the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document.' the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect.' In Masters v Cameron the High Court identified three possible interpretations of subject to contract clauses : This raises an issue about whether they intend to be legally bound immediately or only when and if a formal contract is concluded. In some cases parties may make their agreement 'subject to contract'. (Effect of Ermogenous is that recourse should not be had to presumptions of intent in family arrangements) (Presumptions re: intention should be avoided) Recently, however, the High Court in Australia has indicated that presumptions should not be used when determining intent - in each case intention must be proved without the aid of such presumptions.Įrmogenous v Greek Orthodox Community of SA Inc (High Court, 2002) When assessing each case the courts used to apply certain presumptions to different types of contract thus, typically, domestic or social contracts were presumed not to have been created with an intention to create legal relations and commercial agreements were presumed to have such intention. (Consideration of whether a subjective or objective approach should be taken to determining intention to create legal relations)
In determining if there is contractual intent an objective approach is taken it doesn't matter if one party secretly did not intend to be legally bound if it would appear to a reasonable observer that they did.Īir Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (SC of NSW, 1989) However, intention remains an independent requirement and must be separately demonstrated and there are cases in which consideration has been present but no contract found to exist because this pre-condition has not been fulfilled. Usually, the presence of consideration will provide evidence of this - if the promisor has specified something as the price for the promise this - in most cases - carries with it an intention that the parties be bound. For a contract to exist the parties to an agreement must intend to create legal relations.
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