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Whether intention to create legal relation is an essential to create a contract?

Contracts must not be the sports of an idle hour, mere matters of pleasantry and badinage, never intended by the parties to have any serious effect whatever.”

The intention of the contracting parties that their agreement should have serious effect has emerged as a requirement for the formation of a valid contract. The ‘intention to create legal relation’ was not necessary initially at common law for a binding contract to emerge. The doctrine made its way into the common law in the nineteenth century as an answer to the question as to whether gratuitous promises are enforceable. However, merely offer and aspiration to fulfill promises creates a moral obligation to perform it. the question before us is, whether it creates legal obligation? If the promise so made is non-gratuitous i.e, involving the return benefits to the promisor, it will be enforceable in nature due to presence of consideration.

Another question rises before us, whether a gratuitous promise not involving a return benefit to the promisor, actionable?

Sir William Markby in his paper ‘Elements of Law Considered with reference to the principles of General Jurisprudence’ insisted;

            “There are agreements which will be considered not to be contracts because this legal relation is not contemplated is, I think, abundantly clear. Suppose, for example, that two friends A & B agrees to walk together at a definite time and in a definite direction, no one would say that there is a contract, and yet, it is clearly an agreement, and there is also a consideration for the promise of each. The reason and the only reason why it is not a contract is, as far as I am aware, that the parties presumably, do not contemplate a legal relation.”

Pothier another renowned jurist notes the possibility of the promises being made, ‘without any intention of giving the person to whom they are made, a right of demanding their performance,’ can not construed as a valid contract. It may be though enforceable in their personal capacity but such promises cannot be framed into contract unless it welcomes the legal consequences.

Influenced by Pothier’s translated treatise on the law of obligations, it has now become an established principle of common law that in spite of an offer and its acceptance, there is still no binding contract unless it is made in the contemplation of legal consequences. Thus, is can be construed that an agreement in order to become a contract must be one in which the parties contemplate the creation of a legal relation between themselves.

Following postulates emerged from the decision in Banwari Lal and Ors v Sukhdarshan Dayal 1973 on question, whether intention to create legal relation is essential to create a contract?

  • An intention to create a legal relationship is a requisite for the enforcement of an agreement.
  • An agreement stipulating that it is entered into with the intention of entering into a legal relationship, is no doubt, a contract.
  • An express stipulation to that effect is, however, no necessary. Every agreement is generally, presumed to have been entered into with such an intention.

The postulates of exclusion from the contract pointed out in Rajabu Fathima Buhari and anr v SV Ramakrishna Mudaliar and ors 1973 the attention were drawn to the paper of Roy Milner Stonham in Law of Vendor and Purchaser that mere agreement, or promises, intended to create mere social, political or family obligation or obligations, or understood by both parties as a jest, do not create a contract. There must be an intention to create obligation enforceable between the parties by legal sanctions. In other word, it must be intended to create jural relations. This intention is sometimes referred to a an animus contrashendi. mere statements of intention, hope, anticipation, or expectation do not create enforceable obligations. An agreement intended to create moral obligations only, and not legal rights or obligations, does not create a contract. Also, the agreement may be subjected to a third person’s consent, or any other conditions precedent to it becoming operative as an enforceable agreement. An agreement, though purporting to be made by one party, without prejudice to his rights, will operate according to its tenor and affect the right of the party accordingly. A stipulation whose enforcement against the party concerned rests upon his mere will, has no contractual effect.”

The silent feature pointed in Rajabu Fathima case are;

  • Parties may exclude intention to create legal relationship by expressly declaring so in the agreement.
  • The words inserted in the agreement to exclude legal relations must be specific and not ambiguous.
  • Any ambiguity in expression of the exclusion of intention will result in presumption of intention and not exclusion.

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