Mutual Assent & Objective Standard in Contract Law: Definitions & Examples

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  • 0:07 Offer and Acceptance
  • 2:08 Lucy v. Zehmer (1954)
  • 4:32 Lesson Summary
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Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.

Mutual assent is considered the meeting of the minds between two or more parties that forms the foundation of a contract. At the time of mutual assent, it can be said that a legally binding contract exists.

Offer and Acceptance

When two parties enter into an agreement, a couple of things happen. One party, the offeror, offers something of value in exchange for a promise. The offeree accepts or declines the offer. If the offer is accepted by the offeree, and all things are legal, there is a mutual agreement. This agreement is called mutual assent, meaning two parties agreed upon something and are prepared to enter into a contract.

In other words, both parties agree to the same thing. There is also a mutual understanding of what each party promises and that the promise can be carried out as agreed. The court will look at two things, offer and acceptance, when making a decision on whether both parties actually reached mutual assent. And this must be done objectively. The objective theory of contract states that an agreement between two parties exists if a reasonable person could judge the acts and behaviors of the parties enough to objectively construe agreement.

To exemplify this, Rodney was in the market for a new kayak. One of the first things he did was look at the online classified ads. He noticed that Chappy had a barely used blue kayak for sale in Rodney's $400 price range. After checking the kayak out for seaworthiness, Rodney and Chappy negotiated the price to $389.50. All about a good deal, Chappy accepts Rodney's offer and the two men make arrangements for delivery.

Simply stated, all that is needed for mutual assent is an offer, acceptance of the offer and all other things being legal, a contract can be formed. Of course, all other things being legal, in this case, may mean that the kayak actually belonged to Chappy and he is within his rights to sell it. Once these things are determined, the two men are free to enter into a contract. This sounds pretty simple, but let's see what happens when mutual assent goes too far!

Lucy V. Zehmer (1954)

Back in December of 1952, the Lucys and Zehmers went to dinner. Over dinner, the conversation turned to the sale of a small farm Zehmer owned, called the Ferguson Farm, for the sum of $50,000. Zehmer didn't really want to sell his farm. What he wanted was for Lucy to admit that he did not have the $50,000 needed to make the purchase. In other words, it was a one-sided joke on the part of Zehmer.

Unaware of Zehmer's intent, Lucy continued the farm sale conversation with serious intent to purchase. After several cocktails, Zehmer and his wife drafted an agreement on the restaurant receipt, which loosely read, 'we agree to sell the Ferguson Farm to Lucy for $50,000,' and signed this document in witness of the other parties.

After reading the memorandum drafted by Zehmer, Lucy insisted on giving a deposit of five dollars to secure the land. Zehmer actually refused the deposit stating that the signed agreement made at the table was good enough for him. After all, during a 40-minute conversation, Zehmer offered the land for sale at the price of $50,000. He drafted an agreement between the parties and both parties signed said agreement.

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