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Law Quarterly Review

1987

A comment on the meaning of objectivity in contract

J.P. Vorster
Subject: Contracts
Keywords: Contracts; Formation of contract
*L.Q.R. 274 IN an article in the centenary edition of this journal1 William Howarth attempted to
unravel the precise meaning of the concept of objectivity in contract. Howarth concluded that there
may be both good reasons of principle and a line of authoritative support for adopting what he called
detached objectivity as the better theoretical perspective to describe the way that judges approach
difficult problems of contract formation. 2 One of the important reasons of principle put forward by
Howarth in support of the adoption of detached objectivity is that there is a body of judicial support for
both so-called promisor and promisee objectivity, 3 that these two versions of objectivity are
incompatible and that there is no reason for preferring one of these alternatives to the other.4 The only
House of Lords decision cited by Howarth as support for detached objectivity is Gibson v. Manchester
City Council. 5
The purpose of this article is threefold, namely
(1) to show that Howarth's assertion that there is a body of judicial support for promisor objectivity is
misleading; (2) to argue that the Gibson case should not be seen as authority for detached objectivity;
and (3) to make a contribution towards clarifying the theory of contract formation.
As Howarth attributed certain views to J. R. Spencer6 it is necessary to give a brief summary of
Spencer's approach to the meaning of objectivity.

THE OBJECTIVE THEORY OF CONTRACT AS EXPLAINED BY SPENCER

According to Spencer the objective test of contract formation entails that words are to be interpreted
as they were reasonably understood by the party to whom they were spoken.7 Spencer described this
as the more orthodox theory of agreement (hereafter referred to simply as the orthodox theory) and
it is *L.Q.R. 275 certainly favoured by the weight of authority.8 Spencer added that there are at least
two cases where it is fair to the party seeking to enforce the contract (B) to allow the other (A) to deny
his apparent consent, namely
(1) where B knew or ought to have known that A's apparent intention did not correspond with A's real
intention, and
(2) where it was really B's fault that A appeared to agree to something he did not.9
Spencer also identified a rival theory of agreement (also known as the fly on the wall theory and
called detached objectivity by Howarth) according to which the words used by one contracting party
must be judged, not as they appeared to his co-contracting party, but as they would have appeared to
a reasonable man eavesdropping on the negotiations.10 The dissemination of the fly on the wall
theory of agreement in England is largely the product of the labours of Lord Denning.11 Apart from
Lord Denning's efforts, the only other case which can be used to support this rival theory is
Upton-on-Severn R.D.C. v. Powell. 12 In this case D was entitled to the services of the fire brigade
assigned to his area free of charge, whereas he had no such entitlement to the services of other fire
brigades. D called the Upton fire brigade in the mistaken belief that he lived in their area. The Upton
brigade came to his aid, labouring under the same mistake. Neither party intended to make a contract
and it was only discovered later that D lived in another fire brigade area. Nevertheless, in a
single-page judgment the Court of Appeal held D contractually bound to pay for the services
rendered. Lord Greene M.R.'s judgment appears to be most singularly innocent of any ratio
decidendi. 13 The decision is compatible only with the fly on the wall theory, as the fire brigade did
not conclude, nor would a reasonable person in its position have concluded, from D's request for help
that an offer to pay for their services was being made. Commentators have suggested that the case is
best relegated from contract and seen as *L.Q.R. 276 one based on unjustifiable enrichment.14
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Atiyah15 has gone so far as to cite the case as an example of the long series of low quality decisions
which marks the inter-war period. The main thrust of the criticism of the fly on the wall theory is that
it goes against the majority of English decisions16 and that it leads to absurd results if the parties are
inwardly agreed but outwardly are taken to be at variance or agreed on something else.17 The fly
on the wall theory is too rigidly objective:
It may be acceptable for the law occasionally to force upon one of the parties an agreement which he
did not want; but surely there is something wrong with a theory which forces upon both of the parties
an agreement which neither of them wants.18

