1. The objective standard of agreement makes it impossible for a defendant to plead mistake as an excuse for non-performance. Discuss
Firstly, it is necessary to delineate the theory concerning the manifestation as following
1. The subjective theory emphasizes the intention of the speaker rather than his manifestation on the hearer. For the example If X offer to sell his book to Z in the condition that Z have to accept or refuse no later than 1 pm of tomorrow. In case that X did not have intention to sell his book .There is no need for X to communicate to withdrawal (revocation) of the offer ,it only require to prove one has no longer in his mind to contract when the other party agreed to accept.(see Cook v Oxley,3 Term.R.653,,100 Eng.Rep.785(1790)) or For another example if One said “I agree to purchase my house to you for $500,000” One truly meant to say “I agree to purchase house for $40,000”.
2. The objective theory accept that the manifestation on the hearer rather than the intention of the speaker. It protects the hearer form refusing the binding of manifestation. Following the American law, it is not required to have the psychological consent for the formation of an agreement. The unrevealed purpose is immaterial except when an irrational meaning that he attaches to his manifestations is known to the other side.[1]The objective theory was broadly recognized in the United State of American, It stabilized the contractual relationship. It did not give any chance the offerer to excuse that what was said was different from what was intend. And because the objective theory pay an importance to the external expression, the inside intension is not binding. Hence both offerer and offeree have to take care of the written word which might entail to lose power or benefit.
Nevertheless, the court does not look only the language to interpret the agreement but the circumstance in the transaction It is consistent with the statement of this objective theory of assent was given by Williston:
“The modern law rightly construes both acts and words as having the meaning which a reasonable person present would put upon them in view of the surrounding circumstances. Even where words are used, “a contract includes not only what the parties said, but also what is necessarily to be implied from what they said” And it may be said broadly that any conduct of one party, from which the other may reasonably draw the inference of a promise, is effective in law as such[2]
The objective test supports the court to control private exchange manners through utilize the term of the “reasonable” person as Professor J. Willard Hurst said.[3]Additionally, Professor Horwitz has recommended that the objective approach ground on the outward expression of reciprocal concur was a pro-commercial market replace the theory of intrinsic value that recognize equity idea of contract.
There are cases concerning the objective theory which it should be mentioned as following
Embry v Hargadine ,McKittrick Dry Goods Co.
Embry worked as employee of Hargadine, McKittrick Dry Goods co. with the contract expired on 15 December 1903 On 23 December, Embry said that he would search for a new job unless his contract was renewed. Harradine’s president, McKittrick, told Embry ‘Go ahead, you’re all right. Get your men out and don’t let that worry you.’ Embry believed that the contract had been renew and he did not try to find another employment, he still worked for the company until. When his employment was rescinded. He brought an action to the court for breach of contract. The instruction was given to the jury that It was necessary for both sides to have had a subjective intent to contract or there would be no contract. In this case, there is an important question is that did the court recognized a contract of re-employment on regardless of the intention of McKittrick?
A Meeting of mind of the parties is the important principle of contract law. This principle respect that both parties must agree to the same thing in the same sense[4]. The basic purpose of contract law is to seek the intention of the parties which is including in the words which the parties have used. Trial court ruled that the formation of contract depended on the intention (Subjective) to enter into the contract. The decision of trial court was appealed and the judgment of St Louis Court of Appeals is reversed and remanded.
The rule of this case is the Contract formation ground on the external manifest (objective) ,there is no need to consider the intention in one ‘s mind.
Lucy v. Zehmer
Lucy was a farmer who had known Zehmer for 15 to 20 years. He wanted to buy the Zehmer’s farm. Zehmer had refused his offer to buy it for $20, 000.Anyway, Lucy offered to purchase it again .Zehmer sign the contract to purchase the farm on restaurant bill while they had had a several drink. And the contract was done by his joke .After the contract was signed, Lucy persuaded his brother to pay half of the money. He also reached a half benefit in the land. Moreover he hire a lawyer to verify the title, the next night ,he return to Zehmer’s place and at the first time , Zehmer told him, Lucy said he wasn't going to sell and he told Zehmer "You know you sold that place fair and square.”. Then, he sent a letter to Zehmer that he was ready to perform his debt after his lawyer report that the title was no problem. All the testimony shows that he trusted in good faith that the contract is a serious business transaction. In General, we have to contemplate the outward expression of a person is more important than his hidden intention or unexpressed intention.
Zehmer proved that he was not serious about purchasing the farm. He put his signed paper on the counter in front of Lucy. Lucy said that he passed it to him. Both sides said Lucy keep the signed paper in the pocket then tender Zehmer $5 to seal the negotiate. However, both Zehmer showed that whilst Zehmer asked his wife to sign, he whispered that it was a joke .The trial court held that Lucy and J.C. (claimants) were unsuccessful to establish their right to specific performance, and dismissing their bill. The assignment of error is to action of the court .And then, the Supreme Court of Appeals of Virginia
The abovementioned two case, the objective test protect Embry and Lucy from excuse that the defendants did not have the real intention to binding with theirs outward manifestation that made the reasonable man to understand in good faith that the defendants wanted to be bound in legal relation.
