Intention to create legal relations 51Alternatively, it might be agreed that a contract will become operative only if a condition
is fulfilled. If A and B make a contract of sale, and agree that C will fix the price, this agree-
ment is sufficiently certain to amount to a contract. However, if C refuses to fix a price then
the agreement will be avoided.
The Registrar of Companies
We shall see in Chapter 3 that many businesses use their standard terms and conditions
when buying or selling goods. This can cause difficulties when both the buyer and the seller
of goods insist that a contract is made upon their own particular standard terms. If the par-
ties refuse to agree whose terms are to apply, then there will be no contract. If the parties do
agree, so that a contract is formed and the goods are sold and delivered, a court might need
to discover which set of terms was agreed to. This would be done by applying the ordinary
principles of offer and acceptance, as the following case demonstrates.
Intention to create legal relations
The acceptance of an offer will create a contract only if the offeror and offeree appeared to
intendto create a legally binding agreement. It is therefore said that it is a requirement of a
contract that there must be an intention to create legal relations. This requirement can be
demonstrated by considering an example. Let us assume that one motor dealer says to
another, ‘I’ve got to sell that Ford Ka you were interested in. If you want it, you can have it
for £5,500’, and that the other motor dealer replies, ‘Thanks a lot. I’ll definitely take it.’ If this
conversation took place in a business context, for example if the dealers were speaking on
Butler Machine Tool Co Ltd vEx-Cell-O Corporation Ltd (1979)
(Court of Appeal)On 23 May the claimants offered to sell a machine to the defendants. This offer was made
on the claimants’ standard terms and conditions, which said that they were to prevail over
any terms and conditions contained in the buyer’s order. On 27 May the defendants ordered
a machine. This order said that it was made on the defendants’ terms and conditions. The
claimants’ terms and conditions contained a price variation clause whereas the defendants’
terms and conditions did not. The defendants’ terms and conditions contained a tear-off
slip at the bottom of the order. This said: ‘We accept your order on the Terms and
Conditions stated thereon.’ On 5 June the claimants signed this slip and returned it to the
defendants. They also added that the order ‘is being entered in accordance with our
revised quotation of 23 May’. After the machine had been delivered the claimants argued
that their terms and conditions prevailed and that they were entitled to an additional £2,892
under their price variation clause.
HeldThe claimants were not entitled to the extra money. The price variation clause did not
apply as the contract was made on the defendants’ terms and conditions. On 23 May the
claimants made an offer. On 27 May the defendants made a counter offer. On 5 June the
claimants accepted this counter offer when they signed the acknowledgement slip and
returned it to the defendants.