Pamela the intention to create legal relations or not.

Pamela Lee Kah Yee (16WBD05504)”All contracts are agreements but not all agreements are contracts.” Explain. Under the law of contracts, there must be components within parties before a contract can be formed. It also requires parties to contemplate clearly and fully the contents of contract, as well as the obligations. However, in most circumstances, agreements may not end up to be a contract, as some did not meet the requirements. This requirement is being treated as parties’ intentions, whether parties have the intention to create legal relations or not. As presumed by the law, agreements can be divided into 2 types, which is Domestic and Social agreements, as well as Business and Commercial agreements. Courts have given presumptions to both the areas, where there is no intention to create legal relation in domestic agreements, while in commercial, there is intention to create legal relations. Specifically, domestic contract are legal agreement about intimate relation such as family, friends and neighbours. Domestic contract can be apply in an agreement between a pair of spouses and contemplate their rights in the event of relationship end. Nevertheless, domestic contract are not legal unless it is written in writing and must be signed by both parties in the presence of witness. Under the law, it is stated that each pair of spouses have an equal rights to share value of the property. Hence, without the consent of one party, the property cannot be mortgage or sell. A great example for domestic agreement can be shown in Balfour v Balfour (1919) 2 KB 571, where couple went on a tour to England, then the wife fell sick and unable to return back with the husband. Here, the husband orally agreed to pay compensation each month to support her living in England. The husband then in breach of contract by not paying the compensation. It was held that, the wife could not claim the compensation as it was merely a domestic contract, where it was clearly shown that parties did not intend to form a contract, oppositely, if the couple wanted to enforced in future, they would have put it down in a written contract as an evidence. Apart from the general rule, an exception to this is happened in the case of Merritt v Merritt (1970) 1 WLR 1211, where parties were in an argument for the property that owned by the 2 the parties’ name. The husband had agreed to move the title of the property to the wife if she has done paying the mortgage. Upon completing the payment, the husband did not move the name under hers. It was held that, the decision is as opposite as in Balfour v Balfour case. The reason being that the couple have put this agreement down in a written contract. Meaning to say, there was a clear intention to create legal relation between the parties that they want the contract to be enforced in future once it is in breach. It can be seen that both the cases clearly shown that how the domestic and social contract works. The rationale behind the presumption of the domestic contract is that, it is unpractical for family, relatives, friends or neighbours to put everything down in a written paper, unless it is an important matter, parties would have thought about their intention to create legal relation. Secondly, it is also highly not practical to the court because court would need to hear unnecessary cases. It must be noted that, domestic and social agreements can also happen between parents and children, as seen in Jones v Padavatton, and also friends, as seen in Coward v MIB. Generally, a commercial agreement is legally binding between two or more parties which stated the rights and obligations of the parties to the concern in certain business dealing and transactions. Under the commercial agreement, it is necessary to enter into written contract in order to prove the existence of the contract when the contract is breach. Moreover, verbal contract may be enforceable if the contract included the basic requirements, also depends on how it is structured. Apart from that, courts have also presumed that the commercial agreements have intention to create legal relation, where in most circumstances, it takes into an account of consideration. In Kleinwort Benson Ltd v Malaysia Mining Corporation (1989) 1 WLR 379, where defendants sent a ‘comfort letter’ to request for loan from plaintiffs, it stated in there that “it is our policy at all times to ensure the business is in a position to meet its liabilities.” When the market fell into liquidation, plaintiffs claimed the money owed by defendants, where defendants argued that it was clearly stated in the ‘comfort letter’ that the statement made in the comfort letter does not carry any contractual effects, it was merely a promise of the parents company to ensure the company works, therefore the loans were provided. The court of appeal, upheld this justification, hence the exception for commercial agreement is a no intention to create legal relation. The general role of the commercial agreement is seen in Esso Petroleum Co Ltd v Customs & Excise (1979) 1 WLR 1, where Esso Petroleum promoted its promotion by stating that one coin of the World Cup would be given to every 4 gallons of petrol bought by a person. However, the issue arises as to whether this coins were ‘produced in quantity for general resale’, if so they would be subject to tax and Esso would be liable to pay the money. Esso argued that the coins were only gift and the promotion was not intended to have legal effect and also there was no resale for it. The courts held that there was an intention to create legal relation since it is promoted in a commercial context which raised the presumption that they intend to be bound. What can come to a conclusion for this subject matter is that it must be determined whether the intention was clear in order for that agreement