2 AGREEMENT WHEN WE SAY THAT A CONTRACT IS AN AGREEMENT, THAT DOES N...

When we say that a contract is an agreement, that does not mean that the

parties need to have reached agreement on all the details that concern their

project. Many systems of law will give effect to contracts in which only certain

matters, regarded as essential to the contract, are agreed.

³

Nor does ‘agreement’ necessarily mean actual agreement or a meeting of

minds, in a psychological or subjective sense. Many systems of law will find

that the parties have made a contract containing certain terms, even though

one or other party might not actually have assented to those terms. As long as

the parties have acted towards each other in such a way as to lead a reasonable

third person observing them to conclude that they had agreed certain terms,

then they will be held to have done so and be bound accordingly.

⁴

Many systems of law also distinguish between the agreement or contract

itself and the sometimes lengthy negotiations leading up to the agreement.

Once the contract is formed, the terms of the contract are what bind the

parties and create the obligations and rights which may be enforced. The dis-

cussions or negotiations taking place beforehand will not be taken to form

part of the contract. In some legal systems they may not even be used in order

to interpret the terms of the contract, although some systems may permit the

factual background to the parties’ transaction to be used to interpret the words

of the contract where they are ambiguous or uncertain.

This distinction between the agreement itself and the negotiations leading

up to it highlights the importance for each party to the contract to identify

2

Those steps could, for example, involve first obtaining an order against A in the courts of

the country in which the work was carried out or sited and then applying, relying on that

order, to the court in the country where A ’ s assets are situated.

3

For example, in some systems of law it is essential that the parties identify with certainty

what works are to be performed but not the price to be paid. In such a case the relevant court

might order that a ‘reasonable’ price be paid.

4

Such a criterion for determining whether parties have ‘agreed’, in the sense of a contract,

to particular terms is common to many legal systems and is sometimes called an ‘objective’

test of contractual agreement.

clearly what are the terms agreed between them which will bind each of them,

and to make sure that various other matters, which might have been discussed

but had been abandoned or modified in the course of the negotiations, are

clearly distinguished from the terms of the contract itself.