1 Formation and the Concept of Agreement

Subject(s):

Third parties — Construction of contract — Formation of contract — Interpretation of contract — Performance of contract — Validity of contract

This chapter provides an overview of the objective theory of contract and the concept of agreement. The objective theory dictates that when determining whether or not a statement made by a person was intended to form the basis of a contract, it is construed by reference to a reasonable person in the position of the party to whom the statement is directed. Thus, when trying to determine whether a statement was intended to be an offer, it is construed by reference to a reasonable person in the position of the offeree. An agreement requires that the parties agree the terms of bargain, that those terms be certain and complete, and that the bargain is informed by an intention to contract as well as an intention to immediately assume legal obligations. The final section discusses whether contract formation is an issue of fact or law.