There is a strong presumption that a trade agreement is supposed to be legally binding, especially if the parties expect to obtain a benefit. Arguing against this assumption can be difficult. ⇒ national agreements are generally not considered legally binding, but trade agreements are generally considered legally binding. However, in a recent case (Mckins v Gros [2017] EWHC 46 (QB)), this is exactly what the Court did. The Court confirmed the importance of “certainty” in determining whether the parties intended to enter into a legally binding agreement. The case concerned a meeting between the parties that took place at a dinner in a restaurant. One party agreed to give up employment with an investment bank in order to provide services to the other in order to maximize the return on the sale of its business. The parties discussed a mechanism for calculating costs. After the meeting, emails were exchanged describing the agreement “in the headlines” and the importance for the parties to be “fully aligned” and the need to enter into an “appropriate contract.” ⇒ Since the intention to establish a legal relationship is a presumption of the intention of the parties to be legally bound, it is possible that this presumption can be rebutted. Finally, are there other remedies available to the applicant? In this question, it will be examined individually.
It states that a contract is an agreement (or set of promises) between two or more parties that involves the creation of legal rights and obligations enforced by the courts. It must be consensual and a valid contract will be enforceable in court. But how to see the parties. For a contract to be concluded, the contracting parties must intend to establish legal relations. As a rule, the existence of a counterpart will prove this – if the promisor has declared something as the price of the promise, this – in most cases – implies the intention that the parties are bound. Research: “Intention to create legal relationships” in Oxford Reference » This area of law is hotly debated with differing views on the concept of intention to create legal relationships and its real importance in the drafting of contracts. The concept of intention to create legal relationships is problematic because it is essentially a legal fiction. Hedley argues that when presumptions are exercised under current law, “it is emphasized that the parties must have had an intention or another that compels the courts to invent an intention,” which has led to the objective approach to determining legal intent. He argues that cases such as Balfour, where such an intention has not been proved, have been decided on the basis of “what the law should regard as intentional” rather than on the actual intentions of the parties, so that this is a matter of policy rather than fact (Stephen Hedley, “Keeping Contract in its Place – Balfour v Balfour and the Enforceability of Informal Agreements” (1985) 5 OJ No. LS 391, 396).
Therefore, this is an area where policy takes precedence over the applicability of justice in judicial decisions. An objective approach is taken to determine whether there is contractual intent; It does not matter that a party secretly did not intend to be legally bound if it appeared to a reasonable observer that it had done so. However, this principle can be crucial in deciding whether an agreement is legally binding, as evidenced by the recent Blue v Ashley (2017) EWHC case in 1928. The case concerned an agreement between Mr Michael Ashley, owner of Sports Direct Group, and Mr Jeffrey Blue, a management consultant, which stipulated that if Mr Blue could guarantee the share price of Mr Ashley`s company at more than £8 per share, Mr Ashley would pay him a bonus of £15 million for his services. The deal was struck in a pub with other Sports Direct representatives and the company`s share value reached more than £8, but M. Ashley claimed the deal was just a “skirmish” and refused to pay the bonus to Mr Blue. From: Intention to create legal relationships in a law dictionary » The legal principles that have developed in this area of law and that have led to the traditional separation between “domestic and commercial relations” are firmly entrenched and actively applied in practice, as evidenced by case law. This shows how the intention to create legal relationships led to the creation of a comprehensive body of law, which is now invaluable in contract law. It could be argued that a subjective approach to the intention to establish legal relationships would lead to an increase in actual contracts, but objective scrutiny allows courts to filter out unnecessary details that help them assess the facts more effectively and increase legal certainty, which is why it is preferable. Some scholars argue that the intention to create legal relationships is a legal fiction created by the courts, as it is simply a matter of policy that allows them to regulate the conclusion of the contract, and is therefore not a strictly legal requirement for entering into the contract.
Case law such as Blue v. Ashley (2017) shows how the intention to create legal relationships can be the crucial consideration by which the court decides whether a contractual agreement exists and turns the case around. This underlines that under current law, the intention to establish legal relationships remains a necessary element in the drafting of contracts. Sometimes the parties may agree that they are not legally bound. The courts generally respect this clause as they would any other, unless the agreement is invalid for any other reason. However, such agreements may complicate the interpretation of the nature of the promise. The above principle for domestic relationships usually refers to spouses living happily together, the main authority being Balfour v Balfour (1919) 2 KB 571. ⇒ If the contract is in writing and indicates that the parties intend to create a legally binding contract, this is usually sufficient. ⇒ Some other useful legal resources for concluding an agreement in contract law: Commercial relations: In the case of business relationships, it is generally assumed that the parties intend the agreement to be legally binding. In his judgment in the High Court, Justice Leggatt dismissed Mr Blue`s action. This was done on the grounds that the parties did not want Mr. Ashley to be legally bound by the rather extravagant promise he made to Mr.
Blue. The judge made a number of remarks; The main reason was that a drinking night at the pub was an unlikely setting for formal contract negotiations. In addition, Mr Blue was unable to achieve the target of raising the share price above GBP 8. After all, it would certainly have been irrelevant to Mr. Ashley to make such a promise. ⇒ The employment contract may stipulate that certain conditions depend on the collective agreement of the employer and the unions – is there an intention to establish legal relations? In the present case, an agreement on the payment of monthly maintenance by the wife, concluded in the case of a happy marriage between husband and wife, was found to be legally unenforceable. This was later distinguished in Merritt v. Merritt [1970] AC 806, where the presumption was successfully rebutted and the intention to establish a legal relationship between a separated husband and wife was established. The court will objectively analyze all factors before concluding whether there is an intention to establish legal relationships in such cases.