THE OBJECTIVE THEORY AS EXPLAINED BY HOWARTH

Howarth concluded that there was judicial support for three versions of the objective test, namely
promisor objectivity, promisee objectivity and detached objectivity. It is suggested that Howarth's
contribution is seriously flawed by his misleading use of the terms promisor objectivity and
promisee objectivity. According to conventional usage in a contractual context a promisor is a debtor
and a promisee a creditor. In the case of a unilateral contract there is only one promisor and one
promisee. On the other hand, each party to a synallagmatic contract is both a promisor and a
promisee. He is a promisor with regard to what he undertakes to perform and a promisee with regard
to what he is entitled to receive.
Howarth's explanation of the terminology which he uses makes interesting reading:
The use of promisor/promisee terminology serves as a convenient means of distinguishing the
party wishing to enforce a contract or contractual promise (the promisee) from the party wishing to
avoid the enforcement of that promise (the promisor).19
According to this terminology the question whether a party is regarded as a promisor or a promisee
depends on whether he is seeking to enforce the contract or not. So when Howarth uses the terms
promisor and promisee objectivity, what he really means is defendant and plaintiff objectivity.
This is misleading *L.Q.R. 277 inasmuch as a plaintiff is obviously a promisee (in the conventional
sense of that term) in respect of the performance which he is claiming, but he is not necessarily a
promisee in respect of the object about which there is disagreement. A plaintiff may be a seller
claiming the purchase price about which there is no disagreement. The disagreement may relate
solely to the identity of the thing allegedly bought and sold. With regard to the thing allegedly bought
and sold the seller/plaintiff is the promisor --it is the content of his promise which is in dispute.
20 21
Howarth analysed three well-known cases on mistake (Denny v. Hancock, Tamplin v. James and
Scriven v. Hindley )22 and concluded23 :
The conclusion to be abstracted from these three decisions must be that there is a body of judicial
support for the principle that contract formation is to be viewed from the perspective of the promisor
rather than any other viewpoint. If contract formation is to be objectively ascertained, the stance must
be that of a reasonable man in the promisor's position rather than that of the actual promisor.
This conclusion is misleading as these three cases are not authority for promisor objectivity in the
conventional sense of that term. In all three cases there was disagreement about what exactly, if
anything, had been bought and sold. There was, in other words, a dispute about the content of the
seller's promise. As it was the seller's promise which had to be interpreted, the seller was the
promisor for purposes of the dispute as to whether a binding contract had been concluded. In all three
cases it was the seller who was attempting to enforce the buyer's obligation to pay the agreed price.
In the terminology of Howarth this made the seller the promisee, whereas, according to conventional
usage, the seller would be the promisor for purposes of the dispute.
In all three cases the court tried to determine what a reasonable man in the position of the buyer (i.e.
the promisee) would have thought he was buying. These decisions are, therefore, quite
unremarkable. They are wholly in accord with the main stream of authority in their period, as they are
examples of promisee objectivity in the conventional meaning of that term.24 Howarth25 expressed
the opinion that Spencer had argued that the governing *L.Q.R. 278 principle should be that of
judging the state of things from the perspective of the reasonable promisee. This is doubtful.
According to Howarth's terminology the roles of promisor and promisee are not assigned until
litigation starts. At that stage the plaintiff is automatically designated the promisee. Spencer's
contribution contains no indication that the perspective from which the dealings of the parties should
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be viewed, ought to depend on the fortuitous fact that one or other of the two initiated the litigation.
The truth of the matter is that Spencer did not commit himself to supporting promisee objectivity,
whether in the sense used by Howarth or in the conventional sense to which I have adverted above.
Spencer was content to say that words should be interpreted as they were reasonably understood by
the party to whom they were spoken. This cannot be equated either with promisee or with promisor
objectivity, however promisee and promisor may be defined. The words which have to be
interpreted in order to ascertain whether the parties have concluded a binding contract or not, or on
what terms, may have been uttered or used by either of the parties or by both.
In the discussion of Spencer's contribution I referred to the rival or fly on the wall theory of
agreement. Howarth26 describes his own theory as detached objectivity. In addition to the authorities
discussed by Spencer, Howarth cites Gibson v. Manchester City Council 27 as a more recent
example of a court apparently adopting a similar type of detached objectivity. 28 I think the Law Lords
who decided the Gibson case would have been surprised by the assertion that their speeches were
authority for the fly on the wall theory of agreement. The main dispute in this case was whether a
letter from a city council to a council tenant constituted a contractual offer to sell his council house to
him. The letter stated, inter alia, that the corporation may be prepared to sell the house to you, and
If you would like to make a formal application to buy your council house, please complete the
enclosed application form and return it as soon as possible. The House of Lords was unanimous
in its finding that the letters did not constitute an offer capable of acceptance. Howarth29 seeks to
justify his interpretation of the Gibson case as follows:
On examination of the facts of the case it appeared that both parties believed (at some stage during
the proceedings) that *L.Q.R. 279 the agreement to sell the house had been finalised. On the one
hand an internal memorandum passed between two of the council's departments, to the effect that
the house should be removed from the list of houses being maintained by them, was said to
constitute an admission by the council that they had sold the freehold to Mr. Gibson (the purchaser).
On the other hand Mr. Gibson carried out work in repairing and improving the house and premises in
the belief that an agreement to sell the property had been made. The beliefs of the parties, or for that
matter the reasonable beliefs of persons in their position were not taken to be the determinant of
whether a contract had come into existence. The crucial issue was whether a contract had actually
come into existence, that is whether their beliefs were objectively well-founded by reference to a
