Binding Contracts-The Reasonable Objective Standard

binding contract
Hawkeye Power Corp. v. Sigma Engineering Ltd  2014 BCSC 1444 dealt with the legal test as to whether a binding contract was made, or not, and the test of the reasonable objective standard in order to determine same.

The test for the determination of whether an enforceable agreement exists is an objective one, requiring the court to determine whether the parties have indicated to the objective reasonable bystander their intention to contract and the terms of that contract: MacMillan v. Kaiser Equipment Ltd., 2004 BCCA 270at para. 44.”

[44] In my view, this argument overlooks the fact that the courts have adopted an objective standard in determining the intention of contracting parties. In The Law of Contract in Canada, 4th ed. (Scarborough: Carswell, 1999) by Professor G.H.L. Fridman, the learned author has fairly set out the law at 17:
… The law is concerned not with the parties’ intentions but with their manifested intentions. It is not what an individual party believed or understood was the meaning of what the other party said or did that is the criterion of agreement; it is whether a reasonable man in the situation of that party would have believed and understood that the other party was consenting to the identical terms. The common law embraced this attitude of objectivity in the determination of contractual relations….
62      In Hoban Construction Ltd. v. Alexander, 2012 BCCA 75at para. 35 the court stated:
[35] In G.H.L. Fridman, The Law of Contract in Canada, 5th ed (Toronto: Thomson Canada Limited, 2006), the learned author notes at 15:
Constantly reiterated in the judgments is the idea that the test of agreement for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract. The law is concerned not with the parties’ intentions but with their manifested intentions. It is not what an individual party believed or understood was the meaning of what the other party said or did …; it is whether a reasonable [person] in the situation of that party would have believed and understood that the other party was consenting to the identical terms. [Footnotes omitted.]
63      The court may consider the conduct of the parties leading up to and following formation of the alleged agreement. The parties’ actions, such as the altering of terms after what is alleged to be the conclusion of an agreement, may be evidence that no such agreement was ever reached: Salminen v. Garvie, 2011 BCSC 339, at para. 28.

Trevor Todd

Trevor Todd is one of the province’s most esteemed estate litigation lawyers. He has spent more than 40 years helping the disinherited contest wills and transfers – and win. From his Kerrisdale office, which looks more like an eclectic art gallery than a lawyer’s office, Trevor empowers claimants and restores dignity to families across BC. He is a mentor to young entrepreneurs and an art buff who supports starving artists the world over. He has an eye for talent and a heart for giving back.

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