## Facts

- Rose & Frank Co was appointed as the sole US distributor for JR Crompton & Bros Ltd, a British paper manufacturer.
- The parties entered into a written agreement which included an "honour clause" explicitly stating that the arrangement was not a formal or legal agreement and would not be subject to legal jurisdiction in the courts of the US or England.
- The clause specified that the agreement was a record of mutual trust and good faith, with no intention that it be legally binding.
- Crompton terminated the agreement without notice, leading to a dispute over whether any enforceable contract existed between the parties.

## Issues

1. Whether the inclusion of an "honour clause" in a commercial agreement can negate the presumption of intention to create legal relations.
2. Whether the agreement between Rose & Frank Co and JR Crompton & Bros Ltd was legally enforceable notwithstanding the honour clause.
3. How clear contract wording interacts with the general presumptions regarding legal enforceability in business arrangements.

## Decision

- The House of Lords ruled that the honour clause was sufficient to negate the usual presumption of intention to create legal relations in commercial agreements.
- The court recognized the right of parties to decide, via express terms, whether an agreement is to be legally binding.
- It held that, in the presence of a clear honour clause, courts will not enforce the agreement as a contract under law.

## Legal Principles

- The intention to create legal relations is a fundamental element required to form a legally binding contract.
- Business agreements usually carry a strong presumption of such intention, but this can be rebutted by clear and unambiguous language to the contrary.
- An expressly worded honour clause can remove contractual intent even in a commercial context.
- Courts will consider both the context and explicit terms of agreements to determine legal effect.

## Conclusion

Rose & Frank Co v JR Crompton & Bros Ltd established that a clearly drafted honour clause can effectively exclude the intention to create legal relations in a business agreement, preventing the arrangement from being legally enforceable despite the usual commercial presumption. This case highlights the importance of precise contract language in reflecting the genuine intent of the parties.


Rose & Frank Co v JR Crompton & Bros Ltd [1925] AC 445