to be enforced. If parties did not been into a contemplation, it is clear that there is no intention, hence the agreement will not be a contract or else, the contract will be formed. Therefore, in order to be in existence, an agreement must have been made, it takes into consideration of parties contemplation to its intention as well.The significance of the case of Carlill v Carbolic Smoke Ball Co in the law of contract. Under the law of contract, before a contract can formed there must be elements within the parties. The main element of a contract are the agreement between the parties, the intention, and consideration for the contract. There must be an offer and acceptance of offer before a contract enter into an existence. Thus, awarering that an offer has been made is important. Especially in this modern trading and commerce, would be hindered if there are no specific instance when an offer can be accepted, to bring into a legally binding contract between the parties. It is important to know that, what amount to an offer cannot be exaggerate if there is no existence of offer, there will be no acceptance that would enter into a valid contract.Under the contract of offer, there are two parties which is offeror and offeree. An offeror is a party who makes the offer and an offeree is to whom the offer has been made. To be more specific, an offer is an expression of willingness to contract made by the offeror with the intention to be bound when the offer is accepted by the offeree. The contract of offer can be divided into two types, which is unilateral offer and bilateral offer. The court have concluded that, an unilateral offer only involve one party, which is the offeror who has obligations, while a bilateral offer involve both parties, the offeror and offeree.Specifically, a unilateral offer is an offer made to the public and it requires the offeree to perform an act. Thus, unilateral contract can be only formed if it involve an action undertaken by offeree. The contract is enforced when the offeree performs the acts, as a result, the contract formed are legally binding. However, bilateral is different, where the agreement are form by an exchange of a promise. The promise of offeror is consideration that supports the promise of the offeree. Hence, in bilateral contract, both parties are be bound by the exchange of promise.A best example can be shown about the legal principles of unilateral offer which is Carlill v Carbolic Smoke Ball Co (1892) 1 QB 256, where during the epidemic of influenza, Carbolic Smoke Ball Company placed an advertisement stating that the smoke ball will cure flu and if it did not cure the flu, the buyer will be compensate. Mrs Carlill bought the smoke ball after seeing the advertisement. She uses it as directed but has caught influenza. She then, sued Carbolic Smoke Ball Co. However, Carbolic Smoke Ball Company did not take it into serious matter and refused to pay. It was held that Mrs Carlill are entitled for the compensation because a contract has been made and Carbolic Smoke Ball Co are bound under the contract law by the advertisement. Hence, there was a unilateral contract agreement of the offer and there is acceptance by conduct.In a general rule, an advertisement can either be an offer or an invitation to treat. However, in the case of Carlill v Carbolic Smoke Ball Co, it shows intention of the parties to form a contract with a specific promise, where the buyer agreed to use the smoke ball and the smoke ball company promise to pay if the buyer caught influenza. In the invitation to treat, it is merely an invitation for further negotiations between the parties without the intention to create an offer. It can be assume that invitation to treat comes before an offer is formed. If there are no intention to be bound after the invitation, it will remain as an invitation to treat. Oppositely, if there are intention to be bound, it will be an offer.An invitation to treat can be seen in the case Pharmaceutical Society Of Great Britain V Boots Cash Chemists (1953) 1 QB 401 where Boots Cash Chemists operates a self-service store which included a pharmacy department which sell drugs and medicines. All the items were displays on a shelves and customer will take the items, put it into shopping bag, then take it upon the cash counter to make payment. However, the Pharmaceutical Society argue that Boots Cash Chemists have violated the Pharmacy and Poison Act 1933, which, any sale of drugs and medicine product need to be supervised by the licensed pharmacists before selling it to the buyer. It was held that, Boots Cash Chemists did not breach the Act because there is a contract where the cashier can decide to accept the offer made by customer upon the payment. Thus, the contract is formed as there are presence of the pharmacist. From what can be seen, Carlill v Carbolic Smoke Ball Co is an unilateral agreement, which mean it is open to public, thus, there is no invitation to treat for unilateral offer. The rationale behind the offer contract is that, as long a buyer acting on the terms, it means that the offer has been accepted by the buyer. To be more specific, Mrs Carlill will not simply contact Carbolic Smoke Ball Company before purchasing its products and ask for further negotiation. Hence, it is not invitation to treat.What can be concluded for this matter is that, there must be an acceptance in order for the offer to be valid. If the offer is not accepted, there will be no contract formed. Similarly, if the parties of invitation to treat has the intention to enter an offer agreement, then, an offer contract will be formed. Therefore, offer and invitation to treat need to be clearly distinguish. Where offer have the intention to be bound on acceptance, while, an invitation to treat is merely for further negotiation that cannot be accepted and it make into the invitation for offer.