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Intention To Create Legal Relations And Capacity Notes

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A more recent version of these Intention To Create Legal Relations And Capacity notes – written by Cambridge/Bpp/College Of Law students – is available here.

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Contract: Intention to Create Legal Relations & Capacity Intention to Create Legal Relations (ICLR)

- ICLR: objective test (Smith v Hughes) - can be expressed or presumed. ICLR: parties intend their agreement to have force of law + to be bound. 'common intention to enter legal obligations, mutually communicated expressly or impliedly' (per Atkin LJ in Rose and Frank). objective test: courts seek to give effect to intention of parties. Smith v Hughes [1871]: [Blackburn J] test - a reasonable man believes a party is assenting to the terms proposed by the other party + other party enters contract on that belief. broad general distinction (Rose and Frank Co. v Crompton Bros. [1925]) commercial agreements: rebuttable presumption for ICLR. domestic agreements: rebuttable presumption against ICLR.

- Contextual approach: Edmonds v Lawson [2000] - modification to Smith v Hughes test. facts: barrister pupil suing Chambers (with their support - test case) for minimum wage ? no application: pupil barrister not a 'worker'. test: objective (Smith v Hughes) + 'context is all important' (per Bingham LJ). broadens test: court has regard to whole context.

- Commercial + business agreements: presumption for ICLR - will be implied by courts. courts readily imply commercial ILCR: Well Barn Farming Ltd v Backhouse [2005] - ICLR implied from arrangement of 'slight importance' + temporary nature - trivial nature of transaction not relevant. difficult to rebut presumption: Bunn & Bunn v Rees & Parker [2002]: heads of agreement preliminary to fuller contract enough to establish ICLR.

1. heavy burden for party to commercial agreement to rebut ICLR.

2. terms: typical of commercial agreement intended to be binding. not so vague that parties could not have intended to be bound.

3. ICLR possible even if all details not worked out: expectation of further more detailed agreement not inconsistent with ICLR.

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