ABSTRACT
Whether the parties intended to enter into legally binding relations is an issue to be determined objectively and not by inquiring into their respective states of mind.
Collins, H, Law of Contract , 2003, London: Butterworths, pp 104-105
One of the reasons given in Balfour v Balfour for refusing to enforce the agreement was that the parties did not intend to enter a binding contract. In a few instances, the parties may have made it plain that they do not expect to be legally bound. It is a common practice in business, for instance, to issue ‘letters of comfort’ or ‘letters of intent’, which contain indications of likely future action and current business strategy, but these are not intended, without more, to create binding obligations, and the courts respect this choice not to enter the market sphere. Similarly, it is normally stated expressly or implied by custom in the UK that the parties to a collective agreement between management and trade unions do not intend to create a legally enforceable agreement. Apart from these clear expressions of intent, however, the libertarian explanation seems to be fatally fl awed.
