Key Takeaways

  • Mutual assent refers to an agreement between parties that includes a clear offer and acceptance.
  • Courts may find that mutual assent does not exist in cases involving fraud, duress, undue influence, or mistake.
  • Silence generally does not constitute acceptance unless there's a prior relationship or understanding.
  • Misunderstandings, ambiguous terms, or lack of mental capacity can also invalidate assent.
  • Courts require evidence that both parties had the intent to be bound by the terms of the contract.

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.

Circumstances That May Invalidate Mutual Assent

There are several scenarios in which mutual assent may not exist, making a contract void or voidable. These include:

  • Fraud or Misrepresentation: If one party deceives the other by providing false information or concealing material facts, mutual assent is compromised.
  • Duress or Coercion: A contract signed under threat, intimidation, or unlawful pressure lacks voluntary assent and is typically not enforceable.
  • Undue Influence: When one party exploits a position of power or trust to pressure the other into agreement, the contract may be invalid.
  • Lack of Mental Capacity: Individuals who are mentally incapacitated, intoxicated, or otherwise unable to understand the terms of the contract cannot provide valid assent.
  • Ambiguity or Misunderstanding: If the parties have a fundamentally different understanding of a key term in the contract, there may be no true "meeting of the minds."
  • Silence or Non-Response: Silence alone is generally not considered acceptance unless prior dealings or customs indicate otherwise.

These situations demonstrate that consent must be both informed and voluntary. If either party enters into an agreement without a clear understanding or under improper pressure, courts may determine that mutual assent was never present.

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.

Frequently Asked Questions

1. Under what circumstances might mutual assent not exist? Mutual assent may not exist when there is fraud, duress, undue influence, mistake, ambiguity, or lack of mental capacity.

2. Can silence be considered acceptance in a contract? Generally, no. Silence is not acceptance unless there's a history of similar dealings or an implied agreement that silence will indicate consent.

3. What if only one party misunderstood the contract? If only one party was mistaken (a unilateral mistake), the contract may still be valid unless the other party knew or should have known about the mistake.

4. How does duress affect mutual assent? Contracts signed under threat or coercion lack voluntary agreement and are not considered enforceable due to lack of genuine assent.

5. What role does mental capacity play in mutual assent? A party must be mentally competent to understand and agree to contract terms. If they are not, the contract may be voidable.

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