Meeting of the minds/ mutual agreement
Consensus ad idem means meeting of minds, mostly used in contract law, which refers to the fact that there is an agreement among the parties to contract. It simply means that there exists a mutual agreement among all parties to a contract. The agreement is one of the essential ingredients that constitute a contract. If the parties do not reach a stage of mutual assent then a valid contract can not be formed. The phrase is commonly used to refer to a situation of mutual understanding in the formation of a contract over the same thing. The formation of a valid contract consists of certain essential characteristic features, the agreement being one of them. Therefore, it can be understood in a way that in the absence of meeting of minds, a contract so formed is void ab initio (i.e. null and void from the very beginning). Meeting of minds is very essential to avoid any kind of misunderstanding and confusion in the later stages of a contract and to ensure proper execution of the purpose of entering into a contract. Thus, an agreement is a key feature that can make or break a contract or a legal relation, it is therefore very necessary that the parties are on the same page as to material facts, and contingencies involved in a contract.
The formation of a valid contract involves the following stages:
It is clear from the above flow chart that agreement to all the terms of a contract are very essential for a valid contract to be formulated. This phrase of Consensus ad idem originated from the fact that contracts are rendered void if the parties are not on the same tangent when it comes to terms and conditions that constitute a contract. Hence, in order to avoid conditions like mistake and misrepresentation that consequently makes a contract null and void, shall be removed at the time of formulating/ drafting a written contract. All kinds of perplexities shall be avoided in the terms of the contract and shall not be subject to any ambiguity.
Meeting of minds is therefore very necessary. It does not completely eradicate the possibility of difference in opinion but simply means that all the different opinions shall be clearly discussed and accommodated in a manner that does not overlook the interests of all parties to a contract. It focuses on the removal of any sort of confusion, that may, later on, lead to conflicts. Hence, mutual agreement is essential to keep away any conflicting situation that may arise from a misunderstanding when the contract was formulated.
A and B are two parties willing to enter into a contract, they discuss the terms and conditions before formulating the contract and there are certain clauses that do not disclose the clear meaning of certain words used in the terms. In such a condition, the contract will not be a valid contract, since consensus ad idem is not reached.
It was a case regarding the specific performance of an oral contract. In a landmark judgment, the Apex court aptly summarised that meeting of minds is a vital ingredient to establish the existence of a valid contract between the parties and held that:
“We have given our careful consideration to the arguments advanced by learned Counsel for the parties and have thoroughly perused the record. We agree with the contention of the Learned counsel for the appellants to the extent that there is no requirement of the law that an agreement or contract of sale of immovable property should only be in writing. However, in a case where the plaintiffs come forward to seek a decree for specific performance of the contract of sale of immovable property on the basis of an oral agreement alone, a heavy burden lies on the plaintiffs to prove that there was consensus ad idem between the parties for a concluded oral agreement for the sale of immovable property. Whether there was such a concluded oral contract or not would be a question of fact to be determined in the facts and the circumstances of each individual case. It has to be established by the plaintiffs that vital and fundamental terms for the sale of immovable property were concluded between the parties orally and a written agreement if any to be executed subsequently, would only be a formal agreement incorporating such terms which had already been settled and concluded in the oral agreement.”
In this case, the court held that:
“Section 20 of the Indian Contract Act, 1872 provides that where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. The explanation to the section says that an erroneous opinion as to the value of the thing which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of fact. Where the parties make a mutual mistake, misunderstanding each other and are at cross purposes, there is no real correspondence of offer and acceptance and the parties are not really consensus ad idem. There is thus no agreement at all; and the contract is also void. A common mistake is there where both parties are mistaken about the same vital fact although both parties are ad idem, e.g. the subject-matter of the contract has already perished.”
After reading the contents discussed above, it is crystal clear that in a case where the parties to a contract lack mutual agreement, the contract is rendered void. No Consensus ad idem equals no contract. Therefore, it can be understood that mutual assent/ meeting of minds is a key ingredient to formulate a valid contract.
(This Maxim has been written and submitted by Ms. Mansi Batra during her course of internship at B&B Associates LLP. Ms. Mansi is a third-year law student at the Fairfield Institute of Management and Technology, Kapashera, New Delhi.)