Mutual Agreement Definition

The mutual agreement’s meaning is when two or more individuals establish “agreement” or understanding on a certain subject, problem or issue (also referred to as mutual consent). In contract law, when we remark that there is a “mutual understanding” between the parties or “mutual agreement,” we point out that the parties have come to an agreement which can form the foundation of an oral or written agreement. A mutual agreement is a redundant sentence. Any agreement in essence should be mutual, as it involves two or more persons agreeing on something.

Under this definition, a mutual agreement may relate to any legally enforceable contracts when all terms and provisions have been signed and agreed on between parties. The mutual understanding is enforceable by law between two parties. In short, if two persons or business entities enter into a mutual commercial agreement where one party agrees in exchange for a particular price to execute certain responsibilities, and the other party vice versa, the obligations of those parties become legally binding and enforceable.

What Are the Elements of Mutual Agreements?

A contract is legally binding and creates mutually enforceable duties by private parties. To be legally binding, a contract must comply with several fundamental criteria of formation. The following components that must form part of each mutual agreement:

Consideration—Any value offered by both parties to a contract, which encourages them to enter into a mutual exchange arrangement. Consideration for the creation of a contract is a vital aspect. It might be a promise to perform an act you want to perform or a commitment not to conduct an act you have the obligation to conduct. Value and benefits must be exchanged, for example,  service and payment. It is well established in English law as well as in Indian Contract Act that consideration is essential for an enforceable contract which means that an agreement without consideration is a bare promise and ex nudo pacto non aritio actio, i.e., cannot be held binding on the parties. Capable parties—You have to know or understand what you do to deem you ‘capable’ of concluding an agreement. Minors and those who are confirmed mentally challenged or ill are typically considered as unable to conclude an agreement since they don’t know what they’re doing. In addition, no enforceable contract may be concluded between people influenced by drugs or alcohol. Both sides shall conclude the deal voluntarily and shall not be compelled to do so. All the parties signing the contract must be at least 18 years old which constitutes legal age and they must be of sound mind.Legal purpose—The contract must be valid and binding. It can’t be unlawful, such as the sale of narcotics or prostitution. It does not mean it is illegal to conclude an agreement which does not include all those key elements; it just means that the contract cannot be executed by a court if an important piece is absent. The responsibilities under the contract must comply with US law to make them lawful and implementable.Offer— An offer refers to a commitment made by one party in return for the performance of another party. This is an appeal for a contract to be concluded on a number of terms. It may be stated in many different forms, from a quick spoken declaration to a lengthy and extensive written declaration. You must, however, ensure that your offer is clearly and reasonably stated to persuade the other party that you make an offer.Acceptance—Acceptance is the fulfillment by one person with the terms of an offer made by another under the law of contracts. The acceptance of an offer is the acceptance of its terms and conditions. Acceptance must usually be done in the way that the offer specifies. If the offer does not set out the method of acceptance, the acceptance may take place in a way that is acceptable in the circumstances. However, acceptance shall only be valid if the bidder knows the bid, the bidder exhibits a desire to accept and the acceptance is indicated as a clear and unconditional agreement to the conditions of the bid. For example, Insurance legislation accepts the insurer’s consent to receive an insurance application and to provide a policy to cover a person against specific hazards, such as fire or theft.Mutual and Genuine Assent—The agreement must be freely signed by all parties. If one or more parties have made errors, a contract may not be enforced. Similarly, if a party has committed fraud or exerted unfair influence on another, a contract may be cancelled. For instance, you sign a contract to sell your house to your neighbor next door for one dollar. Your neighbor threatened you when you signed the contract. Obviously you entered into a coercion agreement so that the contract is not valid. So it is really required that all the parties mutually and truly agree to the agreement’s terms and conditions.

Different types of Mutual Agreement

The majority of mutual agreements include other sub-agreements or provisions like a non-disclosure agreement or a confidentiality agreement, and a harmless disclosure or holding agreement which may also be standalone mutual agreements.

Mutual employment agreement: An employment agreement is a mutual agreement between employee and employer. When a firm or employer enters into an agreement with a person or employee to have the person do a specific work in exchange for a specified wage or compensation. Employment partnerships sometimes begin with an offer letter that outlines specific working structure terms and conditions. However, an Employment Agreement is a more comprehensive and detailed contract which enables the employer to learn about what the employee is expecting and to understand how things like salary increases and holidays are being handled. This is why companies and workers are protected via Employment Agreements. Mutual Business Agreement or Joint Venture Agreement: A joint venture is a form of commercial partnership in which two or more parties agree that all their resources must be brought together to achieve a certain objective. The objective might be a task, a new initiative or a business. All the expenditures, revenues and losses connected with a joint venture are accountable to all partners. However, the enterprise itself is entirely different from other companies of the party. Mutual Non Disclosure Agreement: A mutual non-disclosure agreement or a privacy contract is a contract that legally binds and establishes a confidential connection. The person or parties that sign the agreement undertake not to distribute sensitive information with others. Confidentiality agreements represent an important legal framework for protecting sensitive and confidential information against access to that information from the receiver. Companies and companies utilize this document to make sure that the individuals they bargain with do not steal their valuable ideas. Mutual Reciprocal Release or Hold Harmless Agreement: A hold harmless agreement between the parties is a legal agreement that specifies that one party is not accountable for the other for risk. Hold harmless contracts are usually applicable to physical damage or danger. They can either be one-way agreements (also referred to as unilateral agreements) or mutual agreements (known as reciprocal agreements).

