In interpreting agreements, courts generally apply an objective standard(outwardly, as an observer would interpret; not subjectively). The Restatement (Second) of Contracts defines agreement as a “manifestation of mutual assent by two or more persons to one another.” 1The Uniform Commercial Code defines agreement as “the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance.” 2The critical question is what the parties said or did, not what they thought they said or did, or not what impression they thought they were making.
The distinction between objective and subjective standards crops up occasionally when one person claims he spoke in jest. The vice president of a company that manufactured punchboards, used in gambling, testified to the Washington State Game Commission that he would pay $100,000 to anyone who found a “crooked board.” Barnes, a bartender, who had purchased two boards that were crooked some time before, brought one to the company office and demanded payment. The company refused, claiming that the statement was made in jest (the audience at the commission hearing had laughed when the offer was made). The court disagreed, holding that it was reasonable to interpret the pledge of $100,000 as a means of promoting punchboards:
[I]f the jest is not apparent and a reasonable hearer would believe that an offer was being made, then the speaker risks the formation of a contract which was not intended. It is the objective manifestations of the offeror that count and not secret, unexpressed intentions. If a party’s words or acts, judged by a reasonable standard, manifest an intention to agree in regard to the matter in question, that agreement is established, and it is immaterial what may be the real but unexpressed state of the party’s mind on the subject.3
Lucy v. Zehmer(Objective Intentionat the end of the chapter) illustrates that a party’s real state of mind must be expressed to the other party, rather than in an aside to one’s spouse.
Fundamentally, a contract is a legally binding “meeting of the minds” between the parties. It is not the unexpressed intention in the minds of the parties that determines whether there was “a meeting.” The test is objective: how would a reasonable person interpret the interaction?
- For the purposes of determining whether a party had a contractual intention, why do courts employ an objective rather than a subjective test?
- What is the relationship between “the emphasis laid on the ego and the individual will” in modern times (Williston) and the concept of the contractual agreement?