Introduction and Objective Intent Flashcards
Understand Objective Intent and Preliminary Learning of Contract Law in NZ
· What is a contract?
A voluntary transaction → voluntary obligations → people choose it → they are not compelled to enter.
Involuntary transactions → Private law → Torts → people interacting but it is involuntary.
Are all voluntary transactions are contracts → No → Gift → Deed is different from a contract, a will, a testament are all not contracts (different legal instruments)
AN AGREEMENT BETWEEN TWO PARTIES OR MORE → always two or more parties to a contract → If i have a car and want to sell it it is in the realm of voluntary contracts.
All contracts involve AT LEAST ONE PROMISE → promises which are projected into the future → a spot transaction/barter → is NOT A CONTRACT → This will delve into the realm of property law
PROMISES MADE INTO THE FUTURE.
In order for a contract and not to be a gift → in order for something to be a contract something MUST BE GIVEN IN RETURN FOR THE PROMISE.
For example, meet you tomorrow at 12pm (Promise), they say the same (promise/consideration).
MUST INTEND SOMETHING THAT IS EXTRAORDINARY (Enforceable by the state) → Parties agree between them that they want the state of NZ to state the agreement between them → if two people engage in agreement make promises and give consideration with intention to be bound → Then they gain an enforceable right by law. → the law will enforce it
When all the elements of FORMATION are satisfied → then suddenly somebody gained something (promisee) gains a right (an in personam right). →
TWO TYPES OF RIGHTS IN CONTRACT
IN PERSONAM RIGHT → against the person → for example if Lucy decides to sell house and promise money → and she says she doesnt want to → I have an in personam house against Lucy. → Only against the person.
IN REM (Different from the above) → In the thing itself → For example Lucy does not sell me her car, and i steal it and give it to Anna → conversion (torts), criminal (theft). → because my right is in the thing (property), property rights are against everybody and they follow the thing → so they can have a claim against anybody who has possession of the car → IN REM rights follow the thing
In personam means they are in relation only to the person and do not follow the thing (property).
When I have an IN PERSONAM RIGHT → for example agree to sell car, and you dont sell it, i dont have right against car, only against you (the person), NOT THE THING (PROPERTY).
What is the role of general contract law?
CONTRACT LAW → Branch of Private Law
Public law → always involves the state → criminal law, public law.
Contract law → is always about two or more private persons.
Family law → is private law
Tort law → is private law
Equity → Wills, trusts → are private law
Property → Private law
Restitution → private law
Private law helps us manage a free society where people have things (property)
Property → everything we deal with deals with property that we have → what is mine and what is yours → what it means to have something that is yours and mine → ownership. → there are property rights which are less than Ownership.
When you rent a place → that is a property right that you have → It is the right to use —> IN REM → not ownership.
In rem right → ergo omnes → against everybody → property right → nobody can barge into your house you have a claim against everybody who does.
Torts → interfere with property or person → if interfere with property → tortious interference/trespass.
CONTRACT LAW → how we transfer property rights → But also obligations,
Restitution → unjust enrichment → when someone profits elicitly from my property → someone steals my car, drives all night as uber driver. → Tort, Crime, and the money she made → duty to me in restitution → the fruits of my property.
COMPANY LAW is important for a lawyer.
Private law → how we manage society that is free.
CONTRACT LAW → as young people we have signed a employment contract
Employment law→ a special law governing employment contracts.
Tenancy agreement → tenancy contracts
Credit Card
Buy a shirt → consumer contract.
General contract law → rules that apply to all contracts unless they are derogated by a special law.
Employment law is just contract law unless it says different from general contract law.
Consumer law is just contract law unless it says different from GENERAL CONTRACT LAW.
Most litigation in employment law has to do with contracts.
Many claims done in tenancy agreements are in Contract Law.
Legal questions
Important to understand why we have the rule (the principle) → easier to understand if they make sense
Why are these the rules we have? → why isnt the rule different?
Then we will ask what is the remedy for a contract?
The above is the FOUNDATIONS OF CONTRACT
When a contract is formed, and a remedy tells you why it is important
If there is a contract you can’t change your mind → there is a remedy attached to breach of contract.
Contract cancelled?
Formation defences?
What contracts will not be enforced?
How do we interpret contracts?
RATIONALES OF CONTRACT LAW:
Why does the state enforce agreements → back private agreements in this way?
Smith v Hughes
Hartog v Colin & Shields
First question → what kind of agreement must there be for a contractual agreement (Smith v Hughes, Hartog)
HOW TO READ A CASE
HOW TO MAKE SENSE OF THE LAW → the rules, principles, and rationale of the Contract Law
Why does the state enforce agreements?
Corrective justice
Choose to offer future performance, chooses to accept future performance
Contracts allow people to conduct a PRIVATE LIFE, apart from the goals of society and the state → part of their own lives.
Choosing to do things together. → have to do things together
To do things together you need contract law
CONTRACT LAW DEFENDS THE EQUALITY OF CHOICE OF THE WITHIN THEIR PRIVATE RELATIONSHIPS
“Choice” is different from “wish” → choosing is not the same as wanting → choosing is in action and speech about things → when we choose together in the moment of FORMATION → i gain a duty to do what i promise and you gain a right against you that you do as you promise to me.
