HOW TO ENSURE THE PARTIES HAVE INTENTION TO CREATE LEGAL RELATIONS UNDER GHANAIAN LAW

Intention to create legal relations is an essential requirement for a binding contract under Ghanaian law. It refers to the clear and deliberate decision by the parties that their agreement should have legal force and that they may sue or be sued for failure to perform. Without legal intention, even the most serious promises do not become enforceable contracts.

Ghanaian law follows the common law presumptions, which distinguish social arrangements, where legal intention is presumed to be absent, from commercial arrangements, where legal intention is presumed to exist. Both presumptions may be rebutted by appropriate evidence.

SOCIAL ARRANGEMENTS AND THE PRESUMPTION AGAINST LEGAL INTENTION

In arrangements among friends, couples, parents, and children and other family relations, the courts presume that the parties do not intend to sue if things go wrong. These promises are usually motivated by affection, loyalty, or cooperation rather than commercial gain.

This presumption is strong but not absolute. A party that wants to enforce a domestic agreement must show:

• clear formality
• written and signed documentation
• involvement of lawyers
• conduct showing the agreement was treated seriously
• lack of amity at the time of the agreement

Husband and wife

In Balfour v Balfour[1], the court held that the husband’s promise to pay monthly support was not enforceable because it arose within an amicable marital setting where the presumption against legal intention applied.

In Merritt v Merritt[2], however, the couple was separated and no longer in amity. The husband signed a written promise to transfer the house to the wife once she paid off the mortgage. The court held that this was enforceable because the presumption had been rebutted.

In Pettitt v Pettitt[3], improvements made by a husband to the matrimonial home did not imply legal intention because they were voluntary domestic acts, not contractual obligations.

Parent and child

In Jones v Padavatton[4], a mother promised her daughter financial support for legal studies. The relationship remained cordial and informal. The court held that there was no intention to create legal relations.

Broader family

In Hamer v Sidway[5], the nephew’s serious forbearance from vices demonstrated that the parties intended a binding commitment, making the agreement enforceable.

In Parker v Clark[6], the younger couple sold their home based on the promise of receiving a share of the older couple’s house. Their significant financial sacrifice showed a clear legal intention.

In Simpkins v Pays[7], a shared arrangement for entering competitions involved regular contributions and a shared expectation of benefits. The court held that this was not merely social but partly commercial.

COMMERCIAL ARRANGEMENTS AND THE PRESUMPTION IN FAVOUR OF LEGAL INTENTION

In business contexts, the law presumes that parties intend their agreements to be enforceable. This is because commercial promises typically involve financial consequences, professional obligations, and economic expectations.

To rebut this presumption, the party must show clear evidence that the agreement was intended to be binding in honour only.

In Rose and Frank Company v Crompton Brothers[8], the contract expressly stated that the arrangement was binding in honour and not intended to create legal relations. The court respected this intention.

In Edwards v Skyways Ltd[9], an airline argued that redundancy payments were not legally binding but ex gratia. The court held that commercial agreements carry legal intention unless the parties clearly agree otherwise.

HOW TO ENSURE LEGAL INTENTION IN PRACTICE

A corporate lawyer in Ghana can ensure enforceable legal intention by:

• drafting written contracts
• including express clauses stating the agreement is legally binding
• using clear and formal language
• ensuring consideration is present
• advising independent legal representation, especially where the parties have social ties
• recording negotiations and documentation
• avoiding vague or casual promises
• confirming the seriousness and commercial purpose of the agreement

ILLUSTRATIVE CHECKLIST FOR DETERMINING LEGAL INTENTION

Use the following checklist to determine whether the contracting parties intended to create legal relations:

1. Is the agreement commercial in nature
2. Did the parties express in writing that the agreement is legally binding
3. Was the agreement drafted or reviewed by lawyers
4. Was the agreement signed by the parties and witnesses
5. Did the parties rely on the agreement to make significant financial or personal commitments
6. Were the terms clear, definite, and professionally structured
7. Was consideration present on both sides
8. Are there emails, messages, or documents showing a serious business purpose
9. Were the parties in a close domestic or family relationship
10. If they were in such a relationship, is there clear evidence of formality to rebut the presumption against legal intention
11. Did the parties expressly state that the agreement is binding in honour only
12. Was the relationship strained or adversarial at the time of the agreement
13. Would a reasonable person in the position of the parties think the agreement was intended to have legal consequences

A contract is more likely to be enforceable if the answers support commercial seriousness, formality, and clear legal commitment.

ILLUSTRATIVE PRACTICAL CASE STUDIES

Case Study One

Two close friends agree orally that one will invest money in the other’s small shop. Nothing is written, no lawyer is involved, and both continue to visit socially. When the investment fails, one friend claims breach of contract. Under Ghanaian law, this will likely be treated as a social promise. Unless the claimant produces proof of formality or business seriousness, the presumption against legal intention will not be rebutted.

Case Study Two

A husband and wife are going through a separation. The husband writes and signs a document promising to transfer his car to the wife if she settles certain debts. The agreement is witnessed. Later, he refuses. In this context, the presumption against legal intention is rebutted because the parties were no longer living in marital harmony and had formalised the agreement. A Ghanaian court would likely enforce it.

Case Study Three

A parent promises to help an adult child start a business, and both parties sign a formal written agreement drafted by a lawyer, with clear terms, obligations, and a repayment structure. If the child later refuses to repay the loan, the parent may enforce the agreement. The document and level of business formality rebut the presumption that this is merely a domestic arrangement.

CONCLUSION

Under Ghanaian law, intention to create legal relations is essential for a binding contract. Social agreements usually lack legal intention, while commercial agreements ordinarily possess it. Both presumptions can be rebutted by evidence. A careful lawyer can secure this element by formal documentation, express binding clauses, professional drafting, and a clear commercial structure. These measures ensure that agreements are enforceable and aligned with the expectations of the parties.

[1]  [1919] 2 K.B 571; S & T. 136

[2] [1970] 1 WLR 1211; 86 LQR 436(1970)

[3] [1970] AC 777; [1969]2 All E.R 385

[4] [1969] 2 All E.R 616; [1969] 1 WLR 328; 85 LQR 315 (1969); S&T 139

[5] 124 NY 538, NE 256 (Court of Appeal NY1981)

[6] [1960]1 WLR 286; 23 MLR 331

[7] [1955]3 All E.R 10; [1955] 1 WLR 975; (Criticized in 71 LQR 457 (1855)); 19, MLR 96 (1969); S&T 138.

[8] [1925] AC 445; 2 C.L.J. 219 (1924-1926); 80 LQR 315 (1964); S & T 139.

[9] [1964] 1All E.R. 494[1964] 1 WLR 349