How to Make a Mutual Agreement

Whether you are making a mutual agreement between husband and wife, mutual agreement child support letter or a mutual agreement between supplier and buyer, all of which are mutual agreements. All of these may have different formats but they serve the same purpose to bind the parties lawfully. Here are the steps in making a Mutual Agreement. 

Step 1: Meeting between with prospective parties

The prospective partnership or agreement will be formalized at a meeting with all the involved parties. The conference shall also serve as an outlet for discussing, opining or reviewing possible terms and circumstances of the agreement. Always ensure a minutes of meetings to capture and record all talks, action plans and negotiations throughout the meeting.

Step 2: Choose a template

Now that the parties have made up their target goals for the agreement. It is now time to look for templates that match them or almost do. Templates aren’t always catered to the specific needs of a certain partnership agreement but they can help in building ideas. Choose from the many mutual agreement sample templates above and edit it or fill it out with the necessary information. Choose the mutual agreement format that you think is serving the purpose clearly. However, if you want to make your own out of nothing, you can proceed to step 3.

Step 3: Start Drafting 

Download the templates above and have a look at them. How are they formatted? What are the components? Carefully examine the mutual agreement templates above to have an idea on how to make your own. Writing is a process, particularly when legal documents are created. Practice writing drafts always since it helps you to grow your thoughts and identify improvement areas whenever you change them. Drafting needs to be handled seriously, since it might lead to the presentation or submission of a comprehensive and professional document.

Step 4: Lay down all the terms and conditions

The terms and conditions specified by both parties should be evident from the mutual agreement. All parts and clauses must be included in the formal document, detailing them. The sections must cover the titles, expiry/effectiveness dates, names, recitals, confidentiality clause, force majeure and signature lines of the parties involved. Cover everything in this contract so that both parties are protected and protected should misunderstandings arise.

Step 5:  Check errors and do revisions

Go through the document and update it after producing your initial draft. The process of editing entails an examination of the entire material, structure, clarity and style. Present the paper to a legal professional for evaluation after thorough rewriting and editing. Whether you’ve created a job termination form, tenancy/lease terminations, reciprocal divorce agreements, reciprocal privacy agreements, reciprocal arbitration agreements or mutual non-disclosure agreements, seek legal professionals’ advice to help you find ways to produce effective and legal papers.

Step 6: Have the involved parties sign the agreement 

Complete all and ensure that no information is omitted. Once the document has ended, mark your appointment calendar and specify the date for the mutual agreement to be executed. Before signing, both parties should reach good and mutual terms. The parties might continue their business to promote and abide by the agreement after establishing a joint partnership or understanding or agreement. The reason why the signatures are put at the last part is to make sure that the person or party reading the agreement has understood it fully, every single page, and has agreed to everything that has been written down.

FAQs

What if there is a breach of the mutual agreement from the parties involved?

The effect is that legal action will be settled, depending on the type of contract violation. In other words, if there is no first possible agreement between the parties, the problem must be dealt with by the courts. What if a party infringes a contract? If a party infringes a contract, it is susceptible to legal procedures – and often it is. According to law, the guilty party must rectify the violation after the contract has been violated. The major solutions are damages, performance, or cancelation and repayment of contracts. Compensatory damages: The objective of the indemnity is to ensure that the non-breaker is complete as if the violation never occurred.

What is a Mutual Agreement?

A mutual agreement is when two or more individuals establish “agreement” or understanding on a certain subject, problem or issue (also referred to as mutual consent). In contract law, when we remark that there is a “mutual understanding” between the parties or “mutual agreement,” we point out that the parties have come to an agreement which can form the foundation of an oral or written agreement. A mutual agreement is a redundant sentence. Any agreement in essence should be mutual, as it involves two or more persons agreeing on something. Under this definition, a mutual agreement may relate to any legally enforceable contracts when all terms and provisions have been signed and agreed on between parties. The mutual understanding is enforceable by law between two parties. In short, if two persons or business entities enter into a mutual commercial agreement where one party agrees in exchange for a particular price to execute certain responsibilities, and the other party vice versa, the obligations of those parties become legally binding and enforceable.

What are the remedies for the violation of a mutual agreement

Infringement or breach of a mutual contract is subject to two typical remedies: A court may impose monetary damages, or it may order the violator to do the same as they have indicated in the terms of the contract, which are financially compensable to the opposing party. Verbal agreements can be implemented just as written agreements may be implemented, although a written agreement is obviously easier to enforce.

Can any person sign a mutual agreement and make it valid?

No. The ones signing must be people who are capable. You have to know or understand what you do to deem you ‘capable’ of concluding an agreement. Minors and those who are confirmed mentally challenged or ill are typically considered as unable to conclude an agreement since they don’t know what they’re doing. In addition, no enforceable contract may be concluded between people influenced by drugs or alcohol. Both sides shall conclude the deal voluntarily and shall not be compelled to do so. All the parties signing the contract must be at least 18 years old which constitutes legal age and they must be of sound mind.

A Mutual Agreement, like with any other legal contract, helps parties to collaborate better and binds them legally from their duties. Make sure everyone knows what is said here and acts on it. In other words, to ensure that each of the parties’ protection is guaranteed by a quality agreement. A clear, written mutual agreement shows precisely what the parties are, whether they are an individual or a corporation, what the plans are and their positions are and their mutual goals regardless of the time it takes.