standard which was independent of the reasonable perspective of either party. As Lord
Edmund-Davies made the point, the proper question is not whether the town clerk considered that
a contract had been concluded but whether this was so in fact and in law.
Contrary to Howarth's assertion, the Law Lords were by no means convinced that the parties had in
fact subjectively believed that the agreement had been finalised. As far as the internal memorandum
is concerned, Lord Edmund-Davies pointed out that the house was moved from the list of houses
being maintained by the council to the list of pending sales.30 So it appears that, at best, this was an
admission by the council that it pursued a policy not to maintain houses once they were about to be
sold. The fact that this alteration to the list took place a month before the tenant purported to accept
the alleged offer31 must certainly have seriously affected the evidentiary value of the so-called
admission. The assertion that Mr. Gibson improved the house in the belief that the agreement to sell
the property had already been made, was disposed of by Lord Edmund-Davies in the following terms:
It is impossible to conclude that the improvements were executed on the basis that the
corporation had already committed themselves to sell. 32 It is submitted that, if the beliefs of the
parties were not taken into account, this was not due to any commitment by the House of Lords to
approach contractual intention from a wholly objective perspective, but rather because these beliefs
were not clearly *L.Q.R. 280 established by the evidence.33 The decision reached by the House of
Lords is quite consistent with the orthodox theory of agreement as described by Spencer. The
evidence did not show that the council intended to make a firm offer.34 Accordingly, Mr. Gibson could
enforce the sale only if his belief that an offer had been made (if he did ever entertain such a belief)
would have been shared by a reasonable man in his position. The wording of the letter was such that
it clearly excluded the reasonableness of such a belief.
The only recent support for the detached objectivity approach which I have been able to find is the
statement by Staughton J. at first instance in The Hannah Blumenthal 35 that an objective observer
would not have inferred an agreement from the words and conduct in the case before him. This
statement of the law is, however, irreconcilable with the approach followed by the House of Lords on
appeal.36
Howarth37 concluded that there may be both good reasons of principle and a line of authoritative
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support as rational as any other open to the courts for the theory of detached objectivity. I have
already shown that Howarth's interpretation of the Gibson case is questionable. The line of
authoritative support to which he refers therefore appears to consist of exactly the same cases cited
by Spencer in his description of the fly on the wall theory eleven years earlier.38 On the other hand,
recent authority for the orthodox theory is not difficult to find.39 It is submitted that these recent
authorities cannot be reconciled with the fly on the wall *L.Q.R. 281 theory. Furthermore, Howarth's
conclusion does not take into account that eminent writers on contract law have convincingly
demonstrated that
A contract is not enforced according to its outward appearance if both parties concur in intending
something else. It is not invariably true, therefore, to say, as Denning L.J. does, that in the formation
of a contract one does not look into the inner minds of the parties.40
The following comments may be made with regard to Howarth's assertion that there may be good
reasons of principle for the adoption of detached objectivity.
The first reason of principle put forward is that protagonists of the orthodox theory are confronted by
the dilemma that they have no reason for preference between two alternatives open to them, namely
promisor objectivity and promisee objectivity as defined by Howarth.41 I have already indicated that
Howarth's conclusion that there is a body of judicial support for both promisee objectivity and
promisor objectivity is misconceived.42 The truth of the matter is that the orthodox theory of
agreement does not concern itself with the question whether a party may be described as a promisor
or a promisee, however these terms may be defined.43
The second good reason of principle put forward is that detached objectivity provides greater
scope for judicial interventionism and the imposition of agreements upon parties contrary to their
intentions. 44 Howarth concedes that this approach has ostensibly been resisted by the courts, but
refers to cases where the courts have imposed agreements on parties in circumstances where it was
considered just to do so.45 Howarth then quotes Atiyah,46 who says that the law of contract has nearly
always had room for cases of this character. From this Howarth deduces that it would seem that
detached objectivity is, or may become, the *L.Q.R. 282 better theoretical perspective to describe the
way that judges approach difficult problems of contract formation.47
By adopting this line of reasoning, Howarth fails to address the most important argument against the
fly on the wall theory of agreement, namely that it may serve to force upon both of the parties an
agreement which neither of them wants. 48 One of the primary reasons why the objective theory of
agreement was adopted was to protect a party's reasonable expectation that a specific contractual
relation exists between himself and another by preventing the latter from relying on a mistake of
which the former could not reasonably have been aware.49 Detached objectivity negates this very
important purpose of the objective theory, because it may serve to impose on parties agreements
which are contrary to their reasonable expectations. Before detached objectivity can be allowed to
replace the orthodox theory it will have to be demonstrated that it is a means to the realisation of
more desirable ends than those pursued by the orthodox theory. Howarth seeks to demonstrate this
by referring to the cases in which the courts have imposed contracts on parties in circumstances
where it was regarded just to do so. It cannot be denied that the remedies given by the courts in most
of these cases accord with the demands of justice. But contract is not the only basis upon which most
of these remedies may be explained. On the contrary, using the fly on the wall theory of contract
formation to explain these cases, merely serves to obscure the true bases of the remedies given. An
examination of the relevant cases shows that the remedies were granted in the guise of contract in
order to augment deficiencies in other areas of the law.50 The fact that contract has been used as a
fictitious basis of certain remedies is insufficient ground for displacing the orthodox theory of contract
formation which works perfectly well in cases of a truly contractual nature in the classical sense of
that term.

