Intention to

form a contract
Legal intention to
form contract

• The Indian Contract Act, 1872 does not say

anything specifically about the legal intention
to form a contract.
• However, according to the English law, the
element of legal intention to form a contract
has to be established.
Do all agreements form contracts?

No.
There can be agreements where at the time
of making them the parties did not intend to
be legally bound by it.
These agreements are merely arrangements
between the parties and do not form legal
contracts.
They are not enforceable in a court of law
because of lack of legal intent.
 • Balfour vs. Balfour (1919)
Defendant and plaintiff were married. They were spending
Between their vacation in England. Defendant was posted in Ceylon. At
the time of leaving for his job, he promised his wife to pay a
husband monthly amount of £30.
He paid the amount for the first few months. However,
and wife following a disagreement, the couple separated and the
defendant stopped paying the monthly amount.
The plaintiff filed a suit for breach of contract and claimed the
amount.
Was there a contract making the defendant liable to pay?
• No.
• This was merely an arrangement between the parties and during
the time when the promise was made, none of them intended to
make it a binding contract.
• Thus, family and friends making an arrangement among
themselves does not amount to a binding contract as there is
absence of legal intention.
Merritt vs. Merritt (1970)
• Husband promised his wife that he will transfer the matrimonial
home in her name.
• The couple separated after few years but the home was not
transferred.
• The wife filed a suit for breach and demanded the house to be
transferred to her name.

Was there a legal intention to be bound when the promise was made?
 3 women – including a mother and daughter duo
along with their paying guest entered a crossword
puzzle competition in the mother’s name.

After winning the competition, the mother

Simpkins refused to share the winning prize amount with
the others.
vs. Pays Is she legally bound to do so?
(1955)
Was there a legal intent to make the agreement
binding?
• The court held that there was a common intention to share the prize money if they won
– at the time of making the arrangement.
• An ordinary person would infer the same from their actions.
• Therefore, the mother is legally bound by the agreement and is liable to share the prize
money with the others.
What is legal intention?
• Legal intention signifies that at the time of making such agreement
the parties must have the knowledge (intention) that if such
agreement is breached then there will be a legal consequence of the
same upon them.

• Such legal intention can be both expressed or objectively inferred

from the action of the parties.
How is legal intention determined?
Test of objectivity
• Whether there was a common legal intent among the parties to be
bound by the agreement must be inferred from how an ordinary
person would perceive such intent in such situation.

• The test of determining legal intention should not be subjective.

In commercial transactions
• There is always a presumption that there was legal common legal intent among the
parties to be bound by the agreement.

• Any rebuttal to such presumption must be done by the person who challenges the
presence of such legal intent.
- CWT vs. Abdul Hussain Mulla Mohd. Ali
(1988) 3SCC 562.
• Therefore, the burden of proof lies with the person challenging the presumption of
legal intent.
Rose
and • A commercial agreement was signed between an
American company and two British companies.
Frank Co • There was a clause in the agreement stating that
the parties do not intend to make this agreement
vs. binding and in case of dispute, no court either in
USA or Britain will have jurisdictions to decide.

Crompto • There was a dispute and one party filed a suit.

n Bros. • Is there a breach of contract?

(1923)
General offers and
specific offers
Specific
Offers
• As a general rule, the offeror can
make the offer to a specific
individual who accepts the offer
and the contract is formed
between them.
 Weeks vs Tybald (1605)
• This case reflects the old position regarding thew principles of offer and acceptance in a contract.

• Defendant promised to pay £100 to anyone who marries his daughter. Plaintiff married Defendant’s
daughter and claimed the money. Defendant refused by saying that he did not make the offer with
the Plaintiff specifically. Therefore, there was no contract between them.

• The court also affirmed the Defendant’s position that since said offer was not made to Plaintiff
specifically therefore, there was no contract between them. Thus, Defendant was not bound to pay.
New Position
• This legal position however, was soon overruled in several cases.
• Most important among them was the case of Carlill vs. Carbolic
Smoke Ball Company (1892)
Carlill vs. Carbolic
Smoke Ball Company
(1892)
Defendant 1. We did not intend to enter into the contract. The
advert was a mere puff.

’s 2. We cannot enter into a contract with the whole

world and the contract was not made

Contentio 3.
specifically with the plaintiff.
Given the first two contentions are not

ns: accepted, the plaintiff did not communicate her

acceptance to us. So we are not bound.
What did the court say?
• 1. The fact that you mentioned in the advert that £1000 has been deposited in
Alliance bank as a proof of your sincerity about the offer, therefore, it is evident of
your intention to enter into a contract.

• 2. Yes, it is true that one cannot enter into a contract with the entire world. But,
since this was a continuing offer, a contract has been formed with everyone who
has accepted your offer.

• 3. Sometimes offers can be accepted even by actions of the offeree and need not
be specifically communicated to the offeror. By buying the product and using it
according to the instructions provided – Mrs. Carlill has accepted the offer
through her actions.
Lakshman Shukla vs Gauri
Datt
• In this case, Defendant’s grandson went missing. She sent her servant to find him.
• Meanwhile, she circulated pictures of the missing child with a reward. Plaintiff (the
servant) brough the child back home and claimed the reward.
• Court ruled that since Plaintiff was unaware of the offer, therefore, he cannot accept the
offer and there was no contract between them.
• Therefore, for the offer to be complete – knowledge of the offer must be necessary.
 • Your dog goes missing.

Lost Dog
• You post an advert with a reward.
• A brings back your dog and claims the reward.

Example: • Where is communication of the acceptance in this

case?
2nd scenario of
the lost dog
example

• What if the advert specifically

mentioned that whoever finds the dog
has to first make you a telephone call
and share the news. This is a must to
claim the reward.

• A forgot to make the call but brought

your dog back.

• Can he claim the reward?