Question

Legal Principle: An agreement made with the intention of entering into legal relationship gives rise to a contract.
Factual Situation: Two firms entered into a written contract for the sale and purchase of tissue paper. The agreement contained a clause to the effect that 'this agreement is not entered into, nor is this memorandum written, as a formal or a legal document, and shall not be subject to legal jurisdiction in the law courts'. Since the goods were not delivered, the buyers brought an action for non-delivery.
Issue: Are the sellers liable?

• A. The sellers are liable, as they had entered into a written agreement.
• B. The sellers are not liable, as there was no contract as the parties never intended to create legal relationship because they had clearly mentioned that their agreement is not a legal document nor a memorandum nor subject to the jurisdiction of law courts.
• C. The firm may make mutual adjudication.
• D. None of these.

Answer 1

Answer: (B)

The sellers are not liable, as there was no contract as the parties never intended to create legal relationship because they had clearly mentioned that their agreement is not a legal document nor a memorandum nor subject to the jurisdiction of law courts.

• A contract is an agreement enforceable by law. Such agreement must contain an offer, its acceptance, consideration of such agreement as well as free consent of the parties. Also, there must be intention to enter legal relationship to give rise to a contract.
  
• In the present case, although there was a written contract between the parties but there was no intention to create any legal relationship between the parties as decided by the parties specifically by the clause of the agreement which means there was no legal basis of such relationship and hence, there is no liability of the sellers in absence of any legal relationship.