Depending on the circumstances, agreements may be made with different intentions. In some circumstances, the parties may intend that the performance of an agreement will rely on notions of honour, goodwill, affection, mutual advantage, or peer pressure, but they do not intend that their agreement should be enforceable by bringing an action in the courts.

In other circumstances, people enter agreements with an intention that any failure to perform the agreement will involve legal consequences and that they will be able to enforce their agreement by bringing an action in court. It is this type of agreement that is properly called a contract.

The first essential element of contractual formation is therefore the intention of the parties to be legally bound by their agreement. Without this intention, which reflects the will of the parties, the courts will not assist in enforcing the agreement.

In the examples that follow you will learn how to work out whether or not the parties to an agreement intend their promises to be legally binding.