To go back on our joint choice is to undermine the equality between us
By breaching a contract, the breaching party makes their wishes and choices superior to those of innocent party
Enforcing contracts restores the equality between the promisor and promisee, restoring the promisee’s right and discharging the promisor’s duty.
It is not fair when we choose something together and one goes back on it. → it feels unfair because it involves an unequal choice in the agreement between the parties.
People need to cooperate on equal terms → the way to manage this. → there are places where people cannot choose what to do privately. → choose what to do with others on equal terms.
· Economic efficiency
There are two persons, one grows wheat and another is a horse trainer (example)
The farmer that grows the wheat has $3000 worth of wheat → value of oats to farmer
If the horse trainer gets the wheat he will be able to extract more value from it → he will be able to get more utility, and more efficiency out of it → $3600 value of oats to trainer
We want people who can do more with resources to have the resources.
We USE CONTRACTS TO ENSURE THIS IS THE CASE.
Somebody has a resource labelled property and another person can put it to lucrative use
EVERY CONTRACT GENERATES A SURPLUS
What is the contractual surplus? $600
What would be the price? → $3000 < Price < $3600 → depending on the bargaining power of the parties
Contract creates efficiency → wealth → then it divides based on bargaining power. (ECONOMICS)
Why can we trust voluntary transactions to generate surplus? → If there is no surplus there is nothing to divide between the parties → if there is a CONTRACT that THIS IS GOOD FOR BOTH PARTIES → Because they choose → It is voluntary → if there is no surplus created he would keep the wheat
Voluntary transactions ensure everything is efficient → has to work for both of them → people keep their best interests at heart.
Criminals → often do a spot transaction, they don’t promise, i will give you this tomorrow etc. → because they cant rely on the promise of the other BECAUSE THERE IS NO ENFORCEMENT
WITHOUT ENFORCEMENT → all will be SPOT TRANSACTIONS
Many efficient transactions will not happen without contract law protecting reasonable reliance →
How is surplus created → through Contracts (Economic analysis of law).
Utilitarian and Deontological perspectives.
BOTH CONVERGE → principle of free choice → two people choose for themselves whether to contract, how to contract. With whom to contract and under what terms to contract.
Not being told by the state → but being told by the terms of the contract what are obligations are. → justified both in economic efficiency and corrective justice → Principle of free choice
A central principle → TWO REASONS to value CHOICE of private persons and limit state prescription, “freedom of contract”
Corrective justice → Contract law → two people, relationship breached → need to correct the relationship that is breached → the state should do something about it.
Economic efficiency/utility → the reason we have contract law, and enforcement →because they are the reason we live in prosperous nations why we innovate, produce, and create.
BINDING FACTOR → Principle of free choice
Where wouldn’t we want to give private persons the power to create binding agreements according to their own choice? → inherently undermine freedom, → sometimes people’s choices can’t be trusted →
Special contract law → consumer credit law and banking law (in the bank), employment law (don’t have a choice not to work), tenancy law
Special contract law will derogate from general contract law → in most contracts. → lot of special contracts where we don’t trust one of the parties.
Normative lens → corrective justice, economic efficiency.
What makes rules good → Wealth and prosperity. → what makes contracts worth enforcing by the state?
Smith v Hughes (1871) LR 6 QB 597
Three levels for making sense of a case
· What’s going on? → the facts → a good recount of the facts also shows good understanding of the legal questions and the rules (Relevant facts???)
o The parties
o The problem
§ Subjective intent
§ Objective intent (?)
o The legal question
FACTS:
There is a seller and a buyer → they are concluding an oral contract (not in writing) → ORAL CONTRACT CAN BE A CONTRACT, certain types have to be done in writing
The seller sells oats, the buyer buys oats →
The buyer believed they were old oats.
When the seller sold them he knew that he was selling new oats
SUBJECTIVE INTENT → inside the head → things that are known only to the person themselves (Happy or sad) →
OBJECTIVE SENSE → how they act. External —> Shared experience that shows that they are potentially happy or sad.
Most contracts are performed → a fraction of contracts are not performed or there is a legal issue. → a lawyer can send a stern letter and things can get sorted → a smaller fraction gets litigated → a smaller fraction gets to an appellate court and we study them.
Most contracts work → but we are reading on the contracts that don’t work. →
If you were from the outside → what would be the objective intention? →
The seller received from the buyer a sample from the buyer and held on to them for 24 hours → so it seems as if he objectively intended to buy new oats.
What did the buyer say? → it is normal for horse trainers to only buy old oats? → NOT A FINDING BY A JURY
He mentions that trainers usually buy old oats → he is insinuating that the seller should have known that he wanted to buy old oats → he said the subjective intention of the seller had to take into account that I am interested in old oats.
The jury found that it wasn’t old oats.
The buyer says → the money that was paid for this is the amount that was for old oats not for new oats →
Seller says → it was a hot market → scarcity of oats in England and that is why new oats (which are cheaper than old oats).
