Mutual Assent: Everything You Need to Know
Mutual assent is how two parties begin forming a contract, but it can not be used as a binding contract.3 min read
2. Mutual Assent as a Concept
3. Mutual Assent Elements
4. The Process of a Contract
5. Legally Binding Contract Elements
Mutual assent is how two parties begin forming a contract, but it can not be used as a binding contract.
Mutual Assent Defined
When two parties agree to form a contract, this is known as mutual assent.
Mutual assent is generally proven by showing that an offer has been made and accepted. When two parties set to agree to terms that fulfill certain requirements, mutual assent has occurred. Agreeing to these initial terms is the first step in forming a contract.
Mutual Assent as a Concept
When two parties wish to enter into a contract, they will negotiate terms. Agreeing to these terms constitutes mutual assent. While mutual assent is an important part of establishing a binding legal contract, it's important to understand that this agreement is not binding in and of itself.
Mutual assent applies to both verbal and written agreement. A written contract is usually easier to enforce than a verbal contract, but when there is a dispute related to a verbal contract, courts will take into account whether mutual assent occurred. Courts use something called a “reasonable person test” to decide if mutual assent exists. Using this test, the court will examine the circumstance under which the contract was agreed to and then determine what the agreement would have meant to a reasonable person.
You should understand that the court does not consider what the parties involved in the agreement thought the agreement meant, only what a reasonable person would have understood.
Mutual Assent Elements
There are two primary elements that are required for mutual assent to occur: offer and acceptance.
An offer is when you promise to perform or refrain from an act in exchange for something you deem valuable. When one party agrees to the offer that has been made, this is known as acceptance. The offer and the acceptance of the deal must be clearly stated so that the agreement could be easily understood by a reasonable person.
The Process of a Contract
Typically, there are three steps in the contract process:
- Deliberating the offered deal.
- Coming to mutual assent.
- Performing and enforcing the contract.
Deliberating the deal involves both parties examining the proposed arrangement and weighing the benefits and potential risks. During this step, both parties will also need to decide if they can trust one another. An agreement is reached when both parties have accepted the proposed terms. This agreement is usually verbal and is also called mutual assent. Parties can verify the agreement by signing a contract or by simply providing verbal confirmation.
The last phase of the contract process is performing and enforcing the contract. This step involves both parties fulfilling their respective obligations as listed in the contract. Should one of the parties fail to fulfill its duties, the other party has the right to file a civil suit for the purposes of enforcement.
Legally Binding Contract Elements
While mutual assent is important, this agreement cannot create a binding contract on its own. Once an initial agreement has been reached, there are several more steps that must be performed to make a contract legally binding.
Legally binding contracts possess a variety of elements:
- There must be consideration, which means both parties have agreed to exchange something of value.
- There needs to be a clear offer by one party and acceptance by the other party.
- There must be a legal purpose for the contract. Legally binding contracts cannot be used for illegal acts, such as purchasing drugs.
- Every person involved in the contract must be considered capable, which means they are mentally stable, old enough to enter a contract, and able to understand the contract to which they are agreeing.
When one party fails to perform the duties required of them by the contract, this is known as breach of contract. If a breach of contract occurs, a civil lawsuit can be filed by the party that was damaged by the breach.
Depending on the nature of the breach, there are several remedies that the courts could offer. In some cases, the court may award monetary damages to the injured party. In other circumstances, the court may issue an order requiring the party that breached the contract to fulfill the obligations to which they agreed.
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