Subjective Approach to Contract

The Subjective Approach to Contract

Courts will set aside what a specific party was thinking at the time (their subjective intentions). Instead, the court places greater emphasis on what a rationally thinking individual would think under the very same conditions and situations.  They look at the intentions on a more neutral factual basis (objective intent). Courts do not stray into the zone of what is in a person’s mind (such a thing is virtually impossible to prove). Instead, they look at arrangements from the perspective of a reasonable man. The subjective ‘meeting of minds’ is not needed for an arrangement or an agreement to become binding at law. The bigger picture is looked at– the whole situation. Courts examine the rationality behind the big picture, and whether or not the parties could be held to have possessed such an intention. If the various stages of this contractual test are not met, then the court will move to assume that the party having their intentions examined did not willingly intend to be bound by a binding legal contract. What we can see is that, in reality, there are somewhat difficult blurred lines crossing over someone’s objective and subjective intentions. Consider the case of:

Leonard v. Pepsi Co. Inc. 88 F. Supp 2d 1 (S.D.N.Y. 1999)

Facts: Pepsi Co. released a commercial advertisement. This televised advert, showed a jet being offered in exchange for seven million of their ‘Pepsi points™.’ Mr Leonard gathered the requisite number of points. He then sent a his seven million Pepsi points to stake his claim for the jet, valuing each ‘Pepsi Point™’ at $1 each. Pepsi Co. refused to honour Mr Leonard’s offer, and he brought action against Pepsi. Ratio: The court held that the advertisement on TV was not an offer that Mr. Leonard could accept. The advertisement was a ‘sales puff’ that was an obviously not meant to be binding. Application: If the court had fallen on the side of the complainant by looking at his perspective through the subjective approach, it could be remotely (but,not convincingly) conceived that Pepsi Co. had given off the impression in their advertising campaign that they were genuinely offering a military fighter jet, which they had in their possession, in exchange for seven million of their ‘PepsiPoints ™’.

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