Old oats are more expensive →
there is a disjunction between subjective intent of the parties and subjective intent.
The jury says → the subjective intent of the buyer was to buy old oats → but the objective intent seems to be different → he got a sample of oats for 24 hours → objectively it is as though you wanted to buy new oats, but subjectively you didn’t.
Can there be a contract in the absence of subjective agreement?
Seller says objective. → we had a contract
And buyer says contract is all about agreement and we were never in agreement (We were never AD IDEM). → never in subjective agreement.
How would I decide this case as a judge? → engage in the case →
What legal principles are at play? → What does equal choice and freedom of contract entail?
Next you make a hypothesis → something to test legal understanding with → speech of the judges.
BLACKBURN J → Queens Bench, then House of Lords.
Test yourself → do I think like Lord Blackburn?
How do we interpret an offer?
The ratio
o Can there be a contract in the absence of subjective agreement?
o Objective intention or subjective intention
o Blackburn J
§ “if the parties are not ad idem, there is no contract, unless the circumstances are such as to preclude one of the parties from denying that he has agreed to the terms of the other.” (Blackburn J, at 607)
§ “If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.” (Blackburn J, at 607)
RATIO:
AD IDEM → of the same mind
If the parties are NOT AD IDEM THERE IS NO CONTRACT
We have to have a agreement → AD IDEM → unless the circumstances are such as to preclude one of the parties that he has agreed to the terms of the other.
SOMETIMES YOU CANNOT SAY I DID NOT AGREE EVEN THOUGH YOU WERE NOT AD IDEM
No matter what is in the head (subjective) you conduct yourself so that a reasonable man (Objective standard) would believe that he was assenting → Something in his behavioir which signifies assent → and the other party upon that belief enters onto that contract
YOU want new oats → but behave as if you want old oats → and based on this i enter a contract on you → then the man that is conducting himself would be equally bound as if he agreed to the others terms → AS IF HE WAS AD IDEM EVEN IF HE WAS NOT.
PARTIES MUST BE AD IDEM → UNLESS → ONE OF THE PARTIES ENTERED THE CONTRACT BASED ON A REASONABLE OBJECTIVE SENSE OF THE OTHERS INTENTION. → then theres a contract
WHEN WE LOOK AT FORMATION → what is a reasonable OBJECTIVE INTERPRETATION OF THE OFFER? → what is the objective reasonable interpretation of the behavior of the parties → of the intention of the parties.
Objective → in our world
Reasonable person sees the world and says this is the intention of the parties.
In this case objective sense is clear → DID NOT MATTER WHAT THE HORSE TRAINER WANTED, BELIEVED OR DESIRED → IT MATTERS WHAT HE CHOOSE → HE GOT A SAMPLE OF OATS AND SAID HE WANTS THIS.
AND THAT IS WHY THE CASE IS DECIDED THE WAY IT IS.
WHY WAS THE CASE DECIDED THE WAY IT WAS?
RATIO → REASON (LATIN) → YOU DONT KNOW THE RATIO UNLESS YOU KNOW THE REASON
NOT JUST THE RULE → WHY???
Do we understand why the case was decided → and does it adhere with the large principles of contract law.
Justified according to corrective justice? → the parties together choose to decide then one party said only what i want matters → and what about what the seller wanted, desired, believed → not treating another as an equal.
Efficiency of contracts → rely on someone elses promise → they can come and say no matter what i did inside my head i didnt mean to → it cant be a good argument in law. → Anyone can argue subjectively.
Efficiency of the rule → for future parties in future cases.
- The rationale
Hartog v Colin & Shields [1939] 3 All ER 566 (KB)
Facts
· How is this case different from Smith v Hughes?
· “The offer was wrongly expressed, and the defendants by their evidence, and by the correspondence, have satisfied me that the plaintiff could not reasonably have supposed that that offer contained the offerers’ real intention.” (Singleton J at 568)
FACTS:
Two parties a seller and a buyer → contract for 30,000 Argentine hare skins
Disjunction between objective and subjective intent
The seller states a price per pound → but the seller intended to write price per piece. → in one pound of hareskins there is a lot of pieces and ends up selling them at a fraction of the price.
What makes the difference between this case and Smith v Hughes? →
Principle underlying both conditions → the difference is → here there is additional evidence to the objective intent of the seller → the entirety of negotiation was price per piece → expert brought in → price paid was appropriate for price per peace not pound
This makes a difference → the actual objective choice → was that he wanted to sell at a price per piece → In Smith → there was a box of oats, and he believed and wanted them to be old oats. → here there is plenty of objective evidence of the actual choice of the seller → AND CLEAR HE MADE A TYPO IN THE WRITING OF THE OFFER.
The offer was wrongly expressed → and defendant could not have reasonably supposed that the offer contained the offerrers real intention
Is this a principle decision → respect equal free choice of parties → YES
Is it justified → its good to have a rule to show when everything shows that you made a mistake → it is not fair to benefit from that mistake
Dont want people to be very guarded in how they talk
CAN’T SNAP UP A WRONGLY MADE OFFER. → PRINCIPLE OF FREE EQUAL CHOICE.