AN ATTEMPT TO CLARIFY THE CONTENT OF THE ORTHODOX THEORY OF

AGREEMENT
I stated above that the perspective from which the meaning of a promise is ascertained does not
depend on which of the parties may be described as promisor and which as promisee. This is *L.Q.R.
283 because there is no reason why either a promisor or promisee should be in the privileged
position of having the promise interpreted solely from his perspective.51 Spencer's suggestion that
words should be interpreted from the perspective of the party to whom they were spoken does not
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quite hit the mark either.52 Where a contract is apparently concluded, after protracted negotiation, it
may be impossible to discern who introduced the words about which there is a dispute.
The only practicable method of dealing with the formation of contracts, is to view the matter from the
perspectives of each of the parties concerned. One of the great virtues of Hughes' contribution in
193853 is that he emphasised this point. The fact that the courts do not expressly adopt this method in
cases dealing with mistake, is not necessarily due to a judicial aversion to it. The majority of mistake
cases have been pleaded in such a way as to make it unnecessary for the courts to expressly
formulate a comprehensive approach to contract formation. In most cases the defendant who is sued
for specific performance or damages for breach of an apparent contract, is content to deny liability54 ;
accordingly the question whether he is entitled to specific performance or damages for breach of his
version of the contract does not arise. If the court finds that the plaintiff's understanding of the contract
was unreasonable, the claim fails.55 The same is true if the court finds that the defendant's
understanding of the contract was reasonable.56 These two findings make it unnecessary for the court
to enquire into the reasonableness or otherwise of the other party's understanding.57 Where the court
allows the claim for *L.Q.R. 284 specific performance or damages because it accepts that the
plaintiff's understanding of the contract was reasonable, it is at least implicit in this finding that the
defendant's understanding was unreasonable. This has to be so, because if the differing
understandings of the parties are both reasonable, there is no contract.58 Where the court allows the
claim because it accepts that the defendant's understanding was unreasonable, it is also at least
implicit in this finding that the plaintiff's version was reasonable.59
In cases where the defendant does not merely deny the plaintiff's claim, but counterclaims for specific
performance of his version of the contract it will necessarily be more apparent that the court views the
question from the perspectives of both parties.60
The following statement of the law by Lord Diplock in The Hannah Blumenthal 61 is authority for the
broad proposition that the question of formation should be viewed from the perspectives of both
parties:
To the formation of the contract of abandonment, the ordinary principles of the English law of
contract apply. To create a contract by exchange of promises between two parties where the promise
of each party constitutes the consideration for the promise of the other, what is necessary is that the
intention of each as it has been communicated to and understood by the other (even though that
which has been communicated does not represent the actual state of mind of the communicator)
should coincide. That is what English lawyers mean when they resort to the Latin phrase consensus
ad idem and the words that I have italicised are essential to the concept of consensus ad idem, the
lack of which prevents the formation of a binding contract in English law. Thus if A (the offeror) makes
a communication to B (the offeree) whether in writing, orally or by conduct, which, in the
circumstances at the time the communication was received, (1) B, if he were a reasonable man,
would understand as stating A's intention to act or refrain from acting in some manner also specified
in the offer, and (2) B does in fact understand A's communication to mean this, and in his turn makes
to A a communication conveying his willingness so to act or to refrain from acting which mutatis
mutandis satisfies the same two conditions as respects A, the *L.Q.R. 285 consensus ad idem
essential to the formation of a contract in English law is complete.62
His Lordship63 considered this rule to be an example of a general principle of English law that
injurious reliance on what another person has done may be a source of legal rights against the latter.
This cannot be right. I have been unable to find a single English case in which injurious reliance by
