2.2.1. Promisor, Promisee and Detached Objectivity

Although it is clear that an objective approach to agreement has to be adopted, there are different types of objectivity. There is “promisor objectivity”, where the court tries to decide what the reasonable promisor would have intended, “promisee objectivity”, where the focus is on what the reasonable person being made a promise would have thought was intended, and “detached objectivity”, which views what has happened through the eyes of an independent third party. In Smith v Hughes, for example, where the dispute was over what type of oats the parties were contracting about, the test was said to be whether the party who wishes to deny the contract acted so that “a reasonable man would believe that he was assenting to the terms proposed by the other party”: in other words, promisee objectivity. However, the courts are not consistent as to which of these types of objectivity they use, changing between one and another as seemed most appropriate in a particular case.

2.2.2. State of mind

The objective approach must, however, take account of all the evidence. Even if A has acted in a way which would reasonably cause B to assume a particular state of mind as regards an agreement, if B’s behaviour, objectively viewed, indicates that such an assumption has not been made by B, the courts will take account of this. The Hannah Blumenthal, for example, was a case concerning the sale of a ship, where the point at issue was whether the parties had agreed to abandon their dispute. The behaviour of the buyers was such that it would have been reasonable for the sellers to have believed that the action had been dropped. In fact, the sellers had continued to act (by seeking witnesses, etc) in a way which indicated that they did not think the action had been dropped. This evidence of their actual response to the buyers’ behaviour overrode the conclusion which the court might well have reached by applying a test based on an objectively reasonable response.

2.3. The External Signs of Agreement

As we have seen, the process by which the courts try to decide whether the parties have made an agreement does not necessarily involve looking for actual agreement, but rather for the external signs of agreement. The classical theory of contract relied on a number of specific elements, which were regarded as both necessary and sufficient to identify an agreement which is intended to be legally binding. These were:

- offer;

- acceptance; and

- consideration.

These three factors, together with an overarching requirement that the court is satisfied that there was an intention to create legal relations, formed the classical basis for the identification of contracts in English law. As far as offer and acceptance are concerned, in the modern law the courts have, as will be noted below, at various times recognized the difficulty of analysing all contractual situations in terms of these concepts. Some attempts have been made to apply a more general test of “agreement”. These have not been fully developed, but the direction in which English law is moving is perhaps indicated by the Principles of European Contract Law. These suggest that the normal basis for the creation of a contract will be the exchange of offer and acceptance (Arts 2:201; 2:204). They recognize, however, that not all contracts will be made in this way (Art 2:211). The overall test is simply whether there is “sufficient agreement” (Art 2:101), with this being determined by whether the terms “have been sufficiently determined by the parties so that the contract can be enforced” (Art 2:103).