# Intention to create legal relations

> **Key takeaway:** Commercial deals: presume legal intention (hard to displace). Social/domestic: presume no legal intention (Balfour), rebuttable. Honour clauses can oust (Rose & Frank). 'Subject to contract' / later performance: RTS Flexible Systems. Objective assessment of words and conduct.

- **Jurisdiction:** England & Wales
- **Practice area:** Commercial
- **Last reviewed:** 2026-08-04
- **Interactive page:** https://kttclegal.info/library/notes/Commercial/intention-to-create-legal-relations
- **Keywords:** intention to create legal relations, Balfour v Balfour, subject to contract, Edwards v Skyways, Rose and Frank, RTS Flexible Systems, domestic arrangements, comfort letter

## What is this about?

Even where offer, acceptance, and consideration are present, English law requires that the parties intended their agreement to be legally enforceable. The doctrine uses rebuttable presumptions that differ as between commercial and social/domestic settings, and it is frequently decisive in family arrangements, comfort letters, and 'subject to contract' negotiations.

## What is the core rule?

A contract requires an intention to create legal relations. In ordinary commercial agreements, such intention is presumed and the burden lies on the party denying enforceability. In social and domestic arrangements, the presumption is against legal intention, and the party asserting a contract must rebut it on the facts. Express language (including 'subject to contract') and the objective appearance of the parties' dealings are central.

## What are the elements or test?

1. Classify the context: commercial/arm's-length, or social/domestic?
2. Apply the relevant presumption (commercial: for intention; social/domestic: against)
3. Ask whether the facts rebut the presumption (wording, seriousness, reliance, formality, surrounding circumstances)
4. Check for express dispositive wording: 'subject to contract', honour clauses, comfort letters, heads of terms marked non-binding
5. Assess intention objectively from words and conduct, not undisclosed private reservations

## Which authorities matter?

- **Balfour v Balfour [1919] 2 KB 571** — Classic domestic presumption: informal arrangements between spouses living in amity are generally not intended as legal contracts.
- **Edwards v Skyways Ltd [1964] 1 WLR 349** — In a commercial context, a promise described as 'ex gratia' can still be legally binding; the commercial presumption is strong.
- **Rose and Frank Co v JR Crompton & Bros Ltd [1925] AC 445** — Clear honourable-pledge / non-legal language can oust legal enforceability even in a business setting if sufficiently explicit.
- **RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG [2010] UKSC 14, [2010] 1 WLR 753** — Supreme Court guidance on whether parties intended to be bound despite incomplete formal documentation; 'subject to contract' and subsequent performance are highly relevant.

## How does this apply in practice?

This note addresses the intention element of formation only. It does not cover certainty of terms, consideration, or proprietary estoppel as an alternative to contract. Collective agreements and some statutory employment contexts may have special rules. Always read any 'subject to contract' label against later conduct that may show the condition was waived or spent.

## What are common pitfalls?

- Treating all family arrangements as automatically non-binding without examining whether the presumption is rebutted
- Assuming 'ex gratia' or soft commercial language always defeats intention
- Ignoring subsequent performance that may show the parties intended to be bound despite missing formalities
- Conflating absence of intention with absence of consideration

## When would a practitioner use this?

Useful when assessing enforceability of family loans, cohabitation arrangements, comfort letters, side letters, and incomplete commercial negotiations.

## Quick reference

Commercial deals: presume legal intention (hard to displace). Social/domestic: presume no legal intention (Balfour), rebuttable. Honour clauses can oust (Rose & Frank). 'Subject to contract' / later performance: RTS Flexible Systems. Objective assessment of words and conduct.

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*Reference material from [KTTC Legal](https://kttclegal.info/), not legal advice. Work product supports instructing solicitors and barristers under their supervision. England & Wales.*