What Are Mutual Agreement Contracts?
Mutual Agreement Contracts are just as they sound: an agreement between two or more parties to be mutually bound by certain terms. This type of contract is most common in professional scenarios, but can be found in a variety of personal scenarios as well. Many real estate agreements and leases, as well as contracts with suppliers and clients fall into this category.
What defines a mutual agreement contract however is its ability to protect both parties with equal footing. Should any breaches occur, damages can be sought by either party, helping to put them on an equal level when aggressive action is necessary.
There are a couple of key elements to mutual agreement contracts. The first is that proposed terms be provided collectively, rather than separately, to help determine how to proceed . Once terms are set, however, providing the other party with the sole ability to negotiate may be detrimental. For example, a contractor asking whether they could charge a different rate for materials, or sundries (relative to labor costs) could be ignored, and the contractor held to the initial terms. In this case, the contractor wouldn’t have the sole discretion about what counts as a sundry, while the other party would simply be bound to whatever amounts were put forward.
A mutual agreement contract therefore helps each party have an equal say in what they will be paid, how much they will be paid, and under what conditions they will fulfill this agreement. A bad deal for one party can be as detrimental as a bad deal for another.
Elements of a Mutual Agreement Contracts
Parties may enter into a contract of mutual agreement if they have agreed on the terms of a mutual agreement. The essential elements of every contract are an offer, accepting the offer and the intention to enter into a contract. In order for the parties to have entered into a contrac, they had to have accepted the offer and also intended to enter into the contract.
An offer
The law requires that the offer must be such that it has the effect of a biding obligation. An offer must be distinguished from mere puffs or sales talk which cannot be converted into an obligation that is recognised by law. An offer must be clear, unambiguous and certain in its terms.
Acceptance
Acceptance is only effective if it communicates with the offeror. Silence is not usually construed as acceptance of an offer. An acceptance must mirror the requirements of the offer in that it must be practically possible to perform the terms of the offer if accepted. In this regard, an offer which is made to the public at large may be accepted by a member of the public if the offer contains all the conditions which must be fulfilled to claim the offer.
Intention
The parties must intend duties exist between them. The test of whether the parties had the intention to create obligations which are legally recognised is objective. A determination is made with regard to what the parties said and did. The view taken is that a duty may arise between people in any situation, but to be enforceable, the parties must have the intention to be bound. The law is not concerned with the extent to which the parties are bound to each other.
Consideration
The law requires that in order to create a binding contract, both parties have to exchange promises. This means that parties entering into an agreement have to be prepared to give something up and to give something in return. Consideration is the giving up of something in return for compliance with a promise which is contained in a contract. Consideration must be given at the time which the parties intend the contract to take effect. It does not have to be of equal value. Where the offer makes performance of the terms of the contract subject to the performance of terms of another agreement, a party’s failure to perform the other agreement will formally terminate their performance in the first agreement.
Advantages of Mutual Agreement Contracts
Mutual agreement contracts offer numerous benefits for the parties involved. Most notably, the features of transparency and clarity mean that there is little room for misunderstandings during the contract period. Everyone involved knows exactly what they are going to do, how they are going to do it and when they are going to do it.
It can also be less time consuming to secure a mutual agreement contract than other types of contracts that require negotiations. The mere process of negotiating a contract can cost money, so if you can avoid this by drawing up a mutual agreement contract that lists the rights and obligations of each party, you may save yourselves both cash and valuable time that could be better spent on other, more productive ventures.
If there are any disagreements between you, your employer or your clients, a mutual agreement contract is legally enforceable, which means the offending party can be taken to court to ensure compliance with the terms therein. While you may have to spend money on legal fees if this happens, you will be protected under law.
Mistakes to Avoid
A common pitfall when creating a mutual agreement contract is failing to adequately describe the subject matter that is the basis for the agreement. A mutual agreement typically addresses the sale or transfer of property, goods or services for money or other consideration. Taylor v. Bell, 44 Cal. 383 (1872). If an agreement does not specify what the parties are agreeing to do, then performance is not required. Hill v. Wood, 118 Cal. App. 681, 683 (1931).
Another common mistake is failing to state whether the contract should be interpreted under the Uniform Commercial Code (U.C.C.) or under common law. In general, contracts for the sale of goods are governed by the U.C.C. and other contracts are governed by common law principles. The U.C.C. requires that certain contracts be in writing and enforceable. For example, the sale of goods exceeding $500 must be evidenced by a signed writing. In contrast, the sale of intangible assets such as ideas , patents or licenses are not required to in writing.
In order to avoid ambiguity when the U.C.C. applies, the contract should specify whether it is subject to the U.C.C. as adopted in the state where it is formed. This is especially important when the parties, the subject matter or the location could relate to multiple jurisdictions. Another common error when drafting contracts is failing to specify the applicable law that governs the agreement. This lack of specificity can make it difficult to know what legal standards to apply to determine the respective rights and remedies for all parties. (For example, where the seller in a contract fails to make a required delivery pursuant to the terms of the agreement.) In addition to the applicable law, it should specify the venue or the district in which any lawsuits would be brought to enforce the agreement. For example, it could state that the parties agree that any disputes arising from the contract should be brought in New York.
How to Make a Mutual Agreement Contract
Once the parties have established goodwill with each other sufficient to proceed with a contract, it will typically need to devise a draft of the mutual agreement. A mutual agreement can also be known as a "Memorandum of Agreement" (MOA) or "Memorandum of Understanding" (MOU). The MOA provides a statement of intended common aims and guidelines for the parties participating in a joint undertaking. The following steps are to be taken for creating a mutual agreement: • Review and research – Carefully review the entire mutual agreement document, and research compliance with current relevant law. Research should also be done for any applicable regulatory and other general legal issues related to the agreement. • Informed Consent – Ensure that the terms are fully understood and agreed to by all parties. Any provisions that are not understood should be discussed and addressed before proceeding with the contract. • Consider Legal Assistance – Consider hiring legal counsel to review the draft so that all legal issues are considered and properly addressed. • Revise and Finalize – Revise the document as may be required to address any issues raised in the review and consultation with counsel. Finally, prepare a signature page with signatures of authorized representatives for each party involved. Lastly, the contract should issue an effective date and signing date. By keeping clear track of the creation process and by having legal counsel review and provide feedback on the mutual agreement, the parties can help ensure that the final draft meets all applicable legal standards, mutual understanding and approval.
Legal Aspects of Mutual Agreement Contracts
Mutual agreement contracts, also known as mutual acceptance contracts, are legally enforceable in a court of law. It is a legally binding document that must include the signatures of both parties for it be enforceable. Documents with missing signatures are legally unenforceable.
If one party breaches the contract , the party who continues to hold up their end of the agreement can proceed with a lawsuit. The breach of contract will shut down business operations and other potentially harmful things and create monetary losses. If both parties refuse to abide by the contract, the court will order the parties to attempt a contract revision before proceeding with the case.