“Meeting of the Minds” vs. Objective Theory of Contract Formation

The Tenth Circuit Court of Appeals has just reconfirmed the objective theory of contracts – that “what is important is what the language of the document conveys to reasonable people in the circumstances, not what a party to the agreement privately intended.”

Nonetheless, the court also runs with the parties’ arguments whether there was a “meeting of the minds” or not due to an alleged lack of consideration. (As for the latter, the court pointed out that no actual payment need be made for a contract to exist, a promise to pay suffices for consideration. Further, one party’s postcontractual attempt to “obtain a legal opinion about the status” of a lease under the contract does not vitiate the contract.).

It is somewhat surprising that while the court on the one hand states the correct rule – the objective communication theory – the court at the same time does not see that that is not the same as “meeting of the minds.” As long as reasonable third parties or “outsiders” could, under the circumstances, have believed that a contract was made, it does not matter that one party’s subjective intent – the “mind” – was not that of the other party. This case shows that and might function well as a reminder to our students on this point.

The case is Trans-Western Petroleum, Inc. v. United States Gypsum Company (Tenth Cir. 2016). Find it at http://law.justia.com/cases/federal/appellate-courts/ca10/13-4012/13-4012-2016-07-26.html