Intention to enter a legal relationship

Authored by Nicholas Ellery, Partner and Alannah Hogan, Lawyer, Corrs Chambers Westgarth. Updated by the LexisNexis Legal Writer team.

The existence of a mutual intention to create legal relations is an essential precondition of the existence of a contract of employment (or any other kind of contract, including a principal/contractor relationship).

An offer can be made orally, in writing or by conduct. In the event of any dispute, courts and tribunals will examine the conduct of the parties to ascertain firstly whether there was a mutual intent to contract, and if so, the operative terms. As in any contractual relationship, whether the statements or conduct of an employer amount to an offer is ascertained using the ordinary objective approach in contract. The issue is whether a reasonable person in the position of the employee would conclude that the statements and conduct of the employer were intended to convey an offer which would, on acceptance, alter the employee’s legal rights. See Yousif v Commonwealth Bank of Australia, Saad v TWT Ltd and Nikolich v Goldman Sachs JB Were Services Pty Ltd.

When a contract is formed, a key distinction is drawn between stipulations that are intended to give rise to enforceable rights (promissory terms) and those that are said to be mere representations and non-enforceable.