Intention To Create a Legal Relationship
Before knowing about the meaning of contract, we must know about its roots, i.e., Offer and Acceptance.
As per the section 2(a), Any action that may or maynot mutually benefit the other person is termed as an offer. Mere intention is very important for the offer to be legally binding upon acceptance. A contract becomes binding when the offer has been accepted unconditionally.
There are two major parties involved, i.e., the offeror and the offeree. According to section 2(c) of the contract act, an offeree becomes the acceptor when he accepts the proposal made by the offeror.
The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “When the person signifies his assent to the proposal made by other person, the offer is said to be accepted. After such an offer is accepted the offer becomes a promise. And a promise is irrevocable because it creates legal obligations between parties. An offer can only be revoked before it has been accepted. Once acceptance is communicated, henceforth it cannot be revoked or withdrawn.
Consideration is a benefit which parties entering into contract receive or expect to receive. Consideration is mostly monetary, but it sometimes can be a promise to do certain act, or refrain from doing such act. Consideration is an essential for an agreement to be legally binding. Illegal or immoral acts are not considered to serve as consideration legally.
Example – Kaliya agrees to sell his car to Raju for Rs 50,00,000. Raju’s payment serves as consideration for Kaliya’s promise to sell the car to him. Kaliya’s consideration is his promise to sell him the car.
A contract is an agreement followed by legal obligation governing and recognizing rights and duties of parties. A contract is legally enforceable because it is approved by the law. An agreement usually involves the exchange of goods and services, money, promises, etc. If there is a breach of contract, the law awards access to remedies to the injured party such as damages and cancellation.
Intention to create legal relationship is a doctrine used in contract law, particularly English contract law and related common law jurisdictions. The doctrine states that an agreement can be said to be legally enforceable only if the parties are deemed to have intended it to be a binding contract.
I have tried to brief the topic with the help of following famous case laws with the help of IRAC method.
Balfour v. Balfour
A husband promised to pay his wife £30 per month allowance. But after a short span of time when the husband was unable to keep his promise, her wife sued him to enforce the promise.
Does the husbands promise to pay £30 per month constitute a valid contract which can be sued upon?
Agreements between husband and wife to provide money are generally not contracts because generally the “parties do not intend that they should be attended by legal consequences.”
The Plaintiff and the Defendant were a married couple. The Defendant (husband) and the Plaintiff (wife) lived in Ceylon where the Defendant worked. In 1915, while the Defendant was on leave, the couple returned to England. When it was time to return to Ceylon, the Plaintiff was advised not to return because of her poor health issues. Prior to the Defendant returning, he promised to send the Plaintiff £30 per month as a support to pay off the bills timely. Slowly & gradually their relationship started deteriorating and the parties began to live apart. The Plaintiff files a suit to enforce the Defendant’s promise to pay her £30 per month. The lower court found that the parties agreement constituted a contract.
The court first recognized that certain forms of agreements do not reach the status of a contract. An agreement between a husband and wife is often times such a form of an agreement. In such agreements, one party is given a certain sum of money on a daily, weekly, monthly or annual basis. This agreement is sometimes termed as an allowance. However, these agreements are not contracts because the “parties did not intend that they should be attended by legal consequences.” One reason the court is hesitant to treat these agreements as contracts, is that there would not be enough courts to handle the volume of cases. Thus, here, the husband’s promise did not rise upto the level of a contract.
Merritt v Merritt  1 WLR 1211
Husband agrees to transfer home to wife on separation; whether intention to create legal relations is there?
Mr. and Mrs. Merritt got married in 1941. They held their matrimonial home in joint names. In 1966 Mr. Merritt left the home to live with another woman. Contrary, Mr. Merritt also agreed to pay Mrs. Merritt £40 per month. At Mrs. Merritt’s request, he signed a document confirming that if she repaid the balance on the mortgage, he would transfer the matrimonial home into her sole name. Mrs. Merritt managed to pay off the mortgage and successfully acquired a declaration that the house belonged to her. But Mr. Merritt being dissatisfaction by the declaration appealed in the court.
The issue of the case was that even though the parties were legally married, whether the promise carried out by Mr. Merritt was legally enforceable or not?
According to Lord Denning MR(The Judge), Referring to the circumstances one must ask whether the party deems their agreement legally enforceable?
Therefore, it was seen in the case that understanding was already absent in the relationship of the parties. With this, it could be inferred that they intended their agreement to be legally binding.
Mr. Merritt contended the agreement was a domestic arrangement between husband and wife and there was no intention to create legal relations and, as such there was no enforceable contract. He also argued that the contract was insufficient to be enforceable by the court, and that Mrs Merritt had failed to provide consideration for his promise. Mrs Merritt argued that as they were in the process of separating, the presumption of there being no intention to create legal relations did not apply. She claimed there was every intention of creating legal relations, and her paying off all the expenses on the home and finishing off the mortgage payments amounted to consideration.
Mr Merritt’s appeal was unsuccessful. It was stated that when parties are in process of separating, mere presumption of there being no intention to create legal relation does not hold good. The arrangement was sufficient to be enforceable, and paying of the mortgage was ample consideration for Mr. Merritt’s promise. Mrs. Merritt was entitled to the matrimonial home entirely.
Conclusion as a whole:
Intention to create legal relationship is one of the basic elements required to form a contract, intentions are always the first essential to enter into an agreement, as it is after the intentions, one determines that the contractual business would hold good or not.
- Oxford Contract Law( Akhileshwar Pathak)
- Research Gate
- Indian Contract Act(Avatar Singh)
Author: Arunabh Srivastava,
Symbiosis Law School, NOIDA, 2nd Year