The "Mutual Agreement" Definition

People enter into mutual agreements all the time on a personal level. Maybe Joe and Mary want to travel to a distant town. Mary says that if Joe will pay for the gas, she’ll drive. That’s acceptable to Joe, so they’ve reached a mutual agreement.

In the law, the concept is a little fuzzier. A mutual agreement forms the basis of a contract, and contracts can be violated and enforced – even sometimes when they’re just sealed with a handshake.

Mutual agreements have a few different legal terms. They’re sometimes referred to as mutual contracts or as mutual assents.

By definition, “mutual” means that something is shared by two or more parties. A mutual agreement or contract binds two or more entities. Each party agrees to take – or not take – certain actions. The terms of the agreement are acceptable to both or all of them.

A mutual agreement often involves monetary compensation in modern law. Joe effectively offered money when he agreed to pay for gas, but he might have instead agreed to paint Mary’s kitchen in exchange for $500. In either case, both the paint job and the gas money have value, as does Mary taking the wheel or agreeing to pay the $500.

A reasonable person would agree that both of these circumstances constitute mutual agreements, but another reasonable person might not agree there was a mutual agreement if no specific amount of compensation was set for the driving or the painting. This is a critical component in enforcement.

There’s a process to all this, of course. Courts look for various circumstances and certain steps that signify a mutual agreement, including:

• Negotiation between the parties to each provide something of acceptable value.

• An agreement, either oral or written, and sometimes referred to as an “offer and acceptance.”

• Performance. Both parties agree to do something, or either can take legal action to enforce the agreement if the other fails to perform. The terms of the agreement can’t be illegal. For example, Mary can’t provide Joe with drugs in exchange for painting her kitchen, and Joe can’t offer Mary stolen goods in exchange for her to drive to that town.
  
  
  Read More: What Are the Four Elements That Make a Contract Legally Binding and Enforceable?

All parties to a contract must be capable of agreement and able to perform as promised. This is when that old rule comes in that minors can’t enter into contracts. They’re not considered mature enough to understand the ramifications of an agreement. Both parties must be of legal age and of sound mind.

A mutual agreement relationship isn’t legal or binding upon the parties unless all these factors exist. Mary might agree to drive, but this wouldn't constitute a binding mutual agreement if she didn't have a driver's license.

Mutual agreement forms a basis for contract enforcement because both parties believe they’re entering into a bona fide exchange. Either can therefore take the matter to civil court for enforcement if the other party doesn’t perform as agreed.

But enforcement additionally requires that a reasonable person would presume an arrangement is a mutual contract under the given circumstances, and this is the standard a court uses. It wouldn’t necessarily matter if Joe didn’t think there was a mutual agreement if a reasonable person would believe there was.

Two common remedies exist for violation or breach of a mutual contract: A court can order monetary damages – the party who failed to perform must compensate the other party financially – or it can order the violating party to perform as they said they would under the terms of the contract.

Verbal agreements can be enforced just as written agreements can, but it’s obviously easier to enforce a written agreement. The agreed-upon terms are set forth in black and white and are not open to “he said, she said” interpretation.