Edwards v Skyways  1 WLR 349
Intention to create legal relations in the formation of contracts in a commercial context.
An airline company in financial difficulties was making a number of its pilots redundant. The airline company agreed with the British Airline Pilots Association to pay each pilot an ‘ex gratia payment’ equivalent to the company’s contribution to the pension fund, upon being made redundant. This was initially the subject of a resolution of the company’s Board, and agreed upon at a meeting between the company’s representatives and the Association’s representatives. The claimant opted to leave the company and claim the payment of his contributions to the pension fund. The company conceded that there was consideration, yet held that there was no legally enforceable obligation, but a mere ‘moral’ one.
The issue arose as to whether there was an intention to create legal relations and obligations in the agreement between the airplane company and the Association to pay employee contributions.
The Court held that where an agreement is reached in the course of a business affairs, and not in a domestic or social context, the presumption is that the parties have intended to create legal relations and that their legal relations should be affected. The onus Is on the party rebutting this presumption to show that they expressly intended to create a mere ‘moral’ agreement and not a legal obligation. The company’s use of the words “ex gratia” in the promise to pay do not show nor imply that the agreement is without legal effect. Thus, the company’s agreement, reached in a business setting with authorised representatives and conceded consideration, was an intention to create a legal obligation with legal consequences to that effect.
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