the plaintiff on the apparent assent of the defendant has been required for the establishment of a
contractual relationship.64 In cases dealing with contract formation a mere (reasonable) expectation,
in contradistinction with injurious reliance, has been deemed sufficient. It would make little sense to
require injurious reliance on the part of a party who is claiming expectation damages.65 It is
preferable, therefore, to classifly the rule formulated by Lord Diplock as an example of the general
principle that a reasonable expectation that another person is assuming contractual obligations, is a
source of contractual rights against the latter.66
Lord Diplock's use of the phrase mutatis mutandis67 was unfortunate. Strictly speaking his Lordship's
exposition means that where A intends to make an offer X to B, but communicates this intention in
such a manner as to lead B subjectively and reasonably to believe A is offering Y, A is bound by
contract Y only if B communicates his acceptance of offer Y to A in such a manner that A subjectively
and reasonably understands that offer Y is being accepted. The practical effect of this exposition is
the demise of the objective theory of agreement,68 a result which could not have been contemplated
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by Lord Diplock. According to this exposition, *L.Q.R. 286 A will not be bound by contract Y if B
responds by stating that he accepts A's offer, as A will subjectively understand this response as an
acceptance of offer X. It is submitted, therefore, that Lord Diplock's description of B's response to A's
offer is misleading. All that B has to do in order to be able to enforce contract Y against A, is to
respond in such a manner that a reasonable man in the position of A would understand that A's offer,
whatever it may have been, is being accepted.
The importance of Lord Diplock's exposition is that it emphasises that four perspectives may be
relevant when determining whether a contract has been concluded. These four perspectives are: the
subjective understanding of the transaction of both the offeror and offeree; and the understanding of
the transaction which reasonable men in the positions of the offeror and offeree would have had. It is
submitted that these perspectives may be combined in the following ways:
(1) If the parties' subjective understandings of their transaction are the same, there is a valid contract
in accordance with that understanding.69 How reasonable persons would have understood the
transaction is irrelevant in this case.
(2) If the respective subjective understandings differ, the existence and content of the contract
depends upon whether these subjective understandings would have been shared by reasonable
persons in the position of the parties:
(a) If both parties' subjective understandings would have been shared by reasonable people in their
positions, there is no contract.
(b) The same applies if neither of the parties' subjective understandings would have been shared by
reasonable people in their positions.
(c) If a reasonable man in the position of one party would have shared that party's subjective
understanding, but a reasonable man in the position of the other would not have shared the
subjective understanding of the latter, there is a contract in accordance with the understanding of the
former.70
It is clear from the above that a party who wishes to enforce a contract in the sense in which a
reasonable person in his position would have understood it, can do so only if he subjectively
understood it in that sense.71 This is because an apparent contract *L.Q.R. 287 is enforced in order
to protect the expectation interest of the enforcing party. It is submitted that no purpose would be
served by enforcing a contract in a sense in which it was not subjectively understood by the party
seeking enforcement.72
Sceptics may argue along with Brian C.J.73 that the submission that the parties' subjective
expectations may be decisive, is unworkable. But surely it is preferable to accept that a party's
subjective understanding is relevant if it has been proved, than to refuse to take it into account
irrespective of its having been proved or not. The latter refusal is bound to lead to absurd results in
some cases. Objections of unworkability may be met by accepting that the courts are entitled to
assume, in the absence of proof to the contrary, that a party's subjective understanding of a
transaction corresponded with the way in which a reasonable person in his position would have
understood it.
J. P. VORSTER.74
L.Q.R. 1987, 103(Apr), 274-287

1. The Meaning of Objectivity in Contract (1984) 100 L.Q.R. 265.

2. Ibid. 281.

3. Ibid. 270, 273.

4. Ibid. 280.

5. [1979] 1 W.L.R. 294.

6. [1973] C.L.J. 104.

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7. Ibid. 106.

