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James Harris, a business owner, and Sarah Taylor, a supplier, are negotiating a contract for the supply of raw materials. During their discussions, they reach a preliminary agreement via email. However, before a formal contract is signed, Sarah decides to increase the price. James argues that they had a binding agreement and that the price cannot be changed. 

Which of the following elements is essential to determine whether a legally binding agreement exists between James and Sarah?

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In contract law, for an agreement to be legally binding, there must be an intention to create legal relations. This means that both parties must intend for their agreement to have legal consequences and be enforceable in a court of law. While a formal written contract is often evidence of this intention, it is not always necessary. The key factor is whether both parties had a mutual intention to be legally bound by their agreement, regardless of the medium (such as email) through which the agreement was reached. Key Point: The mutual intention to create legal relations is a fundamental element in determining the enforceability of an agreement. 

Without this intention, even detailed agreements may not constitute a legally binding contract.

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