Subjective Approach To Agreement

[31] See T A O Endicott, `Objectivity, Subjectivity, and Incomplete Agreements` in J Horder (ed), Oxford Essays in Jurisprudence (2000) 150, 157. The author talks about the known situation in Hartog v Colin – Shields [1939] 3 All ER 566, where the accused mistakenly offered to sell 30,000 Argentine rabbit skins to the complainant at prices that were indicated “per pound” instead of “per piece” (there were about 3 skins per pound) and it was assumed that there was no contract because the complainant knew that an error had occurred. He concludes (157): “Note that the Hartog court not only established that the purchaser was aware of the error, but also found that, because of commercial practice and a business process where the parties indicated prices “per piece”, the seller could not reasonably have assumed that the seller intended to offer a price per pound sterling. With respect to the objective approach, there is no agreement at a price per pound in this case, even if the applicant did not put anything on the hour of the error. If the buyer had reason to know that the seller wanted to sell the coin, then the seller did not agree to sell by book, and that fact does not change if a stupid buyer honestly believes that the seller said “by book”. If the rule that knowledge of a fundamental error prevents a bidder from executing the promise made in error was a subjective test, then the fact that a bidder who should have known is actually forgotten should make a difference. This is another reason to conclude that Hartog does not deviate from the objective approach: the buyer`s knowledge does not matter because it is his knowledge, but because that knowledge reflects a reason why the buyer must treat the seller as “per piece].” A slightly different way of saying this (see D W McLauchlan, `A Contract Contradiction` (1999) 30 Victoria University of Wellington Law Review 175, 177) is that, as Blackburn J says in Smith v Hughes itself, the objective principle implies a subjective element. It requires not only that a sensible person believe that the promise giver accepts the conditions proposed by the other party, but also that “this other party, on the basis of this conviction, enters into the contract with him”: cf. Sir Gonter Treitel, Das Vertragsrecht (11th edition, 2003) 1 and 8-9; Paal Wilson – Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854, 915-917 and 924; Airways Corporation of New Zealand Ltd v Geyersland Airways Ltd [1996] 1 NZLR 116, 124-125; Rattrays Wholesale Ltd v Meredith-Young – A`Court Ltd [1997] 2 NZLR 363, 374; Magnum Photo Supplies Ltd v Viko New Zealand Ltd [1999] 1 NZLR 395, 401; Transpower New Zealand Ltd v Meridian Energy Ltd [2001] NZHC 460; [2001] 3 NZLR 700, 712; and Giltrap City Ltd/Commerce Commission [2004] 1 NZLR 608, 614 [20].

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