With respect to the interpretation of agreements, courts generally apply an objective standard that would be interpreted as a foreigner; not subjective. (outside, as one observer would interpret; non-subjective). The (second) restoration of treaties defines the agreement as “a manifestation of the mutual consent of two or more persons.” Unique Code of Trade, Section 3. The Single Code of Commerce defines the agreement as “the good deal of the parties in fact, as in their language, or by involvement in other circumstances, including trade or the use of trade or efficiency.” Single Code of Trade, Section 1-201 (3). The crucial question is what the parties said or did, not what they thought they were saying or having, or not, what impression they thought they were making. The distinction between objective and subjective norms sometimes arises when a person claims that he or she has spoken jokingly. The vice president of a company that made boxboards used in gambling told the Washington State Game Commission that he would pay $100,000 to anyone who found a “curved board.” Barnes, a bartender who had bought two boards that had gone wrong some time earlier, brought one to the company`s office and asked for payment. The company refused and claimed that the statement was made jokingly (the public, at the Commission hearing, had laughed at the time of the offer). The court contradicted and found it appropriate to interpret the $100,000 directive as a means of promoting boxboard tables: the sharp dichotomy between the objective and subjective theories of the contract should not indicate that an ordinary and daily agreement would generally be considered a binding contract under one theory, but not under the other. If two parties enter into an agreement, subjectively considering being bound by the agreement, and take external actions showing their intention to be bound by the agreement, then a court that applies either subjective theory or objective theory of contract law would come to the same conclusion as the parties entered into a binding contract. However, the problem with the subjective approach to contract law is that the court may require that data that is not correct or reliable be examined and that it gives unnecessary importance. This can undermine the court`s ability to establish justice. If a party`s subjective intent is supported by valid and trustworthy evidence, it can improve judicial justice.
Since the end of the 19th century, this legal concept has become the measure of determining the intent of the parties at the end of the agreement. Objective contract theory replaces the previous standard, known as the subjective theory of contracts or “meeting spirits,” which was generally applied in the early 1800s. The main determinant of the validity of a contract is therefore the external acts or benefits of the parties, not the internal mental state or intent of the parties to the agreement. The agreement between the parties is at the heart of a legal contract. It is not a necessary ingredient; in communist nations, treaties have been routinely negotiated (or negotiated in the few remaining communist countries) between the parties to which the conditions have been imposed.