Name: Umer Rehan

Q1: Discuss, with reference to relevant cases, whether there is an intention to create legal relations in
each of the following circumstances:

(a) A husband seeks to enforce a promise made by his wife to pay him £2,000 per month while she
works abroad;

(b) A parent company sends a letter to a bank which is proposing to lend money to its subsidiary
stating “its policy is to ensure that its subsidiary is always able to meet its liabilities to the bank”;

(c) An agreement between friends going to watch horseracing that if anyone bets on a horse and wins
then the winnings will be shared equally between them;

(d) A rich businesswoman has lunch with her financial advisor and offers to pay him £1 million if the
shares in her business double in value in the next two months;

(e) When a husband and wife agree to separate and live apart the husband agrees to pay the rent of
the flat his wife moves into; and

(f) A mother persuades her son to study to become a lawyer by promising to pay the rent of his flat
during his law degree.

Ans: In this question we will discuss the doctrine of intention to create legal relation with case
examples accordingly discussing the parts of the question. The necessity for intension is most
evident in domestic and social agreements which are between family members and friends, on
the other hand commercial agreements which are also known to be business agreements which
make it obvious to be a business contract.

a) In this part of the question we will identify that whether or not a contract has formed
between the husband and wife, the statement in this part clearly identifies that it is an
social agreement and according to the general rule the courts presume that the
intension to create legal relation is not present when it comes to an social or domestic
agreement, relating the statement with the answer we have the case example of
“Balfour V Balfour” in which husband promises his wife to pay £30, until he return from
his work after a while they got divorced and the wife demanded to enforce the promises
which the husband refused, however the court of appeal said that although there was
consideration between the husband and wife but no contract was formed between
them because as said by Atkin LI, “ including most agreements between husband and
wife, which the parties never intended they might be sued upon. Agreements such as
 these are outside the realm of contract altogether”, relating to the statement of Atkin LI
we can say that no contract is formed between the husband and wife in the question
and wife is not obliged to pay his husband. Further we have a similar case example of
“Jones V Padavotten” in this case the contract was formed between daughter and
mother. However there is also an exception case to the social and domestic agreements
which is the “Merrit V Merrit” in this case, it was determined that the agreement aimed
to establish legal contacts even though the spouses were previously divorced. A similar
outcome was reached in "Darke v. Strout", where the court determined that, given the
formality of the letter, an arrangement for child support following the dissolution of a
couple's partnership did not lack a purpose to create legal connections. Furthermore,
since the lady had given up her statutory rights to maintenance when she entered the
arrangement, it could not be argued that it was unenforceable for lack of consideration.

b) Discussing the part b of the question, a parent company sends a letter to the bank for
the loan, its policy is to ensure that its subsidiary is always able to meet its liabilities to
the bank still the question that arises is whether sending letter to the bank for the loan
was an intension to be legally bonded or not, as it is an commercial agreement and to
support the answer we have an exceptional case of “Kleinwort Benson V Malaysia
Mining Corporation”, in which a company issued a letter asserting their policy to ensure
subsidiary as the company had all the sufficient resources to meet the obligations, as
later they said the language of the letter was not sufficient to rebut the presumption
that the commercial agreement are not legally binding. But according to the court of
appeal they disagreed with the statement by saying that the letter contained the
intension of being legally bonding which we can relate to this case and say that the
parent company has formed a legal intension to form a contract and are bond to pay the
bank.
c) Moving forward towards the next part of the question in which two friends had an
agreement to watch horses racing together and they both agreed that if anyone bets on
the horse and wins then the winning party will share equally between them, as
discussed earlier in part a of the question it can be said that it is an social agreement
between two friends, these type of agreements are not considered by the courts,
further justify the statement and to explain in detail we have the case example of
“Coward v MIB” where the court found that an agreement to take a friend to work in exchange
for petrol money was an arrangement which lacked contractual intention, by which we can
relate that there was no intension formed between the two friends to bet on horse racing.
d) In this part of the question, a rich business woman invited her financial advisor for lunch
and offered him £ 1 million, if he doubles the share in her business within two months.
Following the statement given in the question by which the question arises that whether
the statement of the business women shows an intension to be legally bound or not to
support the answer we have the case example of “Blue V Ashley” in which the court of
appeal stated that Mr. Ashley the owner of the company is bound to fulfill the promise
he made, similarly we have the case example of “MacInnes v Gross” where the
discussion took place at a expensive restaurant at a dinner and the ensuing
correspondence suggested that a formal agreement was still pending. Further same in
this situation the rich business woman is bound to pay £1 million to the financial advisor
because the intension to be legally bound is formed because it is a commercial
agreement.

e) In this part of the question, the husband agrees to separate and live apart from her wife,
further the husband also agreed to pay the rent of the flat in which his ex wife moved
into. We can relate this case to a previous case of “Merit V Merit” in which the husband
H moved in with a different woman after divorcing his wife W. They agreed in writing
that H would give W sole ownership of their jointly owned home in exchange for W
paying off the mortgage, and H promised to pay D £40 per month. The decision made by
Stamp J to declare this to be a binding contract was maintained by the Court of Appeal.
According to Lord Denning MR, in these cases, the court considers the circumstances
surrounding the parties and determines whether a reasonable person would interpret
the agreement as meant to be enforceable. Similarly in this contract will be formed
between the husband and wife because they agreed to seprate.

f) In the last part of the question, we will discuss about the situation of a mother who
persuaded her son to study hard to become a lawyer in return she promised him to pay
the rent of his flat during his law degree, further it can be stated that it is an social
agreement and as we discussed earlier that that there is no intension to be legally bond
formed because social and domestic agreements are not considered by the courts to be
legally bounding and to relate with the statement we have a case example of “John V
Padavatton” in this case a mother P offered her daughter D, who was working at the
time for a large company in the USA, that P would take care of D if D traveled to England
to study for the bar. D accepted, relocated to England, and started her education. After
two years, D once more consented when P promised to buy a house in England that
would be partially occupied by D and partially by renters whose rent would be given to
D in place of maintenance payments. Three years later, P claimed possession of the
residence, which was registered in his name. The Court of Appeal concluded she should
succeed; the agreement between mother and daughter was a family arrangement not
intended to be legally enforceable. This presumption can be rebutted, but the lack of
formality regarding the agreement between mother and daughter strongly indicated
there was no such intention and the daughter had no defense to her mother’s claim for
the house. Similarly in this question mother is not obliged to pay the rent of the flat
during his degree of law as no legal contract is formed between both of them