Agreement, in legal terms, refers to a meeting of the minds between two or more parties, where they mutually agree to do or not to do something. An agreement is an essential element in the formation of a contract and is governed by the Indian Contract Act, 1872.
In simple words, an agreement is a promise made by one party to another party, and it is backed by the legal system. The act of agreeing is not the same as the act of contract formation. An agreement can be a contract if the conditions for a valid contract are met.
According to Section 2(e) of the Indian Contract Act, 1872, an agreement is defined as “every promise and every set of promises, forming the consideration for each other.”
The landmark case law for the understanding of the term agreement is the case of Balfour v. Balfour (1919). In this case, a husband promised to pay his wife £30 a month during his stay in Ceylon but failed to do so after his return to England. The wife sued for the breach, and the court held that no legal agreement was formed between the spouses because the agreement was based on domestic relations and was not intended to create legal obligations.
On the other hand, in the case of Carlill v. Carbolic Smoke Ball Co. (1893), the company made an offer to pay a sum of money to anyone who caught influenza while using their product, the “smoke ball.” The plaintiff, Mrs. Carlill, used the smoke ball but still caught influenza. The court held that the advertisement was an offer and the use of the product was an acceptance of the offer. Hence, a legal agreement was formed between the parties.
Suppose A promises to sell his car to B for Rs. 5 lakhs. Here, A made a promise, and B accepted the offer. The agreement is reached, and the contract is formed. If A fails to sell the car, B can sue A for breach of contract.
In conclusion, an agreement is a meeting of the minds between two or more parties where they mutually agree to do or not to do something. It is an essential element in the formation of a contract. The Balfour v. Balfour case illustrates that an agreement based on domestic relations does not intend to create legal obligations, and the Carlill v. Carbolic Smoke Ball Co. case illustrates that an advertisement can be an offer leading to a legal agreement. Thus, it is essential to understand the term agreement in legal terms, and it is crucial to ensure that the agreement meets the conditions for a valid contract.