The objective test is a fundamental principle used by courts to determine whether a legally binding contract exists and to interpret the meaning of contractual terms. Under this approach, the court does not focus on what the parties privately intended in their minds. Instead, it examines how the words and conduct of the parties would appear to a reasonable person placed in the same circumstances.
The test is rooted in the need for certainty in commercial and social transactions. If courts were to rely on secret intentions or undisclosed motives, contractual relations would become unpredictable and unstable. The law therefore prioritizes outward expression over internal thought.