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All agreement are not contract

As mentioned below, it is clearly stated that an agreement can be differentiated from a contract through its law enforceability. A mere agreement without intention to create legal intention is not a contract and is incapable to give rise to legal obligation. This means an agreement has a broader scope than a contract.

The laws have drawn a clear distinction between social and domestic agreement and commercial agreement in order to determine which agreements are legally binding and have an intention to create legal relations. Agreement made of moral, religious or social nature, for example a promise to talk a walk together or have a lunch together at a friend’s house are not considered as contracts because both they are not likely to have legal effect between immediate parties with the basis of both parties did not intend to be legally bound in the first place. This depends on the moral duty to honour the agreement but not a legal duty to do so.

In the case of Balfour v Balfour (1919), an agreement was made between a husband and wife. Mrs. Balfour could not return to Ceylon where his husband worked. Mr. Balfour made a promise orally that he will send $30 per month to support her living in England until she came back to Ceylon. Their relationship later soured and the husband stopped sending the money. Mrs. Balfour brought this up to the court and sued her husband for his failure to make the promised payment. It was noted that the promise had been made when they were still husband and wife and the parties had not yet been divorced. Therefore, the court ruled that the agreement was purely social and domestic agreement and therefore it was presumed that the parties did not intend to be legally bound.

Different decision was made in the case of Merritt v Merritt (1970). Mr. Merritt and Mrs. Merritt jointly owned a house. He then left and signed an agreement whereby he would pay the wife a sum of money to enable her to meet the mortgage payments and she paid all the charges in connection with mortgage until it was paid off, he would transfer the house into her sole ownership. When the mortgage was fully paid, Mr. Merritt refused to transfer the house. Mrs. Merritt decided to bring an action for a declaration that the house belonged to her. While domestic agreements between spouses are not likely to be legally enforceable as such in the case of Balfour v Balfour, the Court of Appeal distinguished the case of Balfour v Balfour with the principle that the two spouses who formed an agreement over their matrimonial home had

separated. Where spouses have separated it is generally considered that they do intend to be bound by their agreements. The written agreement signed was further evidence of an intention to be bound.

Another similar cases that the presumption of no intention to create legal relations between immediate parties in social and domestic agreement, may be rebutted by evidence to the contrary are the case of Errington v Errington Woods with an evidence of a written agreement and the case of Simpkins v Pays where there is a third party involved in the agreement.

However, when an agreement is made in commercial context, the law made a presumption that the parties involved do intend to create legal relations by the agreement, which means the agreement made is a contract and is legally bound.

In the case of Esso Petroleum v Customs & Excise (1976), Esso offered made commemorative coins as collector’s item coins given to every motorist buying over four gallons of petrol. The production of the coins were considered by the Commissioner of Customs and Excise as part of the general resale by the company and therefore they would be subjected to tax. If that was the case, Esso would be liable to pay £200,000. Esso argued that the coins were free gift and the promotion was not intended to have legal effect and there was no resale. The court however decided that there was intention from Esso Petroleum to be legally bound and the coins are taxable items. This was due to the coins offered, though given as free gifts, it entitled the company for financial gain which makes the promise as having intention to be legally bound.

Conclusion

Agreement is an element of contract and contract is structured from the basis of agreement. An agreement is similar to contract in terms of the presence of offer and acceptance with consideration however for an agreement to be a contract, there should be an element of enforceability.

Therefore, a breach in agreement does not entitle for legal remedies if a party fails to keep the agreement. However, when a contract is breached or violated, when one party of the contract does not fulfil their obligation, the aggrieved party is entitled to legal remedies against guilty

party for breach of contract through compensatory damages, restitution, punitive damage or specific performance.

Thus, we can conclude that all contracts are agreements but all agreements are not contracts.

https://www.legalmatch.com/law-library/article/breach-of-contract.html http://www.e-lawresources.co.uk/Intention-to-create-legal-relations.php