Objective theory of contract

Objective theory of contract
See also

Objective theory of contract - the offer-acceptance method of reaching an agreement, the difference between bilateral and unilateral contracts, and how to distinguish the meaning of the agreement [1]

In determining whether a contract has been completed, the element of intention is of principal importance. In contract law, the intention is determined by the objective theory of contracts, not by the individual or subjective intent, or belief, of a party. The theory is that a party's intention to enter into a legally binding agreement or contract is judged by outward, objective realities as interpreted by a reasonable person, rather than by the party's own secret, subjective intentions [2].

Exception for Objective theory

The revocation by death rule, when it is implemented to an offeror's death that is unknown to the offeree, is a pointed exception to the universal objective theory of contracts - under the objective theory, a manifestation of assent is effective without regard to actual mental assent, so the offeror's hidden death should not terminate his agreement [3].

Definition of a Contract

'Contract - a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty. In other words, a contract is a legally binding agreement between two or more parties who agree to perform or to refrain from performing some performance now or in the future. Commonly, agreement conflicts appear when there is a promise of future performance. If the contractual obligation is not fulfilled, the party who made it is subordinate to the sanctions of a court. That party may be obligated to pay damages for failing to perform the contractual promise; in limited instances, the party may be required to perform the promised action [4].

Formation of a contract requires two basic elements [5]:

Requirements of a Valid Contract

If any of the elements, which are listed below, are lacking, no contract will have been formed [6]:

  • agreement
  • consideration
  • contractual capacity
  • legality



  1. R. E. Barnett 2010
  2. F. Cross, R. Miller 2008, p. 195
  3. S. Emanuel 2006, p. 55
  4. F. Cross, R. Miller 2008, p. 195
  5. R. E. Barnett 2010
  6. F. Cross, R. Miller 2008, p. 195

Author: Klaudia Wojtas