LLB202 Study Guide - Final Guide: Exxon, Kleinwort Hambros, Skyways Limited
. INTENTION TO CREATE LEGAL RELATIONS pg 120
4.1 Statement of rule
To create a contract there must be a common intention of the parties to enter into legal
obligations, mutually communicated expressly or impliedly.
Rose and Frank Co v JR Crompton & Bros Ltd [1923] 2 KB 261 at 293
The test of whether the parties intended to create legal relations is objective. The court
does not look into the minds of the parties, but whether a reasonable person would regard
the agreement as intended to be binding.
Ermogenous v Greek Orthodox Community of SA Inc. (2002) 209 CLR 95
The following factors are relevant in making an objective determination of the parties’
intention:
1. The subject matter of the agreement
2. The status of the parties to the agreement
3. The parties’ relationship to one another (if any)
4. The language used by the parties
5. The subsequent conduct of the parties
6. The context in which the agreement was made
Ermogenous v Greek Orthodox Community of SA Inc. (2002) 209 CLR 95
This objective approach replaces the traditional approach which involved presumptions
that were said to arise in particular contexts.
Thus, in the case of domestic or social agreements (ie those between family members or
friends) the presumption was against there being an intention to create legal relations, but
this presumption could be rebutted these.
By contrast, in the case of commercial agreements there was a presumption that there was
an intention to create legal relations, and this presumption was more difficult to rebut.
In Ermogenous the High Court cast doubt on the usefulness of presumptions of this kind
and instead replaced this traditional approach with the objective approach which balances
the salient features of the particular case.
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Document Summary
To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly. Rose and frank co v jr crompton & bros ltd [1923] 2 kb 261 at 293. The test of whether the parties intended to create legal relations is objective. The court does not look into the minds of the parties, but whether a reasonable person would regard the agreement as intended to be binding. Ermogenous v greek orthodox community of sa inc. (2002) 209 clr 95. This objective approach replaces the traditional approach which involved presumptions that were said to arise in particular contexts. Thus, in the case of domestic or social agreements (ie those between family members or friends) the presumption was against there being an intention to create legal relations, but this presumption could be rebutted these.