8. See the authorities cited by Spencer 105-107 and Fowkes v. Manchester and London Assurance (1863) 3 B. & S. 917,
929; Sullivan v. Constable (1932) 48 T.L.R. 267, 270 (Affirmed on appeal: (1932) 48 T.L.R. 369, 370 (C.A.));
McCutheon v. David MacBrayne [1964] 1 W.L.R. 125, 128 (H.L.Sc.); Henry Kendall v. William Lillico [1969] 2 A.C. 31,
113D-F; Ashington Piggeries v. Christopher Hill [1972] A.C. 441, 502A; Thake v. Maurice [1986] 1 All E.R. 497, 504j,
511d (C.A.).

9. Loc. cit. 106-107. In these two cases A would probably be able to enforce his version of the contract in accordance with
what Hughes (1938) 54 L.Q.R. 370, 374 described as the rule in Sullivan v. Constable.

10. Loc. cit. 108.

11. See Lord Denning's judgments cited by Spencer at 109 n.27. See also Lord Denning in Storer v. Manchester City
Council [1974] 1 W.L.R. 1403, 1408H (C.A.).

12. [1942] 1 All E.R. 220 (C.A.).

13. Spencer loc. cit. 111.

14. Ibid. 112 n.46.

15. The Rise and Fall of Freedom of Contract (1979), 663.

16. Spencer loc. cit. 110.

17. Ibid. 112.

18. Ibid. 113.

19. Loc. cit. 265 n.5.

20. (1870) L.R. 6 Ch.App. 1.

21. (1880) 15 Ch.D. 215 (C.A.).

22. [1913] 3 K.B. 564.

23. Loc. cit. 270.

24. Pollock, Principles of Contract (7th ed., 1902) 245 summarised the authorities of the period by saying that the test was
what expectation the promisor's words would have created in the mind of a reasonable man in the promisee's
place.

25. Loc. cit. 273.

26. Ibid. 275.

27. [1979] 1 W.L.R. 294.

28. Loc. cit. 277.

29. Ibid. 277-278.

30. At 303C.

31. See the opinion of Lord Edmund-Davies at 303D.

32. At 303B.

33. Lord Diplock (with whom Lords Fraser and Keith agreed) appears to have considered, correctly to my mind, the
evidence relating to the internal memorandum, the clerk's letter and Mr. Gibson's labours to be inadmissible. In the
Court of Appeal Lord Denning M.R. took into account the conduct of the parties in determining whether they had come
to an agreement. Lord Diplock at 296H commented as follows: This approach which in referring to the conduct of the
parties where there is no allegation of part performance appears to me to overlook the provisions of section 40 of the
Law of Property Act 1925. This section requires a written memorandum or note of the agreement for the enforceability
of a sale of land. In the absence of part performance, the section clearly excludes the admissibility of extrinsic evidence
to contradict the express words in a memorandum which evidence a clear intention not to be contractually bound.

34. I indicated in the previous footnote that the letter was the only admissible evidence in this regard. But even if further
evidence had been admissible, it would have been insufficient to justify a different interpretation.

35. [1983] 1 A.C. 854, 865F. In Eyre v. Measday [1986] 1 All E.R. 488, 493a (C.A.) Slade L.J. made a statement which
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appears to support detached objectivity. However, at 495c Slade L.J. concerned himself with what the promisee had
been reasonably entitled to assume, which may be equated with promisee objectivity in its conventional sense.

36. Discussed below, p.284.

37. Loc. cit. 281.

38. Howarth could also have referred to Storer v. Manchester City Council [1974] 1 W.L.R. 1403, 1408H (C.A.) where Lord
Denning reaffirmed his support for the fly on the wall theory.

39. See Centrovincial Estates v. Merchant Investors Assurance [1983] Com.L.R. 158 (C.A.); The Hannah Blumenthal
[1983] 1 A.C. 854 (below, p.284); The Leonidas D [1985] 2 All E.R. 796, 805b (C.A.). Harvela Investments v. Royal
Trust Co. of Canada [1986] A.C. 207, 225D.

40. Glanville Williams (1954) 17 M.L.R. 154, 155. See too Stoljar, Mistake and Misrepresentation (1968) 10-11; Smith
(1979) 13 The Law Teacher 73, 76 who indicated that Lord Denning overstated the objectivist principle; Treitel, The
Law of Contract (6th ed., 1983) 1.

41. Loc. cit. 280.

42. I have found only one judicial utterance in support of promisor objectivity in its conventional sense and that is a
statement by Singleton J. in Hartog v. Colin and Shields [1939] 3 All E.R. 566, 568F. Ironically, Howarth cites this
statement as authority for promisee objectivity. However, Singleton J.'s judgment is not in conflict with the orthodox
theory, as he, quite properly, determined how a reasonable person in the position of the contracting party to whom the
words were spoken, would have interpreted those words. This shows that the orthodox theory does not consider the
fact that a party may be designated as a promisor or a promisee to be decisive in determining the perspective from
which words must be interpreted.

