Can a promise to create a contract to legally bind all parties?

What would amount to a promise?

In everyday life there may be situations where someone will promise to do something without considering the implications of their promise.  

Where a promise is said in a conversation, with no intention to create any sort of legal contract, it will be highly unlikely that the courts will take this as a person’s intention to create legal relations.

The courts approach to the doctrine of promissory estopell

The concept of promissory estopell was originally created by the courts of equity.  

Promissory estopell most commonly occurs when a person genuinely and honestly believes they have entered into a contract of some sort due to a promise made by the other party.  

Lord Denning has commented on this doctrine stating; 

‘A promise to accept a smaller sum in discharge for a larger sum, if acted upon, is binding notwithstanding the absence of consideration’ 

The promise only becomes final and irrevocable if the promisee cannot return to their original position.

Detrimental Reliance

For the courts to usually enforce a promise through promissory estopell there will have to be some form of detrimental reliance. 

For the promise to be enforced as the intention to create a contract one party will have to rely on the words or conduct said to such an extent that they acted upon the reliance in some way.

Part payment of a debt

If a debtor offers to pay part payment of a debt they owe, and the creditor voluntarily accepts that offer, and in reliance on this acceptance to only pay part payment of the debt, the debt goes on to pay that part of the debt, the creditor will be subject to the doctrine of promissory estopell.  

Once the part payment of the debt has been paid, the creditor must accept this as the final sum of payment and accept it as the debt cleared due to his earlier promise to accept the part payment as the end of the matter.

Intention to create legal relations

In addition to the need of offer and acceptance for a contract to be validly created, there must be the intention to create legal relations.  

The intention to create legal relations is assumed absent in domestic situations, such as those that arise in family situations.

Intention to create legal relations on separation or divorce

In domestic situations such as marriage or cohabitation, as earlier stated, the intention to create legal relations is presumed absent. The situations differs entirely where a couple have separated or are not living together. 

In a situation like this then bargaining becomes key concept and so the intention to create legal relations is regarded as a necessary requirement in order to create a legally binding contract.

Intention to create legal relations in a commercial context

The presumption in a commercial context is that an intention to create legal relations is required as a necessary component in creating a legally binding contract. The parties to the contract may include an express exemption clause rebutting the presumption that the intention to create legal relations is required. In order for such an exemption clause to be valid it will have to be carefully worded so that the courts will consider it a legal concept of the contract.

Article written by...
Nicola Laver LLB
Nicola Laver LLB

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A non-practising solicitor, Nicola is also a fully qualified journalist. For the past 20 years, she has worked as a legal journalist, editor and author.