Every formal business relationship is underpinned by a contract. These documents are needed to enforce the terms of an agreement.
But they require the total consent of both parties. For a contract to truly be above board, genuine agreement is needed.
But what is genuine agreement, and why is it important? Well, let’s discuss that and more below.
Let’s look at the definition of genuine agreement.
A genuine agreement is vital to a fair and lawful contract. Imagine that a contract has been signed.
On paper, both parties have reached an agreement. But has this outcome been achieved fairly?
A contract can only be described as a genuine agreement if:
In other words, both parties’ consent must be authentic for a genuine agreement.
There are many reasons why genuine agreement is essential.
First and foremost, it ensures fairness for all parties. It adds credibility to your contract, showing no underhanded tactics were involved.
A genuine agreement also demonstrates complete consensus between all parties.
A contract can be labeled as ‘void’ if a genuine agreement isn’t reached. In other words, participants can back out and cancel it.
Once a contract is signed, it is legally binding for both parties. However, if it is later found not to be a genuine agreement, it will not be binding.
Does reaching a genuine agreement make your contract legally binding?
The process isn’t quite as simple as that.
Genuine agreement is essential for a legally binding contract, but it’s not the only thing you need.
Below are listed some contract elements essential to ensuring a legally binding document.
Duress is when pressure is applied to force someone to act against their interests.
In this scenario, duress means forcing a party to add a signature against their will.
Duress is dangerous and highly illegal. It can fall under three different forms.
As the name suggests, physical duress is the use of violence or the threat of violence to obtain agreement.
To be classed as physical duress, an action must fulfill the following:
An individual being forced to hand over the rights to a property they own.
They have agreed to sign a contract, but only after being threatened with physical violence.
Economic duress occurs when financial pressure is used to force a party to sign a contract.
One party may threaten to terminate an existing contract unless a new agreement is signed.
An employer wants an employee to sign a new employment contract. The employee signs after being told that they will be fired unless they agree.
It’s important to remember that physical duress doesn’t just apply to bodily harm.
Duress to goods is a form of physical duress. It involves damaging or threatening to damage the property of a party if they do not sign a contract.
A landlord wants to enforce a new lease agreement.
They make a veiled threat against the tenants’ belongings if they do not sign.
By now, you should have a better idea of what genuine agreement is.
Before signing any new contracts with a party, ask, ‘Has complete agreement truly been reached?’. Consider your practices in getting a party to sign.
Has everything been above board? Any action that can be counted as duress can land you in hot water.
Remember, too, that reaching a genuine agreement is a legal requirement.
But it isn’t the only factor in ensuring your agreement is legally binding. Always seek legal advice before finalizing any contracts.
A genuine agreement is the first step to a credible contract.
If you ensure that all parties have reached a genuine agreement before signing, you’ll have a contract in which you can be confident.
Want easy, stress-free access to an agreement document? PandaDoc’s agreement templates are a great place to start.
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