Final answer:
In the case of Edwards v Skyways Ltd, a payment described as 'ex gratia' was ruled to be legally binding because the context and conduct implied a contractual intent, therefore affirming that non-legal terminology does not preclude the existence of legal obligations if the overall circumstances suggest an agreement was intended.
Step-by-step explanation:
Edwards v Skyways Ltd is a significant case in contract law that involved the ratio regarding the concept of ex gratia payments in the context of employment and contractual agreements.
In this case, the court had to decide whether a payment described as 'ex gratia' by an employer was legally binding as part of the contract of employment. The Court of Appeal held that despite the language used ('ex gratia'), the context and conduct suggested the payment was intended to have contractual effect, thereby giving the employee a right to the payment.
One crucial aspect discussed in Edwards v Skyways Ltd was whether parties to an agreement intended to create legal relations. The court showed that the use of certain terms does not necessarily negate the intention to create legal obligations. Therefore, both in negotiations and when executing contracts, parties must carefully consider not only the language they use but also the implications of their conduct and the surrounding circumstances.
In conclusion, the ratio in Edwards v Skyways elucidates that despite the use of non-legal language such as 'ex gratia', an agreement can still be legally binding if the overall context indicates a mutual intention to enter into a contract.