Legal Definitions - subjective method

The subjective theory of contract is an older legal concept that held a contract was only formed if both parties had a genuine, internal "meeting of the minds" regarding the exact terms and purpose of their agreement. In essence, it focused on what each person truly and privately intended or understood, rather than what they outwardly said or did. If their private intentions or understandings did not perfectly align, even if their external actions suggested an agreement, no contract would be considered valid under this theory. This approach is largely outdated in modern contract law, which primarily relies on the objective theory of contract.

Here are some examples illustrating how the subjective theory of contract would apply:

• Example 1: Misunderstanding the Subject of Sale

  Imagine a scenario where a collector, Ms. Davies, offers to sell her "vintage automobile" to Mr. Chen for a specific price. Ms. Davies privately intends to sell her rare 1950s sports car. Mr. Chen, however, privately believes she is referring to her antique 1920s touring car, which he has always admired. They shake hands and agree on the price without explicitly clarifying which car is being sold.

  Under the subjective theory of contract, no valid contract would be formed. Despite their outward agreement on a price, their internal, unexpressed understandings of the "vintage automobile" were fundamentally different. There was no true meeting of their minds on the specific item being exchanged, preventing the formation of a binding agreement.

• Example 2: Differing Intentions on Payment Terms

  Consider a freelance graphic designer, Alex, who agrees to create a new company logo for a startup, "InnovateTech." Alex privately intends to receive a 50% upfront payment before starting any work. InnovateTech's CEO, Sarah, privately intends to pay the full amount only upon final delivery and approval of the logo. They discuss the project scope and agree on a total fee, but neither explicitly states their payment expectations.

  According to the subjective theory of contract, a contract would not exist. Even though Alex and Sarah agreed on the service and the total cost, their internal, uncommunicated intentions regarding a crucial term—the payment schedule—were entirely different. Their minds did not truly meet on this essential aspect of the agreement.

• Example 3: Unaligned Scope of Services

  A homeowner, Mr. Rodriguez, hires a landscaping company, "GreenThumb," to "revitalize his backyard." Mr. Rodriguez privately envisions a complete overhaul, including new paving, a water feature, and extensive planting. GreenThumb's owner, Ms. Lee, privately interprets "revitalize" as meaning only basic lawn care, pruning, and seasonal flower beds. They agree on a general budget for the project.

  Applying the subjective theory of contract, no enforceable contract would be established. Mr. Rodriguez and Ms. Lee had vastly different internal understandings of what "revitalize his backyard" entailed. Their private intentions regarding the scope of work were not aligned, meaning there was no genuine meeting of the minds on the core services to be provided.