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A valid contract

Discuss the concept of intention to be bound in the nature of commercial and non commercial
contracts, having regard to the necessity of writing, how the courts view agreements and the

tests used to determine intention.


A valid contract must have an agreement that was made with intentions of making it legally
binding among the parties to the contract (Beatson, 2010). The parties must intend to have legal
relations between themselves Pettit v Pettit (1970) AC 777 and Hardwick v Johnson [1978] 1
WLR 683.
Consideration plays a critical role as it provides the intention and evidence that the promisor
actually specified agreed to exchange his goods with something else in the form of a price or
anything of value (McKendrick, 2012). The items exchanged carries or acts as evidence that the
parties truly intended to be bound by their agreement and the consideration is the proof or test of
their commitment to the contract (Poole, 2012). Once each party has performed his part of the
contract then the contract is said to be executed (Beale, 2007: McKendrick, 2011).
When assessing the contract cases, the courts used to apply particular presumptions to different
contracts and mostly all domestic and social contracts were literally presumed not have intention
to create legal relations while all commercial contracts were all presumed to have legal intentions
however currently all the intentions must be proved in a court a law (Brownsword, 2010). The
case of Balfour v Balfour provides the basis for determining intentions in a contract. However,

Law of Contract 2
commercial contracts that are entered into without any intentions of creating legal relations
mostly have clauses that include such words as Honour clauses and which indicate that the
relationship is not legally binding as indicated in the case of Wilson v Burnett [2007] EWCA
1170 .

The other test that can be applied is the reasonable man’s tests where a reasonable man would
decide given the nature of the contract and transactions at hand like in the cases of Jones v
Padavattan (1969) 1 WLR 328 and Merritt v Merritt (1970) 2 ALL ER 760.

Law of Contract 3
Beatson, J., A. (2010) Burrows and J. Cartwright Anson’s law of contract, Oxford: Oxford
University Press, [ISBN 9780199282470].
Beale, H.G., W.D. (2007) Bishop and M.P. Furmston Contract – cases and materials,
London: Butterworths, [ISBN 0199287368].
Brownsword, R. (2010) Smith & Thomas: A casebook on contract, London: Sweet &
Maxwell, [ISBN 9781847034175].
Wilson v Burnett [2007] EWCA 1170
McKendrick, E. (2012) Contract law: text, cases and materials. (Oxford: Oxford University
Press, [ISBN 9780199699384].
McKendrick, E. (2011) Contract law, London: Palgrave Macmillan.
[ISBN 9780230285699].
Jones v Padavattan (1969) 1 WLR 328
Merritt v Merritt (1970) 2 ALL ER 760
Poole, J. (2012) Casebook on contract law, Oxford: Oxford University Press.
[ISBN 9780199699483].
Pettit v Pettit (1970) AC 777
Hardwick v Johnson [1978] 1 WLR 683

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