43. This statement is amplified in the following section, post, p.283.

44. Loc. cit. 280.

45. See Atiyah, An Introduction to the Law of Contract (3rd ed. 1981), Chapter IV, who discusses the following categories
of cases in this regard; the implied warranty of authority, the request principle, informal property transactions and
collateral contracts.

46. Ibid. 75.

47. Loc. cit. 281.

48. See the passage quoted from Spencer's contribution above.

49. This is apparent from the writings of Holland, Elements of Jurisprudence (13th ed., 1924) 262; Goodhart, English Law
and the Moral Law (1953) 100-101; Waddams, The Law of Contracts (2nd ed., 1984) 109; Burrows (1985) 38 C.L.P.
141, 149; Cheshire, Fifoot and Furmston, Law of Contract (11th ed., 1986) 28.

50. It was necessary to use contract as the ostensible basis of remedies resulting from the socalled implied warranty of
authority, request principle and collateral contracts because, inter alia, tortious liability for misrepresentation was slow to
develop. It was necessary to have recourse to implied contract and implied trust in the case of informal property
transactions in order to augment a system of family law geared to a more conservative society: see Parry, Cohabitation
(1981) 5-9; Eekelaar, Family Law and Social Policy (2nd ed., 1984) 147.

51. It may be argued that as a promisor knows what he wants to promise, he should be under a duty to ensure that his
intention is correctly understood and that the promise should accordingly be viewed from the perspective of a
reasonable promisee. However, it may be argued with equal force that a promisee knows what he wants from the
promisor and that the promisee is therefore bound to make sure the promisor understands what he wants from him.

52. In fairness to Spencer it should be noted that he probably did not intend this to be taken as the definitive description of
the orthodox theory: his explanation of the rule in Smith v. Hughes on p.106 differs from his summary of the rule on
p.114. The summary does not refer to a speaker and a listener, but to a representation by one party of his assent to the
terms proposed by the other. To my mind the summary can be improved upon, as it does not make it clear that the
representee's belief that his terms are being accepted must be reasonable, nor that the perspectives of both parties are
relevant to the enquiry: see the next paragraph.

53. (1938) 54 L.Q.R. 370.

54. E.g., Wood v. Scarth (1855) 2 K. & J. 33 and (1858) 1 F. & F. 293; Scott v. Littledale (1858) 8 E. & B. 815; Denny v.
Hancock (1870) L.R. 6 Ch.App. 1; Smith v. Hughes (1871) L.R. 6 Q.B. 597; Tamplin v. James (1880) 15 Ch.D. 215
(C.A.); Falck v. Williams [1900] A.C. 176; Scriven v. Hindley [1913] 1 K.B. 564; Hartog v. Colin and Shields [1939] 3 All
E.R. 566.

55. E.g. Hartog v. Colin and Shields, ibid. 568F.

56. E.g. Denny v. Hancock n.54 supra, 11. Although this was an equity case it is improbable that a common law court
would have awarded damages to the plaintiff. On the contrary, a common law court might rather have been inclined to
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award damages to the defendant if he had claimed damages for breach of his version of the contract.

57. Although this was done in Denny v. Hancock at 12, 14, where it was held that the defendant's mistake was caused by
the negligence of the plaintiffs. This is tantamount to saying that the plaintiffs' understanding of the contract would not
have been shared by a reasonable man.

58. This may be illustrated by an example analogous to the facts of Henkel v. Pape (1870) L.R. 6 Ex. 7: If A offers to buy X
from B, but a telegraph clerk, who is not the agent of A or B, incorrectly telegraphs that A wishes to buy Y, and B
accepts, there is no contract. As A is not responsible for the clerk's mistake A's understanding of the transaction is
reasonable. A reasonable man in B's position would also have shared B's understanding of the transaction.

59. E.g. Tamplin v. James n.54 supra, 217.

60. See London Holeproof Hosiery Co. v. Padmore (1928) 44 T.L.R. 499 (C.A.) and the discussion thereof by Hughes loc.
cit. 375-376.

61. [1983] 1 A.C. 854, 914.

