There must be an intention among the parties that the agreement should be attached by legal consequences and create legal obligations. Agreements of a social or domestic nature do not contemplate legal relations, and as such they do not give rise to a contract. An agreement to dine at a friend’s house in not an agreement intended to create legal relations and therefore is not a contract. Agreements between husband and wife also lack the intention to create legal relationship and thus do not result in contracts.

Try to work out the solution in the following cases and then go to the answer.

Illustrations.
(a) M promises his wife N to get her a necklace if she will sing a song. N sang the song M did not bring the necklace for her.
(b) The defendant was a civil servant in Ceylon. He and his wife were enjoying leave in England. When the defendant was due to return to Ceylon, his wife could not accompany him because of her health. The defendant agreed to send her £ 30 a month as maintenance expenses during the time they were thus forced to live apart. She sued for breach of this agreement.

Answers
(a) N cannot bring an action in a court to enforce the agreement as it lacked the intention to create legal relations.
(b) Her action was dismissed on the ground that no legal relations had been contemplated and therefore there was no contract.(Balfour vs. Balfour)

In commercial agreements an intention to create legal relations is presumed. Thus, an agreement to buy and sell goods intends to create legal relationship hence is a contract, provided other requisites of a valid contract are present. But if the parties are under a legal obligation, even a business agreement does not amount to a contract. The case of Rose & Frank co, vs.Crompton & Brothers Ltd. Provides a good illustration on the point.

Illustration In the above case R Company entered into an agreement with C Company. By means of which the former was appointed as the agent of the latter. One clause of the agreement was as follows. “This arrangement is not entered into as a formal or legal agreement. And shall not be subject to legal jurisdiction in the law courts.” It was held that there was no intention to create legal relations on the part of parties to the agreement and hence there was no contract.