Southworth v Oliver
The defendant came up to the plaintiff about a trade of land. The plaintiff expressed interest. Both sides communicated each other by the telephone to negotiate about the deal. The Defendant afterwards sent a letter to the plaintiff with 2 attachments (Attachment 1: selling 2933 acres,$324 K:29% down, Rest over 5 years at 5% ,Also selling: grazing permits Attachment 2:selling 6365 acres).The Plaintiff thought it was an offer, and accepted the first attachment save the part that said “also selling: grazing permits.” The Defendant’s lawyer sent a letter of return to the Plaintiff stating this wasn’t an offer, and certainly it wasn’t for you to “pick and choose “The Plaintiff then sued. In this case ,the court hold that there was an offer when the landlord propose a letter citing prices to create an enforceable contract because the court considered that it can be implied from what was said and circumstance that made the plaintiff reasonably understood there was an offer. Thus the rights to accept pass on the plaintiff.
Bretz v. Portland General Electric co.
Bretz and Portland General Electric co.(PGE.) entered into negotiations for Bretz to purchase stock from PGE. Letters were swapped back and forth. PGE mailed a letter to plaintiff requesting for modification of 2 problem that they have. PGE fulfilled the letter saying that “I would appreciate your resubmitting your offer on the above basis.” And then Bretz submitted PGE an revised version of his previous offer titled “Acceptance of Offer,” and wrote that “a contract for sale exists “When the PGE infringed the supposed contract, Bretz filed a suit. The court held for PGE that the writings were insufficient for Montana’s statue of frauds and PGE was not equitably estopped to raise the statute of frauds defense.The United States Court of Appeals held to affirm the inferior court. This judgement insist the rule that acts and words is construed as containing of the meaning that a reasonable person would put upon them in vision of the surrounding circumstances.
Furthermore, in testimony, there is the problem of proof. The range of “objective” evidence concerning to the question of what the parties knew or should have to known and who ought to make a decision of reasonableness.[5]
In my opinion, the objective standard does not absolutely exclude the defendant’s plead of mistake as an excuse for non-performance. There are opportunities for the defendant as following
The Restatement (Second) of Contract section 152 and 153 provide the condition of mistake which grant power to the court to void contractual duty.
“Section 152 when Mistake of Both Parties Makes a Contract Voidable
(1)Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, The contract is voidable by the adversely affected party unless he bears the risk of mistake………
Section 153 When Mistake of One Party Make a Contract Voidable
Where a mistake of one party at the time a contract was made as to basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake…,and
(a) The effect of the mistake is such that enforcement of the contract would be unconscionable, or (b) the other party had reason to know of the mistake or his fault caused the mistake.”
The excuse of one party can be used to avoid the enforcement of a contract, it require the element as following
1) A mistake by one party deals with a basic assumption on which that party made the contract:
2) The mistake has a material effect on the agreed exchange:
3) Enforcement of the contract would be unconscionable ,or the other party knew of the mistake:
Furthermore, there are the examples of mistake which can be pleaded to excuse for non-performance.
Boise Junior College District v. Mattefs Construction Co.
Boise Junior College District [Boise] was admitting bids for a construction agreement which the expenditure was estimated about $150,000. Mattefs Construction [Mattefs] put a bid for a construction agreement with Boise for $141,048,comprising a clause to pay the difference B/W its bid and the next higher bid if it ultimately repudiate to perform. Mattefs’s bid was very cheap because of mistake, and declines to perform. Boise finished up using the next cheapest bidder for $148,915 and sued Mattefs to try and collect on the bond (for the difference).Trial court judge not favor of Boise and Boise appealed. The Supreme Court of Idaho holds affirm and rescinded the contract.
Sherwood v Walker
Sherwood entered into the agreement to buy the cow from Walker. The cow was showed to Sherwood. Sherwood thought that the cow was baron. So the price of this cow was $80.If the cow had been productive, it price should worth more than that. The judge taught the jury that it was not material whether the cow was barren. The jury reversed a verdict in favor of Sherwood and Walker appealed. The Supreme Court of Michigan ruled that a mutual mistake deeming the substance of the subject matter of an agreement might cause the contract to be unenforceable.
According to the Sherwood v Walker, it can be observed that a contractual mistake is a faith that does not match with the fact (Restatement (second) section 151) and the incorrect faith of one or both of the parties have to relate to a fact which is existence at the time that the contract is executed. The belief which is discovered to be in inaccuracy might not be, in substance, a prediction regarding a future occurrence or non-occurrence or non-occurrence.
In conclusion, the objective theory ensures both parties to conclude a contract with no suspect in the internal intension of each other. The internal intention cannot render the contract to be void. Although the American law applies the objective theory in the contract but the mistake still alive as an exception of the objective .The mistake help the common law to make the objective standard of agreement to be more flexible and fair for both party.
[1] Ian Ayres & Richard E. Speidel ,Studies in contract law seventh edition, p.232
[2] Williston,A Treatise on the law of Contracts 22A,at 49-50 (3rd edition 1957)
[3] J.W.Hurst, Law and the Conditions of Freedom in Nineteenth Century America
[4]Ian Ayres & Richard E. Speidel, Studies in contract law seventh edition, p.229
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