CHAPTER 3 - Intention to Create Legal
Relations
What are the requirements of a legally binding contract? - answer1. Offer
2. Acceptance
3. Intention to create legal relations
4. Consideration
5. Capacity
Is an objective or subjective test applied to the intention to create legal relations? -
answer Objective - would a reasonable person regard the agreement as intended to be
binding?
Court seeks to give effect to the parties intentions, whether expressed or presumed.
What is an intention to enter into legal relations? - answer An intention to enter into an
agreement with legal ramifications.
When is an intention to create legal relations presumed? - answer Commercial
agreements.
This presumption must be rebutted by the party alleging that there was no ICLR. The
burden of rebutting this presumption is a heavy one.
How can the presumption of intention to create legal relations be avoided in commercial
agreements? - answerBy using clear wording - ambiguous wording is unlikely to be
enough to rebut the presumption.
E.g., saying 'subject to contract' - creates strong inference that parties do not intend to
be bound until formal execution of contract.
Does an agreement that states 'subject to contract' demonstrate an ITCL? - answerNo -
this creates a strong inference that the parties do not intend to be bound until formal
execution of a contract.
What is a commercial agreement? - answerIncludes between two businesses, or
between a business and an individual, and between individuals.
Is an ICLR presumed in domestic or social agreements? - answerNo - no presumption
of ICLR in domestic setting.
Relations
What are the requirements of a legally binding contract? - answer1. Offer
2. Acceptance
3. Intention to create legal relations
4. Consideration
5. Capacity
Is an objective or subjective test applied to the intention to create legal relations? -
answer Objective - would a reasonable person regard the agreement as intended to be
binding?
Court seeks to give effect to the parties intentions, whether expressed or presumed.
What is an intention to enter into legal relations? - answer An intention to enter into an
agreement with legal ramifications.
When is an intention to create legal relations presumed? - answer Commercial
agreements.
This presumption must be rebutted by the party alleging that there was no ICLR. The
burden of rebutting this presumption is a heavy one.
How can the presumption of intention to create legal relations be avoided in commercial
agreements? - answerBy using clear wording - ambiguous wording is unlikely to be
enough to rebut the presumption.
E.g., saying 'subject to contract' - creates strong inference that parties do not intend to
be bound until formal execution of contract.
Does an agreement that states 'subject to contract' demonstrate an ITCL? - answerNo -
this creates a strong inference that the parties do not intend to be bound until formal
execution of a contract.
What is a commercial agreement? - answerIncludes between two businesses, or
between a business and an individual, and between individuals.
Is an ICLR presumed in domestic or social agreements? - answerNo - no presumption
of ICLR in domestic setting.
