What does "intent to create legal relations" mean in contract law?

"Intent to create legal relations" in contract law refers to the clear intention of the parties involved to establish a legally enforceable agreement. This concept is crucial because, for a contract to be valid and binding, both parties must intend for their agreement to have legal consequences. This means that their agreement goes beyond a mere social arrangement or casual agreement; it signifies that they are willing to accept the legal responsibilities and obligations that arise from the contract.

When parties express a mutual understanding that their agreement is to be legally binding, they demonstrate their seriousness and commitment to uphold the terms of the contract. This intention is assessed from the perspective of a reasonable person, considering the context and manner in which the agreement was reached.

In contrast, the concept is not concerned with the specifics of any clauses or terms of the contract—such as liquidated damages or transaction guarantees—nor does it pertain to informal or casual agreements that lack this legal seriousness. Thus, "B" accurately captures the essence of what "intent to create legal relations" means in the realm of contract law.