ABSTRACT
In addition to the tests of the existence of a contract dealt with in the previous chapters, the courts will also sometimes inquire whether, despite the fact that offer, acceptance and consideration can be identified, the parties did really intend to create a legally binding relationship. In line with the traditional approach that the courts regard themselves simply as ‘referees’ or ‘umpires’ giving effect to the parties’ intentions, it is only where the parties themselves have entered into an agreement which they intend to be legally binding that the courts will treat it as a contract. As with other tests of the parties’ intentions, the courts take an objective approach, looking at what they have said and done and the context in which they have been dealing with each other. This was confirmed recently in Edmonds v Lawson,1 where Lord Bingham said:2
Collins has suggested that this ‘objective’ approach may well not coincide with reality:3
We are not, however, in fact ‘forced’ to this conclusion. In many cases, rather than the parties having different intentions, they may not, at the time of entering into their agreement, have thought about the issue at all.4 In such a situation the courts will adopt the approach, which they also adopt in other areas where there is later disagreement as to the parties’ intentions at the time of contracting,5 of asking what the reasonable person in the position of the parties would have been likely to intend. This is the way in which the issue is dealt with in the proposed Principles of European Contract Law, Art 2.102 of which simply states that:6
Although this approach may be used as a device to bring ‘policy’ considerations into the law, it is also capable of acting as a means of coming to an ‘objective’ view in an area where the parties’ evidence as to their respective states of mind is in conflict.
