Mutual Agreement (What Does It Mean And Why You Should Know)

What does mutual agreement mean?

What is the definition of mutual agreements?

What is the difference with mutual consent?

We will look at how mutual agreement is defined, define mutual consent, how you can get to a mutual contract, what are mutual agreements in business, examples and more!

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What is mutual agreement

A mutual agreement (sometimes referred to as mutual consent) is when two or more people reach an “agreement” or an understanding on a certain topic, issue or matter.

In contract law, when we say that the parties have reached a “mutual agreement” or there is “mutual consent”, we refer to the fact that the parties have reached an understanding that may be the basis of an oral or written contract.

For example:

Mary has offered her used car to John for a price of $10,000 and they have reached a mutual agreement.

This means that Mary and John have mutually agreed on the terms and conditions relating to the sale of Mary’s car to John.
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Mutual agreements can be contrasted with unilateral agreements.

A unilateral agreement is a type of agreement that is one-sided or the legal obligations are imposed on one party as opposed to all parties.

A mutual agreement is a type of agreement where the legal obligations are reciprocal or bilateral. 

In other words, a mutual agreement benefits all parties to the agreement.

Mutual agreement definition

How do you define mutual agreement?

What is mutual agreement meaning?

To better grasp the concept, let’s first define the term “mutual”.

According to the Merriam-Webster dictionary, the term mutual is defined as:

“Shared in common” or “joint”
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To say mutual is to say that something was done jointly.

Now, based on this knowledge, let’s look at the mutual consent definition.

According to the Longman Dictionary, mutual agreement is defined as:

When two or more people both agree to something
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To mutually agree to something is to jointly agree to something or when two or more people reach an agreement that is satisfactory to both.

Mutual agreement synonym

How do you say mutual agreement in alternative terms?

There are many ways that you can refer to the phrase mutual agreement.

Alternative and synonymous ways of saying mutual agreement is to say:

  • Mutual consent
  • Joint consent
  • Mutual understanding 
  • Joint understanding 

So if you wonder what is the meaning of mutual consent, you can consider the phrase to be a different way of saying mutual agreement.

Mutual agreements in contract law

What does mutual agreement mean in contract law?

In contract law, a mutual agreement refers to an understanding or agreement between two or more parties to be legally bound to do or not do something.

In other words, to mutually agree is to agree to the terms of a legally binding contract.

There are a few ways we can refer to the notion of a condition where two or more parties agree to be legally bound by a contract:

  • Mutual contract
  • Mutual agreement
  • Mutual assent

These terms are used interchangeably to refer to a condition where a contract is formed (whether oral or written).

The mutual agreement between two parties is enforceable by law.

In other words, if two individuals or business entities reach a mutual business agreement where one party will agree to perform certain obligations in exchange for a specific consideration (and vice-versa for the other party), the obligations of the parties become legally binding and enforceable.

For example:

Jack reaches an agreement with Suzanne to renovate her basement in exchange for $5,000.

There is mutual assent between Jack and Suzanne with respect to Jack performing certain renovation duties in exchange for monetary compensation.
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The terms and conditions of a mutual agreement in a relationship are unique to the parties involved.

Using our example above:

If Jack agreed to renovate Suzanne’s basement for $5,000, this mutual consent is specific to Jack and Suzanne for a specific renovation mandate.

John (another contractor) may not have agreed to the same terms and conditions as Jack.

That’s why Jack and Suzanne’s agreement was a mutual one leading to a mutually agreeable contract.
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Elements of a mutual contract

What are the elements of a mutual contract?

How is a mutual agreement formed?

A contract is a legally binding agreement between private parties creating mutually enforceable obligations.

For a contract to be legally binding, it must respect certain essential formation elements.

The basic elements required for a contract to be mutually and legally formed are: 

  • Offer
  • Acceptance
  • Consideration
  • Capacity 
  • Legality 
  • Written document (in some cases)

You have a legally enforceable and binding contract when its formation elements observe the application contract laws.

A contract can be formed and legally enforceable no matter if it is oral or written.

In some cases, statutes specifically require the written form of a contract to render the agreement as legally binding such as the sale of a real estate property.

Once the parties come to a mutual agreement, the parties will then be required to respect the terms of their agreement.

We generally refer to this as the performance of the parties’ legal obligations.

Mutual business agreement

What does mutual agreement mean in business?

In business relationships, some companies collaborate to achieve their mission and purpose while others may be in competition.

Those who can form mutually beneficial alliances and cooperations stand to gain in the market and beat their competitors.

A joint venture agreement or a mutual cooperation agreement is the agreement between business entities where the objective is to reach a mutually desired outcome.

Like any other contract, a business agreement is a legally binding agreement between two or more business entities.

Typically, when the negotiations start, the companies will start by executing an NDA or a non-disclosure agreement.

The NDA provides comfort to the business parties that the parties will do what’s necessary to keep the information they exchange confidential.

If the negotiations are fruitful, the business parties will reach a mutual business agreement to outline each company’s roles, responsibilities, rights and benefits.

Every business contract is unique.

Generally, business partners write a mutual agreement in a highly customized manner designed to fit their business arrangement’s specific needs.

Once the contract is signed, the business entities will then move to the phase of executing their mutually agreed obligations.

Eventually, when the mutual agreement’s objective is achieved, the business contract is terminated or the parties sign a mutual release relieving one another from the contract.

Mutual agreement example

What are some examples of mutual agreements?

Although we’ve provided you with the mutual consent meaning above, it’s quite relevant to deepen our knowledge with a few examples.

There are endless ways that parties can reach a mutual agreement. 

A mutual agreement can be reached between private parties for personal affairs, it could be business mutual agreements, could be between companies and legal entities, between a private party and the public entity.

You name it.

For the sake of an example, we’ll give you a few mutual agreement examples that many of you will be familiar with, namely:

  • Mutual agreement employment
  • Mutual agreement real estate purchase

Let’s look at the two examples.

Example 1: Mutual consent on an employment agreement

A mutual consent on employment agreement occurs when a company (the employer) concludes an agreement with a person (the employee) to have the person perform a certain job in exchange for a certain salary or compensation.

The moment the employer and employee reach an agreement on how the employee is going to work, where the work will be done, how much the employer will pay to compensate the employee for the work and so on, the parties have reached a legally binding commitment. 

Example 2: Mutual assent in a real estate transaction

A homeowner may one day want to sell his or her house.

When the property is put on the market, someone may be interested in purchasing the property.

Typically, a person (the buyer) interested in purchasing a property listed on the market by a homeowner (the seller) will make an offer to purchase outlining the terms and conditions he or she proposes to purchase the property.

If the seller agrees to the terms of an offer to purchase, the parties have reached mutual assent or agreement for the sale of the real estate property.

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