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According to Justice Oliver Wendell Holmes Our law does not enforce every promise
which a man may make. Promises made as ninety-nine promises out of a hundred are, by
word of mouth or simple writing, are not binding unless there is a consideration for them.
That is, as it is commonly explained, unless the promisee has either conferred a benefit
on the promisor, or incurred a detriment, as the inducement to the promise.
Promises are made by individuals all of the time yet not all promises are legally
enforceable. Contracts are promises that are legally enforceable and for which the law
will give a remedy if breached.

Which types of promises are not legally enforceable? Why?

What purpose do legally enforceable promises, i.e. contracts, serve in society and
business? If a business person knows that a contract will be enforceable then business
relationships will benefit from certainty, predictability and stability. If a business person
knows that there will be a remedy at law if one breaches their contract then they may be
deterred from committing a breach.
Objective Theory of Contract Law
In the law of contract the use of moral phraseology led to equal confusion, as I
have shown in part already, but only in part. Morals deal with the actual internal state of
the individual's mind, what he actually intends. From the time of the Romans down to
now, this mode of dealing has affected the language of the law as to contract, and the
language used has reacted upon the thought. We talk about a contract as a meeting of the
minds of the parties, and thence it is inferred in various cases that there is no contract
because their minds have not met; that is, because they have intended different things or
because one party has not known of the assent of the other. Yet nothing is more certain
than that parties may be bound by a contract to things which neither of them intended,
and when one does not know of the other's assent. Suppose a contract is executed in due
form and in writing to deliver a lecture, mentioning no time. One of the parties thinks that
the promise will be construed to mean at once, within a week. The other thinks that it
means when he is ready. The court says that it means within a reasonable time. The
parties are bound by the contract as it is interpreted by the court, yet neither of them
meant what the court declares that they have said. In my opinion no one will understand
the true theory of contract or be able even to discuss some fundamental questions
intelligently until he has understood that all contracts are formal, that the making of a
contract depends not on the agreement of two minds in one intention, but on the
agreement of two sets of external signs not on the parties' having meant the same thing
but on their having said the same thing. Furthermore, as the signs may be addressed to
one sense or another to sight or to hearing on the nature of the sign will depend the
moment when the contract is made. If the sign is tangible, for instance, a letter, the
contract is made when the letter of acceptance is delivered. If it is necessary that the
minds of the parties meet, there will be no contract until the acceptance can be read;
none, for example, if the acceptance be snatched from the hand of the offerer by a third

The Path of the Law, Oliver Wendell Holmes, Jr., 10 Harvard Law Review 457 (1897)
Does Holmes agree with the objective theory of contracts which is the generally accepted
of determining whether the parties ever intended to enter into a contract? The objective
theory asks: would a reasonable person in the shoes of the parties think there was intent
to contract as determined by the partys words (written or oral), conduct and
Why would a court consider the inner thoughts, feelings and subjective intent of the
parties to be irrelevant?
Sources of Contract Law
In most jurisdictions the laws pertaining to contracts are a matter of common-law and
have not been codified into statutes. To determine the prevailing rule of law in a contract
case reference must be made to prior cases and judicial decisions. Another source of
contract law is the Restatement Second of Contracts (Restatement) compiled by the
American Law Institute. This is a scholarly treatise that summarizes what the commonlaw rule on contracts as it currently exists in most jurisdictions in the United States. The
Restatement is a source of persuasive authority for judges but it does not carry the
authority of a statute. Contracts involving the sale of goods are governed by the
Uniform Commercial Code (UCC) Article 2. Most states have enacted their own version
of the uniform commercial code to govern business transactions involving goods. Goods
are defined as tangible moveable items of personal property. Goods include items such
as books, clothing, furniture, etc. Also included are intangible items of personal property
like copyright, trademark and stock. Non-goods which would fall within the purview of
the common-law and not the uniform commercial code would include real estate, i.e.
houses, building, land and anything permanently attached to the real estate (known as
fixtures) and services.
Types of Contracts
Contracts are classified in several ways and their classification is based on how they are
created. Express contracts are created by the words of the parties words which can be
either in writing or orally spoken. Implied in fact contracts are created by the actions,
conduct and circumstances of the parties as evaluated by the objective standard for
contract formation. A Quasi contract is not a contract but a remedy devised by the
courts to prevent one party from being unjustly enriched at the expense of another party.
Quasi contracts arise when one party knowingly receives a benefit of some sort either
goods or services and retains the benefit without payment. In those situations the judge
will order the party who has knowingly benefited to compensate the other party for the
reasonable value of the goods or services received.
What are the public policy and business reasons for awarding compensation in the
situation of a quasi-contract?

Closely related to the concept of quasi contract is the doctrine of promissory estoppel.
The law also gives a remedy in situations where one party has reasonably relied upon a
promise made by another party and due to such reliance suffered a detriment
(detrimental reliance). The remedy awarded to the party who has acted in detrimental
reliance is their reliance damages.
Copyright 2010 R.Kowal