The ability to define mutual assent is important for both parties entering into a contract. Mutual assent is an important facet of contractual obligation because it encompasses the consent of both parties and their wish to enter into an agreement. In essence, a contractual agreement is the mutual assent of two or more parties put in writing.

What Is Mutual Assent?

Mutual assent has also been referred to as a meeting of the minds. This basically means that both parties will come together to lay out the particulars of the contract, including the terms of both the offer and the acceptance. The offer is the promise to deliver a product or service for a specified form of compensation, and the acceptance is when the other party agrees to accept the product or service as determined by the terms of the exchange. Both the offer and acceptance cannot be implied but need to be explicitly stated in the contract.

Acceptance can be as simple as saying "I accept your offer," even if the comment is flippant or not fully laid out in writing. If the person did not intend to contract to make the purchase even though they indicated acceptance with their words, then they have not given mutual assent.

Lack of Mutual Assent: When Will Courts Not Enforce a Contract?

The concept of mutual assent becomes most important when a contract is questioned in a court of law. It might be considered that one party had made a mistake and agreed to an offer in a belief that was not consistent with the facts. These are mistakes that caused them to enter into the agreement, not mistakes that occurred during the execution of the agreement.

For example, if someone accidentally signs a comment thinking it is a receipt, this would be a lack of valid assent and therefore unenforceable. There is the possibility that the mistakes can be mutual, where both parties made a false assumption, or it could be considered unilateral, such that only one person that was mistaken.

A mutual mistake will involve four specific characteristics. These characteristics include the following:

  • The mistake was made by both parties at the time the contract was signed.
  • The mistake involves one of the basic assumptions on which the contract was based.
  • The mistake can have a material effect on the agreed exchange.
  • The contract can only be voidable by the party who was affected by the mistake.

What Is a Basic Assumption?

A basic assumption is an assumption that relates directly to a material fact included in the agreement. In the event of a mistaken belief, the mistake must involve a basic assumption that will affect the contract to the degree that the contract would become unfair to one side.

In a situation where there are mistakes in which no contract arises, neither party will be bound. If one of the parties is mistaken about a fact that is material to the contract, even though the other party can hold the mistaken party to the contract, they should not hold the other party responsible.

An example would be party X intending to sell a German shepherd and party Y believing they are buying a Labrador retriever and accepting the offer. If party Y decides that they will take the German shepherd anyway, party X can decline to deliver on the contract since the contract did not really exist due to the material mistake.

There is one caveat to the rule, which is that the adversely affected party is only allowed to void the contract if they did not assume the risk of making the mistake. If one party knew of a risk and went ahead with the agreement anyway, they cannot void the contract just because anticipated problem happened. Additionally, if parties enter into a contract knowing they do not have all of the information relevant to their decision, they cannot void the agreement just because the unknown information turns out to favor or disfavor one party.

Unilateral Mistakes

A unilateral mistake occurs when only one party in the agreement is mistaken. The same requirements for mutual mistakes apply. In addition, one of the following conditions must be true as well:

  • The effect of the mistake is such that the enforcement of the contract would be unconscionable.
  • The non-mistaken party had reason to know of the other party's mistake.
  • The mistake was the fault of the other party.

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