Definition: In legal parlance, the word ‘agreement’ is used to mean a promise/commitment or a series of reciprocal promises which constitutes consideration for the parties to contract.
In an agreement, one person offers or proposes something to another person, who in turn accepts the same. In other words, offer plus acceptance amounts to the agreement, or we can say that an accepted proposal is an agreement.
What is a Promise?
The party to the agreement, to whom the offer is given or proposal is made, gives his/her assent in this regard for mutual consideration, the offer is considered as accepted, which results in a promise.
What are Reciprocal Promises?
In the Contract Act, the word ‘reciprocal’ refers to ‘mutual or give-and-take’. Hence, ‘reciprocal promise’ is the promise which results in consideration or part thereof, for the parties to the agreement.
Characteristics of Agreement
The main characteristics of the agreement are discussed below:
- Plurality of Persons: To constitute an agreement, at least two persons should be there, as one person cannot make an agreement with himself/herself.
- Consensus ad idem: It is a Latin term, which implies “Concurrence of Minds”, i.e. when in an agreement there is a common understanding between the parties with respect to the terms and conditions of the agreement.
This means that the parties to the agreement must agree upon the same thing in the same sense, as it was intended, with respect to their corresponding rights and duties, concerning the performance of promises in the past or future.
Elements of Agreement
Basically there are two key elements of the agreement, which are discussed as under:
- Offer/Proposal: A person makes an offer, when he/she expresses to another person his/her willingness to undertake an obligation, in exchange for a promise, act or abstinence. The person who expresses his/her willingness or the one who makes the offer is known as offeror or proposer, whereas the person to whom the offer is made, is regarded as the offeree.
Offer made by the offeror must be clear, i.e. the terms concerning the offer must be certain. In addition to this, the offer should be communicated to the offeree, which is considered as complete when the offeree comes to know about it.
- Acceptance: As the name signifies, when the offeree gives his/her assent to the offeror, either expressly or impliedly to receive or undertake something which is proposed to him/her, it is considered as acceptance. It is required to be communicated to the person who makes the offer, in the prescribed mode, within a reasonable time. It must be unqualified and absolute.
Further, when the offer is made to a particular person, it is required to be accepted by that specific person only. However, in case of a general offer, it is open to all and anyone can accept it.
- Alex offers to sell his Royal Enfield to Ben for Rs. 80,000. So, when Ben accepts the offer, it becomes an agreement.
- John orders pizza from Domino’s, which is executed by Domino’s by sending pizza at the given address. In this case, John’s order for pizza results in an offer, which was accepted by Domino’s by sending Pizza, which constitutes an agreement.
- Alpha Ltd. sends an offer letter with respect to a job opening to Peter when the offer letter is accepted and signed by Peter, it amounts to an agreement.
The term ‘agreement’ is broader in comparison to ‘contract‘, as in “Every contract is agreement, but vice versa is not possible”. This is because, all the contracts, contains the elements of the agreement, i.e. offer and acceptance, however, not all the agreement contains the main element which constitutes a contract, i.e. Legal enforceability. So, we can say that every agreement is not a contract.