Reasonable Person - Reasonable Bystander

Reasonable Bystander

For common law contracts, disputes over contract formation are subjected to what is known as the objective test of assent in order to determine whether a contract exists. This standard is also known as the reasonable bystander, reasonable third party, or reasonable person in the position of the party. This is in contrast to the subjective test employed in most civil law jurisdictions. The test stems from attempts to balance the competing interests of the judicial policies of assent and of reliability. The former holds that no person ought to be contractually obligated if they did not consent to such an agreement; the latter holds that if no person can rely on actions or words demonstrating consent, then the whole system of commercial exchange will ultimately collapse.

Prior to the 19th century, courts used a test of subjective evalutation; that is, the trier of fact determined each party's understanding. If both parties were of the same mind and understanding on matters, then assent was manifested and the contract was valid. Between the 19th and 20th centuries, the courts shifted toward the objectivist test, reasoning that subjective testimony was often unreliable and self-serving.

From those opposite principles, modern law has found its way to a rough middle ground, though it still shows a strong bias toward the objective test. Promises and agreements are reached through manifestations of consent, and parties are liable for actions that deliberately manifest such consent; however, evidence of either party's state of mind can be used to determine the context of the manifestation if said evidence is reliable and compatible with the manifestation in question, though such evidence is typically given very little weight.

Another circumstance where the reasonable bystander test is used occurs when one party has inadvertently misstated the terms of the contract, and the other party sues to enforce those terms: if it would have been clear to a reasonable bystander that a mistake had been made, then the contract is voidable by the party who made the error; otherwise, the contact is binding.