Where parties make an outward sign that they intend the agreement to be legally binding, this will be effective. In Simpkins v Pays [1955] 3 All ER 10, it was held that a binding contract existed when the parties had an agreement to share winnings and had all contributed to the cost of the lottery tickets. The fact that Emily, Sarah, and James regularly entered the lottery together, sharing the costs, and had an understanding to share any winnings, indicates an intention to create legal relations. Thus, James can sue Emily to enforce the agreement to share the winnings.

Key Point: In English contract law, the intention to create legal relations is essential for the formation of a binding contract. Even in domestic or informal arrangements, if the parties' actions and contributions demonstrate an intention to be legally bound, the agreement can be enforced by the courts.