§ 1.9 Agreement Defined

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What is meant by the term agreement? How does it differ from such terms as contract and obligation? Like all other legal terms, it, too, has been used in a variety of senses. No doubt, it is frequently used as an exact synonym of the term contract.n1 It seems desirable, however, to narrow its meaning so that it expresses nothing more than mutual assent, nothing more than the terms offer and acceptance.n2 To say that there is an agreement generally means that two or more persons have expressed themselves in harmony. Of course these harmonious expressions can be with regard to any subject in life. Two persons may be in agreement that Napoleon was a great general, or that Smith is the best man for President, or that the weather is disagreeable. In the law of contracts, however, the term agreement is commonly used to mean the expressions of two or more persons respecting a subject-matter of a kind that in the past has stimulated official action on the part of organized society. In the law of contracts we mean by the term agreement an expression of mutual assent between two parties that frequently creates a contract.n3

Agreement consists of mutual expressions; it does not consist of harmonious intentions or states of mind. It may well be that intentions and states of mind are themselves nothing but chemical reactions or electrical discharges in some part of the nervous system. It may be that some day we may be able to observe a state of mind in the same way that we observe chemical processes and electrical discharges. At present, however, what we observe for judicial purposes is the conduct of the parties.n4 We observe this conduct and we describe it as the expression of a state of mind. It is by the conduct of two parties, by their bodily manifestations, that we must determine the existence of what is called agreement. The Uniform Commercial Code defines ''agreement'' as ''the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance....''n5 This makes clear that an agreement, as a factual matter, includes not only the words and non-verbal expressions of the parties, but also the added meaning as revealed by the context of their expressions. This is what is meant by mutual assent.

As we proceed through this treatise it will appear over and over again that one may be ''bound'' by a contract in ways that one did not intend, foresee, or understand. The juristic effect (the resulting legal relations) of expressions in word or act may be very different from what the speaker or actor supposed it would be. The legal effects that are produced by an ''agreement'' depend upon past legislative and judicial history, of which most of humanity must necessarily be largely ignorant. They may depend also upon surrounding factors that are unknown to the parties and upon subsequently occurring circumstances that could not at the time of agreement be known to anybody. Courts often declare that they ''can not make contracts for the parties,'' a statement that is quite true; but it is of much greater importance to realize that the courts must determine the requirements of justice and that the legal effects thus given to expressions of agreement are seldom exactly what one or both of the agreeing parties supposed or expected.n6

By the foregoing it is not meant that courts are indifferent to actual intentions and expectations or to the legal effects that one or both contracting parties thought that they were producing. But in the law of contracts, as in all other legal fields, ''justice'' is not attained by giving the parties unlimited freedom or power, by enforcing every result that either one of them expected and intended, or by never enforcing a result unless both of them expected and intended it.

The word ''agree'' is often used by contractors and even by draftsmen of statutes with a meaning that is identical with that of ''promise.'' Thus, one may say ''I agree to pay one hundred dollars,'' or ''I agree to receive a horse in full satisfaction of the debt.'' This usage is too common to be eliminated. When the word ''agree'' or ''agreement'' is used, the context may show that the intended meaning is something other than mutual expressions of assent.

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FOOTNOTES:

(n1)Footnote 1. In Fitzpatrick v. Vermont State Treasurer, 144 Vt. 204, 475 A.2d 1074 (1984) , the court cited this treatise in concluding that the legislature intended the term ''special agreement'' to mean ''special contract.''

(n2)Footnote 2. See Restatement of Contracts (Second) § 3.

(n3)Footnote 3. See Sage v. Wilcox, 6 Conn. 81, 85 (1826) : ''The word, 'agreement,' in its popular and usual signification, means no more than concord; the union of two or more minds; or a concurrence of views and intention... This concord or union of minds, may be lawful or unlawful; with consideration, or without; creating an obligation, or no obligation. Still by the universal understanding of mankind, proved by daily and home conversation it is an agreement; and it is none the less so because it is opposed to law or even to good morals.''

This section is quoted (par. 2) in Kitzke v. Turnidge, 209 Or. 563, 307 P.2d 522, 527 (1957) , holding that contract depends on mutual expressions of agreement, not upon identity of unexpressed ideas. The court said: ''If this requested instruction was intended to say that the mind of the plaintiff and that of the defendant had to meet; that is, that each of the two parties had to have in mind the same idea and intent before the jury could find that they effected a contract, the instruction if given would have erred. The law of contracts is not concerned with the parties' undisclosed intents and ideas. It gives heed only to their communications and overt acts.'' The supposed necessity of a ''meeting of the minds'' is fully discussed in §§ 4.12, 4.13, 538, 599.

This section is cited in Boggs v. Motors Ins. Corp., 139 A.2d 733, 735 (D.C.Mun.App.1958) , as to definition of the term ''agreement.''

(n4)Footnote 4. In Carroll v. Lee, 148 Ariz. 10, 712 P.2d 923 (1986) , the court cited this treatise in concluding that a contract can be inferred from conduct other than verbal expressions.

(n5)Footnote 5. § 1-201(3).

(n6)Footnote 6. This paragraph is quoted and applied in Lilley v. Gonzales, 417 So.2d 161 (Ala.1982) (seller's undisclosed thought that a ''due on sale'' clause was part of the deal is not relevant); see also Dixie Ag Supply, Inc. v. Nelson, 500 So.2d 1036 (Ala.1986) .