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  Held, the Ds are bound, even if they subjectively did not intend to sell, and were only joking. The evidence indicates that P took them completely seriously, and that he was not unreasonable in doing so. “A person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing that he intended a real agreement.” Lucy v. Zehmer, 84 S.E.2d 516 (Va. 1954).

b. Manifest intent not to have legal relations: There is one exception to this general rule that what appears to be a business transaction shall be presumed to have been intended to be enforceable. The exception is that where both parties to a business arrangement explicitly manifest their understanding that the arrangement is not to be legally binding, it will not be enforced by a court. C&P, pp. 29-30; Rest. 2d, § 21.

3. Domestic and social situations: Where an agreement arises in a social or domestic situation, on the other hand, the presumption is that legal relations were not intended.

Example: Husband promises to pay a certain monthly allowance to Wife, with whom he is living amicably at the time of the promise. The couple later separate; Wife sues for the payments owing.

  Held, the agreement is not enforceable, because agreements between family members living amicably together are presumed not to have been intended as legally enforceable. Balfour v. Balfour, 2 K.B. 571 (1919).

Note: Where an agreement is made between family members not living together amicably (e.g., a separation settlement), the agreement will usually be presumed to have been intended to be legally enforceable. Even in the Balfour situation, the contract will be enforced if the parties explicitly agree that it is to be enforceable. See Rest. 2d, § 21, Comment c.

D. Intent to memorialize agreement in writing: Suppose two parties negotiate with each other, reach a mutual assent on all the terms of the proposed agreement, and also decide that they will subsequently put their entire agreement into a formal written document which both will sign. Is there a contract as soon as the mutual assent is reached, or only when the formal document is written up and signed? The question can arise not only when the parties conduct their preliminary negotiations orally, but also when they exchange letters or documents.

1. Where intent to be bound manifested: If the parties’ actions or words make it clear that they intend to be bound even before the legal document is drawn up, the courts will almost always find an enforceable contract, even if the document is never drawn up. Murray, p. 34. C&P, pp. 47-48.

2. Where intent not to be bound manifested: If the parties’ actions or words make it clear that they intend not to be bound unless and until the document is drawn up, the courts will not find an enforceable contract until the document is drawn up. Id.

3. Where no intent manifested: Where the parties have not manifested any intent at all about whether they want to be bound before the document is drawn up, and have indicated only that they wish such a document to be produced, the courts are split as to whether there is a contract.

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