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Lecture 3 Intention to create legal relations Rose & Frank Co v JR Crompton & Bros Ltd - Parties can expressly exclude the intention - “This arrangement is not entered into, not is this memorandum written, as a formal or legal agreement, and shall not be subject to legal jurisdiction in the Law Courts either of the United States or England, but it is only a definite expression and record of the purpose and intention of the three parties concerned to which they each honourably pledge themselves with the fullest confidence, based on past business with each other, that it will be carried thought by each of the three parties with mutual loyalty and friendly cooperation.” Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117 (world cup soccer coins) - Absence of ITCLR may be inferred Banque Brussels Lambert SA v ANI - Letters of comfort or support - ‘not our intention to reduce our shareholding in SHL [2(a)]. We would, however, give you 90 days’ notice of any subsequent decisions by us to dispose of this shareholding [2(b)], … - ‘we…confirm it is our practice to ensure our affiliate SSL will at all times be in a position to meet its financial obligations..[3] - “There should be no room in the proper flow of commerce for some purgatory where statements made by businessmen, after hard bargaining and made to induce another business person to enter into a business transaction would, without any express statement to that effect, reside in a twilight zone of merely honourable engagement.” Masters v Cameron - Letters of intent; also preliminary agreements might raise issues of ITCLR - ‘Agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my (Cameron’s) solicitors on the above terms and conditions, and to the giving of possession on or about 15 March 1952’ Three classes of case (remember it is a Q of construction whether intention exists or not) I. The Parties intend to be bound immediately, but propose to restate the terms in a form which will be fuller or more precise, but not different in effect; [ITCLR NOW] II. The Parties have agreed on all the term of their bargain, and do not intend to vary those terms, but have made performance conditional upon the execution of a formal document; [ITCLR NOW, PERFORMANCE CONDITIONAL ON SECOND DOCUMENT] III. The Parties do not intend to make a binding agreement at all unless and until they execute a formal contract, in which case, the terms of the agreement are not intended to have any binding effect [NO ITCLR UNLESS AND UNTIL SECOND DOCUMENT] -

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Q of construction: The question depends upon the intention disclosed by the language the parties have employed and no special form of words is essential to be used in order that there shall be no contract binding upon the parties before the execution of their agreement in its ultimate shape. Nor is any formula, such as ‘subject to contract’, so intractable as always and

necessarily to produce that result - A fourth class ? Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (per McLelland J): “one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent additional terms.” - See the case book pages 159 to 160 at [5.105] for comments on this. Notes Giles JA in Tasman Capital Pty Ltd v Sinclair (2008) 75 NSWR 1 at [26] – the categories of case are intellectual aids: it is a matter of objectively ascertaining intention. Categorisation does not greatly contribute to this decision which is concerned with finding what case, if any, the parties came to. Administration of PNG v Leahy - Government agreements – policy positions in administrative documents Ermogenous v Greek Orthodox Community of SA - Because the search for the ‘‘intention to create contractual relations’’ requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. - Although the word ‘‘intention’’ is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties - Relevant factors include: subject matter of the agreement, status of the parties to it, their relationship to each other, and other surrounding circumstances’ (at 105) Kleinwort Benson Ltd v Malaysia Mining Corp Berhad - ...it is our policy to ensure that the business of [the subsidiary company]...is at all times in a position to meet its liabilities to you under the [loan] agreement Balfour v Balfour - They are not sued upon, not because the parties are reluctant to enforce their legal rights when the agreement is broken, but because the parties, in the inception of the arrangement, never intended that they should be used upon. Agreements such as these are outside the realm of contracts altogether. The common law does not regulated the form of agreements between spouses. Their promises are not sealed with seals and sealing was. The consideration that really obtains for them is that natural love and affection which counts for so little in these cold courts…I think the onus was on the plaintiff, and the plaintiff has not established any contract. - Approved by HCA in Cohen v Cohen (1929 ) 42 CLR 191. Todd v Nicol - Text of letters and cables on page 149, 150 of PRD case book (13th edition) - Mayo J - Regard may be had to the subsequent conduct and communications between the parties for the purpose of discovering whether the intention to be attributed to them was to make a binding agreement or otherwise - If the former, what the parties understood the terms to be – acts may be used to remove uncertainty or to explain, but not to contradict the language used

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‘if an intention to enter into an enforceable undertaking does not appear by the express terms of the engagement, it must be capable of being property read into the provisions. The language used, the relative situation of the parties to the understand, may be such as to indicate no such intention was present…when the circumstances or conduct demonstrate that no such purpose was present, it will not be imputed. - If the arrangement by its terms indicates that the plan is merely to take effect as an honourable pledge, or is not to be followed by any legal consequences, it will not have legal enforceability attributed. - The intention must be that of all parties. Where the parties are ad idem consensu, a common purpose will be attributed to them. Administration of PNG v Leahy - “The work done by the Administration was analagous to a social service which generally does not have as its basis a legal relationship of a contractual nature and from which no right of action would arise in favour of the citizen who is receiving the services if the Government acts inefficiently in performing them...”...