Intention to create legal relations

Statement of the Rule
To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly (Rose and Frank Co v JR Crompton & Bros Ltd).

It is open for the parties to use express language to indicate an intent (or lack of) to impose legal obligations on each other. Alternatively, this intention can be impliedly from the circumstances.

The courts use an objective test in making a determination about the intention of the parties. In making an objective determination of the parties, intention the court looks at the surrounding circumstances and asks if a reasonable person would regard the agreement as intended to be binding.

Domestic and social relationships

Presumption
The presumption is that domestic and social agreements are not intended to have legal force.

Rebutting the presumption
The presumption can be easily rebutted for example if parties who are in a familial relationship are contracting in a business context or if a husband and wife enter into an agreement in circumstances in which they are no longer living in harmony. Similarly, if the words used in the contract indicate a legal intention, the presumption that may otherwise have arisen may be rebutted.

Case Examples a) Husband and Wife (Balfour v Balfour)
Parties intended involved in a domestic relationship, will generally not have intended legal consequences to follow their arrangement thus a contract will not be enforceable. Given many couples now choose to cohabit without marrying, the same presumption should apply where an agreement is entered into between ac acouple living ain a de facto relationship.

b) Separated husband and wife (Merrit v Merrit)
Where parties are divorced, separated, or in the process of separating, the negotiation do not