62. See also Hardwick Game Farm v. Suffolk Agricultural and Poultry Producers [1966] 1 W.L.R. 287, 339D (C.A.) where
Diplock L.J. (as he then was) said: The task of ascertaining what the parties to a contract have agreed shall be their
rights and liabilities to one another is accomplished not by determining what each party actually thought those rights
and liabilities should be, but by what each party by his words and conduct reasonably led the other to believe were the
acts which he was taking a legal obligation to perform. (My emphasis.) This statement was echoed on appeal by Lord
Pearce sub. nom. Henry Kendall v. William Lillico [1969] 2 A.C. 31, 113D-F. In Ashington Piggeries v. Christopher Hill
[1972] A.C. 441, 503B Lord Diplock unequivocally reiterated the view that the parties' respective reasonable
understanding and belief had to be determined. See too, the passage from Gloag on Contract (2nd ed., 1929), 7
referred to with approval by Lord Reid in McCutcheon v. David MacBrayne [1964] 1 W.L.R. 125, 128 (H.L.Sc.) and by
Lord Denning M.R. in British Crane Hire v. Ipswich Plant Hire [1975] Q.B. 303, 311 (C.A.).

63. At 916B.

64. On the contrary, in Centrovincial Estates v. Merchant Investors Assurance [1983] Com.L.R. 158 (C.A.) the contention
that injurious reliance was a requirement, was expressly rejected.

65. But see Fuller and Perdue (1936) 46 Yale L.J. 52, 66-67.

66. Lord Diplock's description of this liability as reliance-based reflects a confusion between the orthodox objective theory of
agreement and estoppel. Whereas his Lordship thought the ordinary principles of contract formation applied to a
contract of abandonment, Lord Brandon, with whom he was concurring, appeared to consider abandonment as sui
generis. Lord Brandon thought at 914B-C that abandonment could be effected actual[ly] or by estoppel.

67. Meaning with the necessary changes: O.E.D. Supplement (1976).

68. See The Leonidas D [1985] 2 All E.R. 796, 804c-805b (C.A.).

69. See the quotation from Glanville Williams supra, p.281.

70. Whether the contract exists ipso iure, or only if the former avers its existence, is a moot point which falls beyond the
scope of this article. The case law appears to be against the proposition that the contract exists ipso iure : see Hughes
loc. cit. 377.

71. This is apparent from Blackburn J.'s famous statement in Smith v. Hughes (1871) L.R. 6 Q.B. 597, 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 the 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 (my emphasis).
Pollock, Principles of Contract (7th ed., 1902) 12-13, also made it clear that a reasonable understanding or expectation
presupposed a subjective expectation. In The Hannah Blumenthal it was contended that a contract of abandonment
existed if a reasonable person in the position of the party requesting the court to recognise the contract would have
drawn that inference from the conduct of the other party, even in the absence of any actual belief on the part of the
former party that the contract had been concluded. The House of Lords rejected this contention: Lord Brandon (with
whom Lord Keith agreed) at 914E; Lord Diplock at 916H; see further, The Leonidas D [1985] 2 All E.R. 796, 805b
(C.A.), but see contra The Golden Bear, The Times November 18, 1986. It has to be conceded, however, that The
Hannah Blumenthal is not necessarily compelling authority for the proposition in the text. Only Lord Diplock expressly
stated that the ordinary principles of contract formation applied to abandonment. It is possible that the other Law Lords
considered abandonment to be sui generis and that the doctrine of estoppel, as opposed to the orthodox theory of
contract formation, was applicable. In the case of estoppel the requirement of injurious reliance can be satisfied only if
the party pleading estoppel acted in reliance upon the representation. There can be no causal link between the
representation and the prejudice suffered by the representee if the latter did not subjectively rely on the representation.

72. Waddams, The Law of Contracts (2nd ed., 1984) 112, has stated that it is too simplistic to argue that there is no interest
worth protecting in such a case. Waddams 113 contends in effect that it may serve a useful purpose to enforce a
fictitious expectation. However, the enforcement of a fictitious expectation is just a roundabout way of imposing a legal
obligation on the basis of unarticulated policy considerations. In the interests of clarity and rationality it is preferable to
clearly articulate the basis of a remedy which is essentially non-contractual.
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73. Anon (1478) Y.B. 17 Ed. 4, Pasch, fo. 1, pl. 2: [T]he intent of man cannot be tried, for the Devil himself knows not the
intent of man (in translation).

74. Research Student, St. John's College, Cambridge. While accepting sole responsibility for the defects which remain, the
author wishes to thank Mr. C. C. Turpin of Clare College, Cambridge, for his comments on an earlier draft of this paper,
as well as The Bradlow Foundation and The Fidelity Fund for Attorneys, Notaries and Conveyancers of South Africa for
their financial support.

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