Kabil Developments Corp. v. Mignot
279 Or. 151, 566 P.2d 505 (Or. 1977)

  • Kabil sued Mignot for breach of contract, alleging that the Mignot orally agreed to supply Kabil with helicopter services for a construction job.
  • Mignot denied there was a contract.
    • Mignot claimed that their agent had told Kabil that they would have to examine and approve the job site before a contract could be made.
    • At trial, testimony was admitted that Kabil subjectively thought they had a deal with the Mignot.
  • The Trial Court found for Kabil. Mignot appealed.
    • Mignot argued that the subjective testimony of what Kabil believed shouldn’t have been admitted. Mignot argued that a contract is only formed if a reasonable person would have thought there was a contract based on what was said.
      • That’s known as the objective theory of contract formation.
    • At trial, the jury was told that unexpressed convictions and purely subjective reactions could have probative bearing on the fundamental issue of whether or not an oral contract had been formed.
      • That’s known as the subjective theory of contract formation.
  • Appellate Court affirmed.
    • The Appellate Court found that “a contract has, strictly speaking, nothing to do with the personal, or individual, intent of the parties. A contract is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. If it were proved that a party, when he used the words, intended something else than the usual meaning which the law imposes upon them, he would still be held the usual meaning of the words.”
  • Although historical case law is muddled, for most part the modern standard is the objective standard (this case not withstanding).
    • Under the modern standard, the jury is only to consider whether a reasonable person would have inferred a promise on the part of the defendants. It doesn’t matter what the specific person believed.
    • Some courts find that subjective evidence is relevant, though not completely determinative.
    • So basically, when a court determines whether a party has assented to an agreement, the only intention that matters is the party’s apparent, objective intention (or the intention that a “reasonable person” would infer).