Intention to Create Legal Relations

• Author: John D. McCamus
• Pages: 112-138

112

CHAPTER 4

INTENTION TO CREATE

LEGAL RELATIONS

A. INTRODUCTION

An agreement entered into by two parties w ill be enforceable only if the

parties have entered into the agreement with the intention of creating

legal relations. Social arrangements, for example, are often made with-

out any intention that a legally enforceable agreement has been created.

In a leading case,1 this proposition was illustrated with reference to

an agreement by two parties to take a walk together, or a situation in

which hospitality is offered and accepted. No one would suggest that,

in ordinary circumstances at least, such arrangements would be ex-

pected by the partie s to result in contracts enforceable at law. Similarly,

the many agreements entered into by family members with respect to

the details of daily life are not normally expected to be enforceable.

Unsurprisingly, an Ontario court has held that election promises by

politicians are not ex pected to create binding contracts.2 In commercial

contexts, it is less likely that agreements would be entered into with-

out an expectation of enforceability. Nonetheless, there are a variety of

commercial situations in which parties might wish to have an under-

standing th at does not engage the full majesty of legal enforceability. As

we shall see, courts have generally assumed an absence of intention to

1Balfour v. Balfour, [1919] 2 K.B. 571 (C.A.).

2Canadian Taxpa yers Federation v. Ontario (Minister of Finance) (2002), 73 O.R.

(3d) 621 (Ont. S.C.J.).

Intention to Creat e Legal Relations113

create legal relations in family and social settings and a presence of an

intention to create legal relations in commercial settings. The test for

the presence of the intention is objective. Thus, a promisor’s private in-

tention that no enforceable agreement be created will not prevail if the

conduct of the promisor is such that the promisee reasonably believes

that a binding agreement is intended.3

The requirement that parties must intend legal relations is obviously

one of a cluster of doctrines designed to isolate from the universe of

promising behaviour those promises and agreements that are appro-

priately subject to legal enforcement. Thus, the doctrine is evidently

related to the rules of offer and acceptance4 and the doctrine of con-

sideration.5 Indeed, it is sometimes suggested that the doctrine of inten-

tion is indistinguishable from one or both of these doctrines.6 Ty pic al ly,

however, the doctrine is treated separately and it can be distinguished,

if narrowly, from those related doctr ines. The doctrine of consideration

holds that a promise will be enforceable where it is made in return for

something of value given by the promisee. In effect, consideration doc-

trine limits enforceability to promises made as part of a bargain. There

may be many bargain s, however, especially in non-commercia l settings,

which fail to meet the enforceability threshold, not because of the ab-

sence of consideration but, rather, because the partie s had no intention

of creating legal relations. Nonetheless, at the margins of the doctrine

of consideration, as we shall see,7 it appears that courts are more likely

to f‌ind the existence of consideration in c ircumstances where the court

believes that the parties intended to create a legally binding relation-

ship. The rules of offer and acceptance, on the other hand, are de signed

to determine whether the communications b etween negotiat ing parties

are such that a true consensus ad idem has been achieved on the term s of

the agreement. This is not the objective of the requirement of intention

to create legal relations. On the other hand, in determining whether or

not a particular communication amounts to an offer, we have seen that

it is relevant to consider whether the offeror intended that the offeree

3See generally A. R obertson “The Limits of Voluntar iness in Contract” (2005), 29

Melbourne U.L. Rev. 179; M. Pratt, “Promi ses, Contracts, and Voluntar y Obliga-

tions” (2007), 26 Law & Phil. 531.

4See Chapter 2.

5See Chapter 7.

6See, for example, R. Tuck, “Intent to Contrac t and Mutuality of Assent” (1943)

21 Can. Bar Rev. 123; B. Hepple, “Intention to Cre ate Legal Relations” (1970) 28

Cambridge L.J. 122.

7See Chapter 7, Section B(1).