THE OBJECTIVE THEORY OF CONTRACT AND THE RULE IN L'ESTRANGE V. GRAUCOB

Abstract

This article begins with a review of the objective theory of contract in relation to the doctrine of mistake, and the evolution of that theory into the so-called “fly on the wall” theory, which expands the objective theory to say that a defence in mistake must appear reasonable not only to the plaintiff, but to a third party observer. The author reviews the criticism, argues that authority does not support such an extension of the objective theory and, to prove the point, surveys the contradictory aspects of both American and English law. An alternative argument is reviewed to illustrate deficiencies and to present a more conceptually valid framework for the objective theory to replace the highly inadequate fly on the wall theory.