Intention to Create Legal Relations

• Author: John D. McCamus
• Pages: 118-145

118

CHAPTER 4

INTENTION TO CREATE

LEGAL RELATIONS

A. INTRODUCTION

An agreement entered into by two part ies will 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 cre ated.

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

agreement by two partie s to take a walk together, or a situation in which

hospitality is offered and accepted. No one would suggest that, in ordi-

nary circumstances at least, such arrangements would be expected by

the parties to re sult 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. Unsurpris-

ingly, an Ontario court has held that election promises by politicians

are not expected to create binding contracts.2 In commercial contexts,

it is less likely th at agre ement s would be entered i nto w ithout an e xpec-

tation of enforceability. Nonetheless, there are a variety of commercial

situations in which parties might wish to have an understanding that

does not engage the full majesty of legal enforceability. As we shall see,

courts have generally assumed an absence of intention to create legal

1 Balfour v Balfour, [1919] 2 KB 571 (CA).

2 Canadian Taxp ayers Federationv Ontario (Minister of Finan ce) (2002), 73 OR

(3d) 621 (SCJ).

Intention to Creat e Legal Relations119

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 intention that

no enforceable agreement be created will not prevail if the conduct of

the promisor is such that the promisee reasonably believes that a bind-

ing agreement is intended.3

The requirement that parties must intend legal relations is obvi-

ously one of a cluster of doctrines designed to is olate f rom the un iver se

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 consid-

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

tion is indisting uishable 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 doctrine s. The doct rine 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

doctrine limits enforceability to promises made as part of a bargain.

There may be many bargains, however, especially in non-commercial

settings, which fail to meet the enforceability threshold, not because

of the absence of consideration but, rather, because the parties 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 circumstances

where the court believes that the parties intended to create a legally

binding relationship. The rules of offer and acceptance, on the other

hand, are designed to determ ine whether the communications between

negotiating parties are such that a true consensus ad idem has been

achieved on the terms 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 part icular communication amounts to

an offer, we have seen that it is relevant to consider whether the offeror

intended that the offeree could, by acceptance of the offer, create a

3 See generally A Robe rtson “The Limits of Voluntarine ss in Contract” (2005)

29 Melbourne UL Rev 179; M Pratt, “Pr omises, Contracts, and Volunta ry

Obligations” (2007) 26 Law & Phi l 531.

4 See Chapter 2.

5 See Chapter 7.

6 See, for example, R Tuck, “Intent to Contract and Mutu ality of Assent” (1943)

21 Can Bar Rev 123; B Hepple, “Intent ion to Create Legal Relations” (1970) 28

Cambri dge LJ 122.

7 See Chapter 7, Section B(1).