Embry v. Hargadine
127 Mo. App. 383 (1907)
Rule of Law:
The formation of a contract is determined by the objective, outward expressions of the parties, not their subjective, secret intentions. A contract is formed if a party's words and acts, judged by a reasonable standard, manifest an intention to agree, and the other party reasonably understands them as such.
Facts:
- Lucien D. Embry was employed by Hargadine, McKittrick Dry Goods Co. under a written contract for a salary of $2,000 per year, which was set to expire on December 15, 1903.
- Prior to the expiration date, Embry attempted to secure a renewal of his contract with the company's president, Thomas H. McKittrick, but was repeatedly put off.
- On December 23, 1903, eight days after his contract had expired, Embry approached McKittrick in his office.
- Embry stated that his contract had lapsed and that if the company wished to retain his services, he must have a contract for another year or he would quit immediately to seek other employment.
- According to Embry, McKittrick, who was busy with other matters, replied, "Go ahead, you’re all right; get your men out and don’t let that worry you."
- Believing he had been re-employed for another year, Embry continued to work for the company.
- On February 15, 1904, Embry was notified that his services would be discontinued on March 1, 1904, due to a need to retrench expenses.
Procedural Posture:
- Embry (plaintiff) sued Hargadine, McKittrick Dry Goods Co. (defendant) in a trial court for breach of an employment contract.
- The case was previously tried and appealed, then remanded for a retrial.
- At the retrial, the court instructed the jury that a contract existed only if they found that 'both parties thereby intended and did contract with each other'.
- The jury returned a verdict in favor of the defendant, Hargadine, McKittrick Dry Goods Co.
- Embry (appellant) appealed the judgment to the St. Louis Court of Appeals (intermediate appellate court), arguing the jury instruction was legally incorrect.
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Issue:
Does the formation of a legally binding contract depend on the subjective, secret intention of both parties to agree, or on the objective manifestation of assent that would lead a reasonable person to believe a contract was formed?
Opinions:
Majority - Goode, J.
No, the formation of a contract does not depend on the secret, subjective intention of both parties. A contract is judged by the objective standard of what a reasonable person would understand from the parties' words and actions. The court held that the inner intention of parties cannot create or prevent a contract if the outward words and acts are sufficient to constitute one. Citing established legal principles, the court emphasized that the law imputes an intention corresponding to the reasonable meaning of a person's words and acts. If a person's conduct is such that a reasonable person would believe they are assenting to the other party's proposed terms, and the other party enters the contract on that belief, a binding agreement is formed regardless of the first person's unexpressed, real intention. Applying this to the facts, McKittrick's response to Embry's demand, "Go ahead, you’re all right; get your men out and don’t let that worry you," would be understood by a reasonable person as an assent to re-employment for another year. Therefore, the trial court erred by instructing the jury that a contract could only be found if both parties subjectively intended to make one.
Analysis:
This case is a foundational decision in American contract law, firmly establishing the objective theory of contract formation over the subjective 'meeting of the minds' theory. By focusing on outward manifestations rather than secret intentions, the ruling provides certainty and predictability in commercial transactions. It prevents a party from escaping contractual obligations by later claiming they did not subjectively intend to agree, if their words and actions reasonably indicated otherwise. This precedent is crucial for enforcing agreements in business and employment, as it allows parties to rely on the reasonable meaning of communications.
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