Things, not Words: Disambiguating Intention to Create Legal Relations

(The following guest post is contributed by Shivprasad Swaminathan, who is Associate Professor at the Jindal Global Law School)

“We must think things not words,
or at least we must constantly translate our words into the facts for which
they stand, if we are to keep to the real and the true.”

 Oliver Wendell Holmes Jr
The Source of the Confusion: English Law
Contemporary textbooks on the
English law of contract enumerate intention
to create legal relations
as a distinct and separate hurdle, besides
consideration, to be overcome for an agreement to be granted entry into the
“charmed circle of contract”.  The common
law of contract in the early nineteenth century, however, did not possess a distinct
category of intention to create legal
relations
alongside the doctrine of consideration. The category, under its
Latin label animus contrahendi, was
imported from the civil law jurists, amidst the whirl of the doctrinal imports
in contract law from the Continent in the nineteenth century [A.W.B.  Simpson, Innovation
in Nineteenth Century Contract Law
(1975)91 LQR 247, 264]. In the absence
of a doctrine of consideration, the category of intention to create legal relations plays the role of filter in a
Civil Law system on agreements that are to be enforced as contracts. In the
common law system, the doctrine of consideration traditionally played this role,
to some extent, along with the
concept of “puffery” –which cautioned against taking seriously, extravagant
claims by the offeror [D. Ibbetson, A Historical Introduction to the Law of
Obligations
, 233-4]. In Carlill v Carbolic Smoke Ball Co. [1893] Q.B. 256, however, the
“puff”, “was analysed in terms of intention to create legal relations.” [Ibbetson
op. cit. 233].  In Balfour
v Balfour
[1919] 2 KB 571, intention
to create legal relations
was pressed into service to deny enforceability
to an agreement of a domestic nature between a husband and wife.  Then came, Rose & Frank v Crompton & Bros [1925] AC 445, where the
category was expanded to deny effect to an agreement of honour which two
businesses had mutually agreed to be not legally binding as a contract.
It would be incorrect to suppose that all
these three cases are natural, organic instantiations or extensions of a single
doctrine or that they are all logically subsumed under it. The fact is that a
label-intention to create legal relations–came to be attached to various
different legal consequences unconnected by a common theme. The law could very
well have brought about those legal consequences without invoking the label intention to create legal relations and the
contract law jurisprudence would not have suffered any doctrinal debilitation
for the lack of it.  As Stephen Smith’s reductionist
account of intention to create legal relations amply demonstrates, there is perhaps
no need for invoking the label
intention to create legal relations as cases purportedly decided under its
rubric “are more easily explained on other grounds” [ S. Smith, Atiyah’s Introduction to the Law of Contract
p. 99].  Puffs and statements in jest  hardly need to be subsumed under a distinct
category of intention of legal relations to be denied enforceability—amply
demonstrated by the fact that adequately dealt with before the category arrived;
if domestic arrangements of the Balfour
variety are not enforced, it is so because of the policy of the courts to not
enforce such agreements and not because of intention of the parties (express or
implied) to not be bound; intention to create legal relations has no role to
play in the Rose & Frank variety
of cases either because all the court is doing is to give legal effect to an
exemption of liability clause [ Smith op
cit.
 pp. 98-106]. There is thus,
strictly speaking, no such thing as a free standing doctrine of intention to
create legal relations independent of these individual instances. The label is
just a way of conveniently referring to a compendium of the aforesaid rules
evolved by the courts.
If one bears in mind Smith’s reductionist
account of the requirement of intention
to create legal relations
, any talk of abolishing the doctrine in English
law—of the sort proposed by Samuel Williston—just because English law has a
distinct doctrine of consideration, would be completely off the mark, attacking
as it does, only the label and not the separate situations the label is applied
to. Assuming one wants to retain the rules with respect to puffs, domestic
arrangements and agreements of honour of the Rose & Frank variety—and it might be added that there is a
great deal going in favour of their retention–it is not immediately obvious
how the English doctrine of consideration alone could do the job. Consider
agreements of honour or letters of comfort, for instance. The parties could
intend to be unenforceable an agreement of honour which is otherwise supported
by consideration in the traditional benefit/detriment/exchange sense. Indeed, there
was consideration in the traditional sense in the Rose & Frank case. The law with puffs cannot obviously be dealt
with by the doctrine of consideration alone either. Perhaps the domestic
arrangement case could be thought to be one area where the doctrine of
consideration could do the job alone (see White
v Bluett
