GROUP 1 LAW 436 TUTORIAL CLASS B

INTRODUCTION

First of all, in Malaysia there are no provisions in Contract Act 1950 for the element
of intention to create legal relations. However, in common law position even though there are
elements of offer, acceptance and consideration that exists, an agreement or transaction might
not still be enforceable if the parties did not have any intention to create legal relations. So, in
Malaysia we apply common law regarding this intention to create legal relations. These legal
relations also means that the party would be legally bound and legal consequences can be
taken into court to sue or to be sued.

ISSUE

Whether Becik could take action against his father, Beja for breach of promise.

LAW
The test of intention is what makes the parties actually intended to conclude a binding
contract which comprises the totality of evidence, written, oral and conduct. There are 4
elements to determine whether there are any intentions to be legally bound into the contract.

Firstly, the contract must be in expression of writing. Which we can refer to in the
case of Carlill v Carbolic Smokeball Co. which concludes that the statements made in the
advertisement showed intention of the defendant to enter a legally binding relationship.

Secondly is the subject to contract clause, whereas here, parties have made the
agreement with a phrase ‘subject to contract’. Usually this clause is not conclusive of the
issue of whether there is a concluded contract. Thus, if there is any contract that has included
the ‘subject to contract’ clause, there is no legally binding contract between both parties.

Thirdly, social or domestic agreements, that means these arrangements are between
parents, children, close relatives and friends. The general rule is that the social and domestic
arrangements do not have the intention to create legal relations then presumed does not havve
legal consequences. The case that clearly shows the family arrangement is in the case of
Balfour v Balfour, the plaintiff or the husband promised to pay ₤30 per month to the
defendant but their relationship has broken down. The court held that the arrangements are
not contract because “parties did not intend that they should be attended to by legal
consequences”. Other than that, the number of the cases would increase and the court cannot
handle them if these are considered as a contract. Another case that we can refer is Choo
Tiong Hin v Choo Hock Swee, which explains that the social or domestic arrangements can
be legally effect in court and considered as a contract if the arrangements are being expressed
and impliedly, companied by consideration, and mere relationship cannot block this
arrangement to be not legally effect in court.
 However, the presumption may not be invoked in certain circumstances. Firstly is
when the parties are in cordial terms. In Merritt v Merritt, the couple held their matrimonial
home in joint names. However, a few years after marriage, Mr Merritt left their family house
to live with another woman. Mr Merritt agreed to pay Mrs Merritt £40 per month. At Mrs
Merritt’s request, he signed a document confirming that when she had repaid the balance on
the mortgage, he would transfer the matrimonial home into her sole name. Mrs Merritt paid
off the mortgage and successfully acquired a declaration that the house belonged to her.
However, Mr Merritt contended that the agreement was a domestic arrangement between
husband and wife and there was no intention to create legal relations and, as such, there was
no enforceable contract. The court held that Mr Merritt’s appeal was unsuccessful. This is
because, when parties are in the process of separating or are separated, the presumption of
there being no intention to create legal relations does not apply. The arrangement was
sufficiently certain to be enforceable, and the paying of the mortgage was ample
consideration for Mr Merritt’s promise. Mrs Merritt was entitled to the matrimonial home
entirely.

Next circumstance where the presumption may not be invoked is where the parties
undertake a substantial commitment in which the commitment is huge and is a serious
undertaking. In the case of Wakeling v Ripley, the Supreme Court of New South Wales
unanimously decided that there was sufficient evidence that the parties had made a definite
and binding contract. The Court considered the evidence and concluded that the
correspondence between the parties regarding the arrangements as well as the seriousness of
the move for the Wakelings demonstrated that the parties intended to be legally bound by the
agreement.

Fourthly, business or commercial arrangement. In business transactions, the

presumption is the other way around. The general rule is there is intention to create legal
relations. The rational being to facilitate trade and commerce and to promote certainty. Also
in commercial transactions, it would always involve not only rights but also profits,
commision and opportunity. However the presumption can be rebutted for example in the
case of Esso Petroleum v Commissioners of Customs and Excise. The case focused on
whether promotional gifts offered by Esso constituted a sale for tax purposes, and more
broadly, whether there was an intention to create legal relations in such promotions. Esso
launched a promotional campaign where it offered customers a free World Cup coin with
every four gallons of petrol purchased. The Commissioners of Customs and Excise argued
that these coins were "produced for sale" and therefore subject to purchase tax. Esso
contested this, arguing that the coins were promotional items given as gifts, not sold. The
critical issue was whether the transaction involved an intention to create legal relations,
specifically whether the provision of the coins as part of the transaction created between Esso
and its customers. The court ruled that the promotional offer carried an intention to create
legal relations, binding Esso to provide the coins as promised. However, the coins themselves
were not considered items "produced for sale," and therefore, they were not subject to
purchase tax. This case highlights the importance of the context in determining the intention
to create legal relations, particularly in commercial settings where promotional activities are
intertwined with business operations.

APPLICATION
In this case it seems that the promises between Becik and Beja are made within the
familial relationships so it is expected not to carry any legal weight except when they have
clear evidence that specifies differently. The familial context in this shows that there is a lack
of intention to create a legally binding contract. Courts commonly view this as a social
agreement and not a contract.This clearly illustrate in the case of Balfour v Balfour, when
the court considered the arrangements as not a not a contract because lack of intention to
create legal relations between them and it is under social or domestic agreements. Despite
that if Beja’s clearly expressed his promise that it is intended to create a binding contract or
he showed a serious intention as an example by creating a written document then this can
shift it as a contract. For example in the case of Choo Tiong Hin v Choo Hock Swee, as
long as there is a bona fide agreement which means that the agreements were expressed and
implied and accompanied by consideration, then the court should give legal effect to the
arrangement and importantly the mere relationship cannot be a block for these arrangement
considered as a contract.

Next in this case, Becik’s put his hard work and succeed academically can also be
seen as a valid consideration for Beja’s promise it means that in order for consideration to
happen it needs something valuable to be exchanged between the parties involved. So,
Becik’s achievement can fulfil the requirements made by Beja in order to receive the car that
he promised. However there is still absence of the intention to create legal relations and it still
weaken Becik’s position to claim the promised car. If it is established that Beja do not have
any intention for his promise to be legally binding then even with Beck's fulfillment of the
requirements, he can still not enforce any claim against Beja his father.

CONCLUSION
To conclude, there is no legal binding contract in between Beja and Becik as it is
considered as a social agreement rather than a contract. Their relationship as father and son
highlighted that there is no intention to create legal relation in between them.