
Chitty on Contracts 32nd Edition, 2 Volumes & Supplement (2016)
The above are not necessarily the latest edition.