 Hello, it's Waylon Chow. This is the Law of Contract Formation, Module 2A, Part E. In this part, we will look at the second essential element of a valid contract, which is the intention to create legal relations. Okay, let's get back to our friends Daria and Jamal. So let's say Daria and Jamal are at the pub. Jamal says to Daria, you've got a sick laptop. I wish I had one like that. And Daria says, yeah, I love it. I would never sell it. Then Jamal says, okay, how about if I give you $10,000 for it? And Daria replies, I'll take that. So the next day, Daria asked Jamal to pay $10,000 for the laptop. Is Jamal obligated to buy Daria's laptop for $10,000? In other words, has an agreement been formed between Daria and Jamal for the sale of the laptop at $10,000? Of a valid contract, the parties must have intended to form a legally binding contract. So how do we go about ascertaining whether or not someone actually intended to form a legally binding contract? So what the courts have done, they've developed a two-step process to determine intention. The first step is to start with a presumption, or in other words, a starting assumption. And that presumption depends on the type of situation in which the agreement was made. If the agreement was made in a domestic or social context, then we presume that there was no intent on the part of the parties to form a legally binding contract. If the agreement, however, was made in a business or commercial context, we presume the opposite, that there was intent to form a legally binding contract. So this step one sets out our starting point. Step two, we ask, is that presumption rebutted by any of the facts or evidence of the particular case? So here we actually look at what happened in this case, and then we ask what a reasonable person think that the presumption was rebutted. So for example, if there was an agreement made between two family members, the presumption there would be that there was no intent to form a legally binding contract. So that would be step one. Step two, we actually look at what happened. So let's say the two family members put their agreement in writing and they both signed it. So a reasonable person would think that when people put something in writing and they sign it, that that is a clear intention to form a legally binding contract. So is Jamal obligated to buy Daria's laptop for $10,000? And we are assuming that neither Daria nor Jamal were intoxicated while they were at the pub when they made this agreement. The issue here is whether or not Jamal and Daria had an intention to create a legally binding contract. The first thing that we do is we determine our presumption. So firstly, we presume that there was no such intention since the agreement was made in a social context while Daria and Jamal were socializing at the pub. They were having a drink, they were talking to each other, they were joking around. So it was clearly a social situation. Secondly, that presumption is not rebutted by anything else that happened in that situation where that agreement was formed. In particular, the agreement for the sale of the laptop was not put into writing. If they had put it into writing, that would have been clear evidence that would have rebutted the presumption and we would have concluded that there was intention. But since there was no agreement in writing and there was nothing else to indicate that they were making a serious agreement, our conclusion should be that there was no intention to form a legally binding contract and therefore Jamal is not obligated to buy Daria's laptop for $10,000.