Another way of distinguishing between contracts that should and should not be enforced and protected by law.
Balfour v Balfour (1919)- general position is that there is no intention to create legal relations in domestic arrangements, and therefore such arrangements are not enforceable as contracts.
“Agreements such as these are outside the realm of contracts altogether. The common law does not regulate the form of agreement between spouses”
BUT Merritt v Merritt (1970)- Denning argues that Balfour does not apply to an agreement made at separation, i.e. following the breakdown of a marriage. The test for intention is an objective one, i.e. not what the parties themselves concluded.
Jones v Padavatton (1969)- court in this case found a lack of intention in domestic arrangements, but the minority decision leaves the door open for intention to create legal relations to be found if the duration of the agreement was certain.
Builds from Balfour that there is no intention in such circumstances. It is also argued that quasi-legal arrangements (i.e. an arrangement that appears to have legal importance) will also lack intention.
Whether there is intention or not is generally an OBJECTIVE test (what would the reasonable person conclude?) However this presumption can be rebutted in three circumstances:
John Sadler v George Reynolds (2005)- burden of proof when rebutting the presumption that there is no intention lies with the person looking to prove that there IS an intention to create legal relations.
General presumption is that there IS intention in commercial arrangements- Edwards v Skyways Ltd (1964).
Esso Petroleum Ltd v Commissioners of Customs and Exise (1976)- Esso gave customers a free World Cup coin with 4 gallons of petrol.
Question- were they liable for VAT on the coins?
- Clear that it was a commercially viable scheme even though coins themselves had no intrinsic value
- Really an exception to commercial arrangements general point? Or refining of consideration issue?