Final answer:
Courts use an objective test to determine contractual intention to provide fairness and predictability, considering how a reasonable third party would interpret actions and statements. This approach avoids disputes over personal interpretations and aligns with legal principles for clear and societal understandings of contracts.
Step-by-step explanation:
For the purposes of determining whether a party had a contractual intention, courts employ an objective test rather than a subjective one to ensure fairness and predictability in contract enforcement. An objective test allows for the actions and statements of the parties to be evaluated as to how they would be reasonably interpreted by a third party, rather than relying on the undisclosed intentions or thoughts of the parties involved. This approach aligns with the legal principle that contracts are agreements that must be clear and understandable not just to the parties involved but also to society at large, which may need to rely on these contracts. It also reduces the potential for bias and helps avoid disputes that might arise from differing personal interpretations of intentions.
One of the reasons for the objective standard is that the true intentions of individuals can be difficult to discern, and parties to a contract may not always be forthcoming about their actual intentions. Furthermore, using an objective standard supports the notion of rational basis test and prevents excessive government entanglement with private agreements. This method promotes a more efficient judicial system and reinforces the societal goal of establishing a set of common expectations for the enforcement of contracts.