‎(1853) 23 LJ Ex 36 which achieved with the doctrine of
consideration what would now in all probability be accomplished by the doctrine
of intention to create legal relations), but even here one can no longer rest
on such certainties for qua doctrine,
much water has flown under the bridge since. As Ewan McKendrick reminds
us,  post William v Roffey Bros [1991] 1 QB 1, the restrictive ambit of
the doctrine of consideration has been greatly curtailed as any potential benefit
or detriment in fact, is more likely to pass muster of the doctrine as the
courts become more willing to infer consideration “so as to reflect the
intention of parties”. [E. McKendrick, Contract
Law: Text, Cases and Materials
5th ed. P 288]. If Jack and Jill
agree to “split the bill”, to borrow Steve Heldey’s example, and Jill welches
at the till, the doctrine of consideration which considers peppercorns as
sufficient consideration is not enough to act as a filter which prevents the
enforceability of this agreement. And yet a de
minimus
filter there must be for this kind of an agreement, whether or not
one refers to it with the label intention
to create legal relations
—for, to not have one would be to invite a deluge
of litigation by opening the floodgates. To make consideration do this job
would be to further convolute a doctrine that has already, for long been considered
a morass of conflicting aims and hence “senseless” and “illogical” to use Henry
Ballantine’s description [H. Ballantine, ‘Is the Doctrine of Consideration
Senseless and Illogical?’ (1913) 11 Michigan
Law Review
423]
Confounding the Confusion: Indian Law
The utility of teasing out the
doctrinal strands tousled together under the casing of the label intention to create legal relations
cannot be overstated. Its need is most acutely felt when one glances at the
scholarly treatment of the subject in the Indian literature.  Let us, as a sample, consider the discussion
in Avtar Singh’s, Contract and Specific
Relief
10th ed.  After having summed
up the English cases falling under the doctrine, Avtar Singh points to one
Indian case in which the Supreme Court supposedly
invoked it, namely, Banwari
Lal v Sukhdarshan Dayal
 (1973) 1 SCC
294
. Banwari Lal was, in fact, a
case involving a puff and Chandrachud J had dealt with it on those lines, without
invoking the doctrine of intention to
create legal relations
. Avtar Singh argues that “a limited recognition of the applicability of this principle
[intention to create legal relations] in India could be inferred from the
decision of the Supreme Court in Banwari
Lal
v Sukhdarshan Dayal” (Avtar
Singh Contract and Specific Relief
10th ed. 16 emphasis added).  Two points
about this analysis are worth noting. First, Avtar Singh subsumes the Banwari Lal case under the category of
intention to create legal relations. Second, he points out that applicability
of the doctrine of intention to create legal relations in India has “limited”
applicability. Why is its applicability “limited”? That is because, Avtar Singh
argues that in another case,  CWT
v Abdul Hussain
(1988) 3 SCC 562
, the Supreme Court of India calls into
question the applicability of the doctrine of intention to create legal
relations in India, which has a separate requirement of consideration.  
“the separate element of
intention is foreign to the common law, imported from the Continent by academic
influences in the nineteenth century and useful only in systems which lack the
test of consideration to enable them to determine the boundaries of contract
…..” [CWT v Abdul Hussain (1988) 3
SCC 562, 569 quoting Cheshire & Fifoot; reproduced by Avtar Singh op cit p.16]
Commenting on
this judgment Singh notes, the “Supreme Court expressed its reservation about
the need of this separate requirement” [Singh op cit p.16]. The court did indeed express its reservation, but
what was the reservation directed against? It turns out that Cheshire and Fifoot’s
reservation, which the court relies on, is directed against the label intention to create legal relations, but
not against any of the individual doctrines the label compendiously refers to. Avtar
Singh’s treatment of the subject, which refuses to peer beneath the label means
that all the doctrines the label refers to are automatically in jeopardy when the
label is brought in question in such a manner. As a way reconciliation, Avtar
Singh argues that the doctrine of intention to create legal relations has
“limited applicability”—limited, presumably only to the case of puffery because
that is what the Banwari Lal case was
about. But this is an uneasy compromise, unprincipled even. What good reason is
there to deny enforceability to contracts of the Rose & Frank variety, a great deal of which are in the nature
of letters of comfort—a common feature of modern commerce? Surely, the answer
cannot be because they lack consideration.
One might do away with the label intention to create legal relations, but
the job done by the real doctrines that it refers to would have to be
outsourced to other existing doctrines, as McKendrick points out. Any abolition
would be only of the label—the words, as it were—not the real things that stand
behind it.  And as O.W. Holmes reminds
us, it is things we should be
bothered about, not words.

About the author

V. Niranjan

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