Lesson 6: Mutual Assent

Mutual assent is a foundational concept in contract law, essential for the formation of a binding contract. It reflects the agreement between the parties on the terms of the contract. Mutual assent is often referred to as a "meeting of the minds."

Definition of Mutual Assent

Mutual assent occurs when two parties agree to the terms and conditions of a contract. This agreement is typically demonstrated through an offer and acceptance.

Components of Mutual Assent

Mutual assent comprises two key components:

• Offer: One party presents terms of an agreement to another party.
• Acceptance: The other party agrees to those terms.

Objective Theory of Contracts

Under the objective theory of contracts, mutual assent is determined by the external actions and statements of the parties, rather than their internal intentions.

Manifestation of Assent

Mutual assent must be manifested in an external manner, such as through words, actions, or written documents. Silence alone generally does not constitute acceptance unless it's specified in the contract or followed by actions indicative of acceptance.

  
Manifestation through Actions:
  
A sends a signed contract to B, and B begins performing the contractual obligations.

Communication of Acceptance

For mutual assent to be valid, the acceptance must be communicated to the offeror. There are several methods of communicating acceptance:

• Oral Communication: Verbally agreeing to the offer.
• Written Communication: Signing a document that outlines the terms.
• Conduct: Performing actions that signify agreement.

Exceptions to Communication Requirement

There are certain situations where communication of acceptance is not necessary:

• Unilateral Contracts: Where performance of the requested act constitutes acceptance.
• Silence as Acceptance: When the offeree silently accepts benefits or when previous dealings establish that silence means acceptance.

Diagrams and Relationships

The following diagram illustrates the flow from offer to acceptance:

Legal Standards and Tests

Courts apply different tests to determine the existence of mutual assent, including the "reasonable person" standard. This standard assesses whether a reasonable person in the position of the offeree would believe an offer had been made and accepted.

For more advanced readings on related topics, see:

• Definition and Purpose of Contracts
• Offer and Acceptance
• Consideration

Mutual Assent in Digital Contracts

With the advent of digital transactions, mutual assent can also be established electronically. This includes email exchanges, electronic signatures, and online form submissions.

Issues Affecting Mutual Assent

Several issues can affect the validity of mutual assent, including:

• Misunderstanding: When both parties have a different interpretation of the terms.
• Misrepresentation: When one party provides false information that leads to assent.
• Duress: When one party is forced into the agreement.
• Undue Influence: When one party uses their influence over the other to obtain assent.

Case Example: Lucy v. Zehmer

One of the landmark cases illustrating mutual assent is Lucy v. Zehmer. In this case, the court held that a contract was valid even though one party claimed to have been joking, because a reasonable person would have believed the contract was genuine.

Behavioral Indicators

Behavior can also be a strong indicator of mutual assent. Actions consistent with the terms of the contract, such as starting performance or making payments, can indicate assent.

Contracts Formed Through Silence

While silence alone generally does not constitute acceptance, there are exceptions:

• When the offeree takes the benefit of offered services with a reasonable opportunity to reject them and knows they were offered with the expectation of compensation.
• Where, because of previous dealings, it is reasonable that the offeree should notify the offeror if they do not intend to accept.

Revocation of Offer

An offer can be revoked before acceptance, but the revocation must be communicated to the offeree. The timing of this communication is critical.

Mailbox Rule

The mailbox rule is an exception to the general rule that acceptance must be communicated to the offeror. Under the mailbox rule, acceptance is effective when dispatched, not when received.

Diagram: Overview of Mutual Assent

Advanced Topics in Mutual Assent

For more advanced topics related to mutual assent and contract formation, see the following lessons:

• Mistake
• Misrepresentation and Fraud
• Duress and Undue Influence