Agreement: Legal Definition, Types, Validity and Enforceability

What Is An Agreement?

An agreement, in legal terms, is a mutual understanding between two or more parties regarding their respective rights and responsibilities.

It may involves the exchange of goods, services, or promises and can be formal or informal, written or oral.

Binding agreements require offer, acceptance, consideration, and the intention to create legal relations.

Introduction

The concept of an agreement is foundational to the facilitation of various interpersonal and commercial interactions.

It serves as the bedrock upon which the edifice of contractual obligations is constructed, representing a confluence of wills that gives birth to rights and duties recognised and enforceable by law.

Essential Elements of an Agreement

To transform a mere agreement into a legally binding contract, certain elements must be unequivocally present.

These elements are what the law requires for an agreement to be recognised as enforceable. They include:

Offer and Acceptance: A contract begins with an offer by one party, which is then accepted by another. The offer must be clear, specific, and capable of being accepted. Acceptance, on the other hand, must mirror the offer exactly, reflecting an unambiguous intent to be bound by its terms.

Consideration: This refers to something of value that is exchanged between the parties involved. Consideration is what each party gives up to benefit from the contract. It validates the agreement and can be in the form of money, goods, services, or a promise to perform or refrain from performing a certain action.

Capacity: All parties entering into an agreement must have the legal capacity to do so. This means they must be of a certain age (usually 18 or older) and have the mental capacity to understand the terms and implications of the contract.

Intent to Create Legal Relations: The parties must intend for their agreement to have legal consequences. This intention is often presumed in commercial agreements but not in social or domestic arrangements unless expressly stated.

Types of Agreements

Agreements can take myriad forms, each with its own set of rules and conventions. Some of the common types include:

Written and Oral Agreements: While many agreements are formalised in writing to ensure clarity and enforceability, oral agreements are also legally binding, provided they meet the essential elements of a contract. However, proving the terms of an oral agreement can be challenging.

Express and Implied Agreements: Express agreements are those where the terms are stated clearly by the parties, either orally or in writing. Implied agreements are formed by the conduct of the parties, indicating an unspoken understanding or assumption.

Bilateral and Unilateral Agreements: Bilateral agreements involve two or more parties who each make a promise to the other. Unilateral agreements, on the other hand, involve a promise made by one party in exchange for the performance of a certain act by another party.

International Agreement in Treaty Making: An international agreement in treaty making is a formal, binding contract between two or more sovereign states or international organisations, governed by international law. These agreements, also known as treaties or protocols, cover various matters including trade, peace, defence, and environmental protection, and must be ratified, or acceded to, by the participating parties to take effect.

The Significance of Agreements

Agreements are the lifeblood of commercial transactions and personal relationships, providing a framework within which parties can cooperate and transact with confidence.

They help in the allocation of resources, distribution of risks, and protection of interests.

Furthermore, agreements foster trust and predictability, essential ingredients for the smooth functioning of markets and societies.

However, if one party has relied on the other’s promise and incurred losses because of this reliance, the affected party may seek restitution under the principles of promissory estoppel or unjust enrichment.

These doctrines aim to prevent one party from suffering a detriment due to their reasonable reliance on a promise, even if a formal contract was never finalised – see Central London Property Trust Ltd v High Trees House Ltd.

Once evidence is gathered, the aggrieved party may initiate legal action by filing a claim in the appropriate court, demonstrating that all elements of a binding contract (offer, acceptance, consideration, and mutual intent to create legal relations) were present.

Success hinges on the ability to convincingly establish the agreement’s specifics and the defendant’s failure to fulfil their obligations under that agreement.

What Is An Agreement In Principle, And Is It Legally Enforceable?

An agreement in principle is a non-binding outline of the main terms between parties during negotiations.

It signifies mutual intention to enter into a formal agreement but lacks the detail and finality required for legal enforceability.

Typically used in real estate, finance, and preliminary business deals, it demonstrates a serious commitment to proceed but does not legally compel the parties to finalise the transaction.

While not enforceable as a contract, it can influence subsequent formal agreements and negotiations.

What Is The Difference Between Unilateral And Bilateral Agreements?

Unilateral and bilateral agreements represent two fundamental types of contracts distinguished by the number of parties making a promise and the nature of those promises.

In a unilateral agreement, only one party promises to perform an action or service in exchange for a specific performance by another party, who accepts the offer through their performance rather than a promise.

Common examples include rewards or contests where the offeror promises a benefit for completing a task.

Bilateral agreements, on the other hand, involve mutual promises between two or more parties.

Each party is both a promisor and a promisee, committing to perform certain obligations in exchange for the other party’s commitments.

Most commercial contracts, such as sales agreements, leases, and service contracts, are bilateral, based on the reciprocal promises that bind both parties.

Agreement In Treaty Making

In the context of international relations and treaty making, an agreement represents a formal understanding between two or more sovereign states or international organisations.

It outlines specific obligations, rights, and duties agreed upon by the participating entities.

Unlike informal agreements, treaties have a more formal character and must adhere to international law, including principles outlined in the Vienna Convention on the Law of Treaties if applicable.

Agreements in treaty making are meticulously negotiated, drafted, and then subjected to a ratification process by the signatory parties’ respective legislative or executive branches, depending on each country’s legal requirements.

These agreements can cover a wide range of subjects, such as trade, defence, environmental protection, and human rights.

Once ratified, they become legally binding on the parties involved and can be enforced through international legal mechanisms or arbitration.

The process of treaty making emphasises sovereignty, as only states and organisations with treaty-making capacity can enter into agreements.

Moreover, these agreements signify a commitment to uphold the stipulated terms, fostering international cooperation, stability, and peace.

Violating such agreements can lead to diplomatic disputes, sanctions, or legal actions in international courts.