Intention to contract. In order for a contract to be legal, the parties must have intended to create a legally binding relationship. A court will not, for example, enforce a casual agreement between two people who agree to go shopping at 3PM because there was no intention to have a legally binding contract. However, where the parties are entering into a business
Intention to contract. An agreement is enforceable only when the parties intend to create a legally binding relationship. Not all agreements are made with this intention, so a court would need to consider the nature of the relationship between the parties and any evidence about the formation of the agreement in order to determine if the parties did intend to contract with one another. The general rule in law is that where there is a sufficiently close relationship between the parties, such as between family members, spouses or close friends, there is a presumption that the parties do not intend for their promises to be legally binding agreements. This presumption can, however, be rebutted if one of the parties wants to show that despite the close nature of the relationship, they intended to create a legally binding contract. In determining whether there was an intention to create a legal contract, a court will consider several factors, such as whether the agreement was written, if lawyers were involved in drafting the agreement, whether one party relied on the presumption of a contract to their detriment, and what the actual nature of the relationship is as opposed to its formal title, among others. For example, in the English case of Xxxxxxx x Xxxxxxx (1970),2 Mr. and Xxx. Xxxxxxx signed a written agreement upon separation stating that if Xxx. Xxxxxxx continued to pay the mortgage on their home, that once the mortgage was paid in full Xx. Xxxxxxx would transfer the property to her. When that time came, Xx. Xxxxxxx refused to transfer the title and argued that he had no intention to create a legally binding contract with his former wife. The court ruled that there was in fact a contract and ordered Xx. Xxxxxxx to transfer the deed for the home to Xxx. Xxxxxxx. Despite the family relationship, Xxx. Xxxxxxx was able to provide evidence that the parties intended to contract and therefore the presumption was rebutted. Conversely, parties entering into contracts in business settings are presumed to intend for their bargains to be legally binding contracts. Once again, this presumption can be rebutted if the party wanting to disprove the contract shows evidence that despite the nature of the relationship, there was no intention to create a legally binding relationship. For example, if the person could show that there was a clause in the contract indicating that “this is not a formal legal agreement”, the court may consider the presumption to have been rebutted.
