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Intention To Create Legal Relations And Capacity Notes

GDL Law Notes > GDL Contract Law Notes

This is an extract of our Intention To Create Legal Relations And Capacity document, which we sell as part of our GDL Contract Law Notes collection written by the top tier of Cambridge/Bpp/College Of Law students.

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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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