After completion of this lesson students will be able to : a) identify the presumptions relating to domestic agreements and commercial transactions b) distinguish between the two basic presumptions under the doctrine of intention to create legal relations;

1. INTENTION
TO CREATE
LEGAL
RELATIONS
PREETI KANA SIKDER
Assistant Professor
Department of Law & Justice

2. BASIC PRESUMPTIONS
• Cases concerning intention to create legal relations are thus
commonly divided into two categories;
– the first, concerning domestic and social agreements, where the
presumption is that the parties did not intend to create legal
relations, and
– the second, concerning commercial agreements, where the
presumption is that the parties did intend to create legal relations.

3. D O M E S T I C
A G R E E M E N T S
“CLEAR” EVIDENCE IS REQUIRED OF
AN INTENTION TO CREATE LEGAL
RELATIONS

4. • A mother persuaded her daughter, who was a secretary in
Washington, DC, to give up her work and read for the English
Bar by promising to pay her $200 maintenance per month.
• After the daughter had begun to read for the Bar, the
agreement was varied. The mother bought a house in London
so that the daughter could live there rent free, and the rent
from letting out the other rooms to tenants would provide the
daughter with her maintenance.
• Eventually, after the daughter had had more than one
unsuccessful attempt at passing the Bar examinations, the
mother and daughter fell out. The mother came to England
and sought to gain possession of the house.

5. J O N E S V P A D A V A T T O N
[ 1 9 6 9 ] 1 W L R 3 2 8
The daughter relied upon their agreement as a
defence to her mother’s action. The court of
appeal held that the agreement was not
intended to be legally binding and that the
mother was entitled to possession.

6. LENS V DEVONSHIRE SOCIAL CLUB
(1914)
The winner of a competition held by a golf club could
not sue for his prize where “no one concerned with that
competition ever intended that there should be any
legal results flowing from the conditions posted and the
acceptance by the competitor of those conditions”

7. SNELLING V JOHN G
SNELLING LTD (1973)
• The plaintiff and his brothers, the second and third defendants were
directors of a family business and company, the first defendant.
• The company owed the brothers large amount of money. The brothers
had a falling out and in an effort to make amends, an agreement was
drawn up stating that if any of the brother’s resigned as director, they
would forfeit the amount of money that was owed to them and that
money would be used to pay the company mortgage.
• Snelling resigned and his director brothers passed a resolution
upholding the terms of the agreement.
• Snelling issued a writ against the company for the monies owed.
Proceedings ensued.

8. WOULD
THERE BE A
FAMILY
AGREEMENT
OR A LEGAL
CONTRACT?

9. It was held that the legal
relations were created when
three brothers entered into
an agreement relating to the
running of the company.
SNELLING V JOHN G SNELLING
LTD (1973)

10. Upon consideration of the background in
which the agreement between the brothers
was made, i.e. That the company was
running into financial difficulties, the
agreement was intended to apply to the
company and be considered legally.
Therefore, the plaintiff was entitled to be
legally bound by the contract.
SNELLING V JOHN G SNELLING
LTD (1973)

11. PARKER V CLARK (1960)
• The defendants, suggested that the claimants, who were their
friends, come to live with them. The claimants were agreeable
to the proposal but pointed out that, if they were to live with
the defendants, they would have to sell their own house.
• The defendants replied that the problem could be resolved by
the defendants leaving a share of their house in their will to
the claimants.
• The claimants accepted this offer and sold their own house,
ultimately moving in with the defendants.

12. PARKER V CLARK (1960)
• The parties soon began to disagree over certain matters and the
result was that the defendants asked the claimants to leave.
• The claimants left and brought an action for breach of contract.
• Justice Devlin held:
– “I cannot believe…that the defendant really thought that the law would
leave him at liberty, if he so chose, to tell the claimants when they
arrived that he had changed his mind, that they would take their
furniture away, and that he was indifferent whether they found
anywhere else to live or not.”

13. COMMERCIAL
AGREEMENTS
PRESUMPTION IS THAT THE
PARTIES TO DO INTEND TO
CREATE LEGAL RELATIONS AND
THIS PRESUMPTION IS A
‘HEAVY’ ONE.

14. Rose and frank co v J R Crompton
and bros ltd [1925]
• The claimants and defendants entered an agreement for the supply of
some carbonised tissue paper. Under the agreement the claimants were
to be the defendant's sole agents in the US until March 1920.
• The contract contained an honourable pledge clause which stated the
agreement was not a formal or legal agreement and shall not be subject
to the jurisdiction of the courts in neither England nor the US. The
defendants terminated the agreement early and the claimants brought
an action for breach.

15. “This arrangement is not entered into, nor is this
memorandum written, as a formal or legal
agreement, and shall not be subject to legal
jurisdiction in the law courts either of the United
States or England, but it is only a definite
expression and record of the purpose and
intention of the three parties concerned, to which
they each honourably pledge themselves with the
fullest confidence - based on past business with
each other - that it will be carried through by each
of the three parties with mutual loyalty and
friendly cooperation.”
THE PLEDGE CLAUSE

16. Rose and frank co v J R Crompton
and bros ltd [1925]
• The honourable pledge clause rebutted the presumption which normally
exists in commercial agreements that the parties intend to be legally
bound by their agreements.
• the House of Lords decided that the agreement between RFC, JRC and
Brittains was not a legally binding contract because the ‘honourable
pledge’ clause showed that the agreement was intended to be binding in
honour only.
• The agreement therefore had no legal affect and was not enforceable by
the courts.
[From https://www.johnwiley.com.au/highered/blaw/content110/case_summaries/rose&frank_vs_JR_crompton.pdf]

17. This decision demonstrates that the courts
will recognise a clause in an agreement
according to which the parties expressly and
unambiguously stipulate that the agreement
is not legally binding. Such a clause is
evidence that the parties did not intend to
be legally bound and can be relied upon to
rebut the strong presumption that parties in
business and commercial relationships
intend to be legally bound.
Significance

18. Both the presumptions may be
rebutted by evidence of contrary
intention, but a mere subjective
intention to create legal relations will
not suffice

19. There must be some objective
evidence of a contrary intent.

20. THANK YOU