Intention to create legal relations (UK): objective test, puff and domestic agreements

What is the legal definition of intention, and when is something just a puff or a joke rather than a binding promise? In short, intention to create legal relations is decided case by case on an objective test, it is presumed in commercial dealings, and advertising puff and most domestic arrangements fall outside it. This page is part four of my series on what makes a contract legally binding, after the offer, acceptance and consideration.

How courts decide intention case by case

The contract law element of intention, also known as intention to create legal relations, is determined by a court on a case-by-case basis. It is a question of fact, decided by reference to the particular facts of the case. A judge will consider all the circumstances and then decide whether the intention to create legal relations was present or not.

There is no checklist that settles it in advance. The same words can show intention in one situation and not in another, which is why the surrounding facts matter so much. Who the parties are, how they dealt with each other, what was said before and after, and whether anything was written down will all feed into the decision. In practice this means that if you ever have to argue that a contract exists, you will be arguing about facts, not abstract legal principles, so the records you keep at the time are what count.

Presumption of intention in commercial deals

When it comes to commercial transactions, meaning dealings between businesses, the intention to create legal relations is presumed. The starting point is that there is indeed an intention to create a legal contract.

For business owners this is important. If you negotiate terms with another business and reach agreement, the law assumes you both meant it to be binding. The party arguing that there was no intention has to displace that presumption. It cuts both ways: it helps you hold a supplier or customer to what they agreed, but it also means you should not assume that a quick commercial agreement, reached informally, is something you can walk away from because it was never "formalised".

Acceptance by conduct and the burden of proof

The position is different if you are relying on a contract where the acceptance happened by conduct. Acceptance by conduct is when a party does not expressly state that they agree or accept the offer, but instead acts as if they had accepted it. In that case the intention to create legal relations needs to be proven by you, the party relying on the contract. You cannot simply point to the presumption. If you have started work on the strength of someone's conduct rather than a clear yes, be aware that you carry the burden of showing that both sides intended to be bound, and gather the evidence that supports it.

The objective test of intention

Intention is an objective test, not a subjective one. We do not look at the person who accepted the contract and try to work out whether, in their own thoughts and feelings, they actually meant to create legal relations. Instead we look at the facts and circumstances of the case and ask what they show to a reasonable observer. This is the same approach the law takes to the offer itself: it protects the party who reasonably relied on what was said, rather than the party who later claims they did not really mean it.

Mere puff vs intention to be bound

One of the things to consider is whether the offer or acceptance carried real intention, or whether it was just a puff or a joke. Puff is the opposite of something that has the intention of being legally binding.

The classic example is a marketing puff. When an energy drink brand says that if you drink their product you will get wings, that is not a legally binding promise being made to you. It is just marketing puff. So when is something a puff rather than an offer with intention? It is just a puff if, to the other party, it should have been obvious that it was indeed just a puff. The objective test does the work again: a reasonable person does not expect wings, and the brand knows nobody will hold them to it.

Avoid vague terms when drafting

A practical tip now that we understand intention: when drafting your contracts, do not make them too vague. If a contract is too vague it is possible, and likely, that it will be recognised as legally invalid because of a lack of intention. Vagueness suggests the parties had not got as far as intending to be bound by anything specific.

An example from the family context shows the point. If an ex-husband tells his ex-wife that she can stay at his house because her mother has died, the law typically would not recognise that as an offer with the intention of being legally binding. It is unclear how long she can stay and on what terms. Without that detail, there is nothing the law can hold him to.

The lesson for business is to spell out what each party is committing to. The fuller and clearer the terms, the easier it is to show that both sides intended legal consequences. Vagueness also overlaps with the separate element of certainty, which I cover in the next part, so an agreement that is too loose can fail on two fronts at once.

Are domestic agreements legally binding?

Domestic contracts, meaning arrangements between partners or family members, are typically not recognised by the courts as legally binding, because the intention to have legal consequences is missing.

If you and your partner agree that you will cook and your partner will wash the dishes, that is not going to be recognised as a legal contract. It is unlikely that either of you intended that, if the dishes went unwashed, you could sue and claim against your partner. The arrangement is real, but it is not meant to have legal consequences. The same thinking applies to many informal arrangements between relatives and friends: the law starts from the position that people in those relationships do not usually mean to create rights they can enforce in court.

Are prenuptial agreements legally binding?

That does not mean you cannot have legally binding contracts between partners. Prenuptial agreements are the obvious example. So long as a prenup is professionally drafted, all of the elements of a legally binding contract are present, and each partner has received independent legal advice, that contract has a very good chance of being recognised as legally binding. The difference from the cooking example is that both parties plainly intend legal consequences and have taken steps to show it.

The last element: certainty

We have now covered the offer, acceptance, consideration and intention to be legally bound. The final element is certainty of terms, and the next part of the series covers certainty in contract law.

Next steps

If you want an arrangement to be enforceable, make the intention obvious: put specific terms in writing, avoid vague language, and, where the other side is a family member or partner rather than a business, consider whether the presumption of intention will help you at all. For agreements that matter, have a commercial solicitor draft or review them so the intention to be bound is clear on the face of the document.