Don’t State that the Parties Intend to Be Legally Bound

For the heck of it, let’s go back to basics.

Generally, no purpose is served by stating, in the introductory clause or elsewhere, that the parties intend to be legally bound. The approach under U.S. law is summarized by section 21 of the Restatement (Second) of Contracts, which states that “Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract.” Instead, formation of a contract requires an intentional act manifesting assent. (But here’s one oddity to bear in mind: under the Uniform Written Obligations Act, enacted only in Pennsylvania, any written release or promise won’t be unenforceable for lack of consideration if the signer states that it intends to be legally bound.)

By contrast, in England and in most civil-law countries, the existence of a contract depends, at least in theory, on the parties’ intent to be bound. But under English law, a presumption applies that if a commercial agreement satisfies the other elements of a contract, the parties intended to be legally bound. See, e.g., Edwards v Skyways [1964] 1 All ER 494.

As a practical matter, disputes regarding whether a party intended to be legally bound are comparable to disputes regarding whether for purposes of U.S. law the parties had actually entered into a contract. In both kinds of dispute, informal communications feature prominently. By contrast, it would be ludicrous to argue that someone who entered into a traditional contract articulating the terms of a commercial relationship might not have been aware that the contract was legally binding. So unless a quirk of governing law makes it necessary or advantageous to do so, don’t include in a contract a statement that the parties intend to be legally bound by the contract.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.