Glossary
Intention to create legal relations
intention to create legal relationsIntention to create legal relations is the rule that a bargain is only a contract if the parties meant it to be legally binding. Social and domestic arrangements are presumed not to be; commercial deals are presumed to be. Edwards v Skyways Ltd [1964] 1 WLR 349 and Balfour v Balfour [1919] 2 KB 571 are the cases.More in the glossary is the rule that a bargain is only a contract if the parties meant it to be legally binding. Social and domestic arrangements are presumed not to be; commercial deals are presumed to be. Edwards v Skyways Ltd [1964] 1 WLR 349 and Balfour v Balfour [1919] 2 KB 571 are the cases.
Last updated 28 October 2026
Offer, acceptance and consideration are not enough if nobody meant a lawsuit to follow. Between businesses the presumption is that they did: Edwards v Skyways. A party who wants a commercial promise to be “in honour only” has to say so in words the other side cannot miss. Subject to contract is the usual label while talks continue.
We would rather you put the intention on the paper than argue about a handshake later. Lex drafts a short commercial agreement, not a comfort letter. Heads of terms should mark which lines bind now — confidentialityConfidentiality is a promise to keep shared information private and to use it only for the agreed purpose.More in the glossary, exclusivity, governing lawGoverning law is the legal system the parties choose to interpret their contract and decide disputes about it.More in the glossary — and which wait for the long form.
Do commercial deals have a presumption of intention?
Yes. In a business context the court presumes the parties intended legal relations. The burden is on the party who says they did not. “Ex gratia” did not save the airline in Edwards v Skyways. If a side letter is meant to be non-binding, write “not legally binding” on its face, not in a footnote.
Are heads of terms intended to bind?
Only the parts you mark. A document that is silent will be read against the commercial presumption. The clean pattern is: confidentiality and exclusivity bind; price, scope and IP wait for the signed contract. See heads of terms and letter of intent.
How do we show we did not yet intend a contract?
Use subject to contract on the emails and the draft. Do not start the work, take a deposit, or send invoices “as if” the deal is done. RTS Flexible Systems [2010] UKSC 14 shows that conduct can override the label if the essential terms are agreed and the parties perform.
Does a comfort letter create legal relations?
Usually not, if it says it is an expression of present intention and is not a promise. Kleinwort Benson v Malaysia Mining [1989] 1 WLR 379 treated a comfort letter as non-binding. If you need the parent on the hook, take a personal guarantee or a deed, not a warm paragraph.
A worked example
Two founders agree over dinner that one will “sort the brand work for mates’ rates.” There is no invoice, no paper, no “this is a contract.” That looks like a social arrangement. The same two people, trading as studios, who exchange a scoped proposal, a deposit request and a start date, are in the commercial presumption. They sign a one-page services agreement on a shared link before the work starts.
How it shows up in a contract
Sample wording · our own drafting
The parties intend this agreement to be legally binding. Any prior term sheet, comfort letter or “subject to contract” correspondence is replaced by this agreement and does not create rights, except for clauses that were expressly marked as binding.
In Plain English
This signed paper is the deal. Earlier “subject to contract” notes and warm letters are not, unless a line on them said it already bound you.
Common mistakes
- Relying on a handshake between companies and assuming it cannot be a contract.
- Marking a commercial email “in honour only” after the work has started and the invoice has been paid.
- Leaving heads of terms silent on what binds, then arguing every line was only a talk.
- Using a comfort letter when you needed a guarantee.
Frequently asked questions
What is intention to create legal relations?
The rule that a bargain is a contract only if the parties meant it to be legally binding. Commercial deals are presumed to be; social ones are presumed not to be.
Do commercial deals have a presumption of intention?
Yes. Edwards v Skyways Ltd [1964] 1 WLR 349. The party who says a business promise was not meant to bind has to prove it.
Are heads of termsHeads of terms are a short commercial outline of a deal the parties intend to write up as a full contract. In England and Wales they bind only if the parties intend that. They are often marked subject to contract, and they do the same job as a letter of intent under another name.More in the glossary intended to bind?
Only the parts you mark. Silence will be read against the commercial presumption. See /glossary/heads-of-terms.
How do we show we did not yet intend a contract?
Write “subject to contract"Subject to contract" means the parties do not intend to be bound until a formal contract is signed. The label is strong but not magic. If they act as if they have a deal and leave no essential term open, a court can still find a contract: RTS Flexible Systems Ltd v Molkerei Alois Müller [2010] UKSC 14.More in the glossary”, and do not perform as if the deal is done. Conduct can still bind you: RTS Flexible Systems [2010] UKSC 14.
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The legal wording governsLast reviewed 28 October 2026Pending lawyer review