If both parties agree on the wording of a contract but disagree on its meaning and intent, the main purpose of the interpretation is to identify its legal meaning in the context used that achieves the subject matter of the contract. According to contract law, a contract is only legally binding if the parties demonstrate a willingness to be legally bound. In addition, a party must express its intention through clear words or actions. SUBJECTIVE AGREEMENT: The subjective approach of contract law refers to a legal theory that defines a contract as an agreement in which there is a subjective meeting of thoughts between the parties involved. In applying this approach, the court will consider the subjective expectations and expectations of the parties and ignore the objective wording of the contract. However, some courts and commentators have rejected this theory, preferring the objective approach instead. From a legal point of view, intent can be defined as a person`s state of mind when performing an action or behaving in a certain way. This is the purpose or reason for a sequence of activities that the person wants to follow. The other party must understand the words or actions as the previous part intended to understand them. However, this is not always the case.
Sometimes there may be misunderstandings resulting from certain factors, such as: 1) Wrong word choice. 2) Misunderstood or otherwise understood materialization of intent. 3) Deliberate concealment of secrets. In addition, a party must express its intention through clear words or actions. The other party must understand the words or actions that the previous party had planned for it. However, this is not always the case. Sometimes there may be misunderstandings resulting from certain factors, such as: Strictly speaking, a contract has nothing to do with the personal or individual intent of the parties. A contract is an obligation that is bound by the mere force of law to certain actions of the parties, usually words that accompany and generally represent a known intent. However, if twenty bishops proved that one of the parties, when using the words, intended to do something other than the usual meaning that the law imposes on them, he would always be detained, unless there was a mutual error or something else in nature.
Subjective approach Contract law refers to a legal doctrine that considers a contract concluded on the basis of a subjective gathering of opinions to be legally binding. It requires the court to consider a party`s state of mind when determining whether a contract is legally enforceable. If an objective approach is taken, the court will consider the case from the perspective of a rational person. Although many legal experts reject the subjective approach, some believe it should play a more important role in contract law. The intention to create legal relationships, otherwise an “intention to be legally bound”, is a doctrine used in contract law, particularly in English contract law and related common law jurisdictions. [a] Legal historians note that many of the chief justices and jurists of the late 1800s and early 1900s adhered to the objective theory of contracts. Among these judges and scholars were CHRISTOPHER COLUMBUS LANGDELL, OLIVER WENDELL HOLMES and SAMUEL WILLISTON. Judge LEARNED HAND of New York summarized the objective theory of contracts in a famous quote from a 1911 case (Hotchkiss v. National City Bank, 200 F. 287 [S.D.N.Y. 1911]): In 1919, Lord Atkin stopped in Balfour v Balfour (where a husband promised his wife to pay alimony while working in Ceylon), that there was no “intention to be legally bound” even though the woman depended on payments.
The judge noted that agreements between spouses would generally not be legally enforceable: commercial transactions give rise to a strong presumption of a valid contract: these agreements, in which the parties act as if they were foreigners, are considered binding. However, “honor clauses” in “gentlemen`s agreements” are recognized as a denying intention to create legal relationships, as in Jones v Vernons Pools (where the “This agreement is binding only in honor” clause was effective). Care must be taken not to draft a clause to try to exclude the jurisdiction of a court, because the clause will be void, as in Baker v. Jones.  If a contract contains both an “honour clause” and a clause that attempts to exclude the jurisdiction of a court (as in Rose & Frank v. Crompton), the court may apply the blue pencil rule that removes the offensive part. The court will then recognize the rest, if it still makes sense and is consistent with the agreements of the parties. The offensive clause read as follows: the examination of the objective nature of the contractual intention is insufficient in this respect. It restricts the formation of real contracts.
The use of rigorous and rigid objective evidence and the absence of an assessment of the relevance of the parties` subjective mindset is a disadvantage of the application of the objective test. What a party had in mind when it accepted the offer is of dubious value and cannot be blindly ignored. Given that the application of a subjective approach could mean taking into account data that may not be authentic, attaching unnecessary importance to unreliable data, and destroying the court`s objective of creating justice, if the party`s subjective intent can be supported by valid evidence that can be trusted, it will improve justice. Therefore, the intention of both parties must be taken into account in the contract. However, the problem with the subjective approach of contract law is that the court may take data into account and attach unnecessary importance that may not be accurate or reliable. This can undermine the Court`s ability to create justice. On the other hand, if a party`s subjective intent is supported by valid and reliable evidence, it can improve justice. “The intention to create legal relationships” is one of the most important things in the design of a contract.
When disputes in this regard are brought before the courts, the “intention to create a legal obligation” requirement has the role of distinguishing cases that can and cannot be brought before the court. Not all agreements can be enforceable under the law and form a binding legal contract that implies a legal obligation. Some legal experts believe that more importance should be given to the subjective approach to contract law. Indeed, limiting the drafting of contracts to objective intentions may unreasonably restrict the formation of contracts. However, this approach has its positive and negative effects. If the subjectivity of intent plays a more important role in determining the enforceability of a contract, this will broaden the scope of the contracts to be drawn up and not limit them to be concluded solely on the basis of objective intent. As such, it can facilitate the creation of real contracts. Contrary to intuition, the best way to know if the parties intend to enter into a contract is not to ask them, as this “subjective test” would give the bad guy an easy escape to avoid liability. (He replied, “No! I didn`t intend to be bound. Instead, as in Carlill v.
Carbolic Smoke Ball Company, the court applies the “objective test” and considers whether, after considering all the circumstances of the case, the reasonable viewer considers that the parties intended to be related. [b] Given that the advertisement (pictured) stated that the company “had deposited £1,000 in Alliance Bank to show its sincerity in the case”, the court ruled that any objective viewer reading this would suspect the intention to contract. A contract is a legally binding agreement. Once an offer has been accepted, there is an agreement, but not necessarily a contract. The element that turns any agreement into a real contract is “the intention to create legal relationships.” It must be shown that the parties intended the agreement to be governed by contract law. If proof of intent is found, the agreement creates legal obligations under which any party who is the victim of a violation can be sued. Although many sources consider “social and domestic agreements” as a single class, it is preferable to consider “family agreements” as a class distinct from “social agreements”, since the latter do not invoke presumption and only the objective criterion applies. It is not necessary to have a subjective meeting of the chiefs to make a contract legally enforceable. The court assesses the whole situation and tries to determine whether it is rational to attribute such an intention to the parties. In the event that the conditions for verification of the contract are not met, the court assumes that the party in question did not intend to enter into a legally enforceable contract. .