Consensus Ad Idem

EROSION OF CONSENSUS AD IDEM This work is to discuss about the erosion of “consensus ad idem” or called as “meeting of the minds”, to get to know about this we have to know about “Contract” where in which the “consensus ad idem” plays a very important role. Meaning and Definition of Contract: The word contract is derived from the Latin “contractum”, meaning “drawn together”. It, therefore, denotes a drawing together of two or more minds to form a common intention giving rise to an agreement which is intended to be enforceable by law and which may have elements in writing, though contracts can be made orally.

Section 2(h) of the Indian Contract Act, 1872 defines a contract as an agreement enforceable by law. Section 2(e) defines agreement as “every promise and every set of promises forming consideration for each other. ” Section 2(b) defines promise in these words: “When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Essentials of Contract: Every contract is said to have the following elements:- ? Offer ? Acceptance ? Consideration ? Meeting of the minds [consensus ad idem] ? Competency of parties & Legality or Lawful Object These six elements are said to be the essentials of a valid contract, absence of even one of these would result in non-enforceability or a contract which is not legally enforceable. Two or more persons can enter into a contract and there should be offer or proposal from any of the party to the other and the offer can be of any form i. e. , express, implied or general offer, also the offer should be certain and definite. An offer is synonymous with proposal. The offeror or proposer expresses his willingness “to do” or “not to do” (i. . , abstain from doing) something with a view to obtain acceptance of the other party to such act or abstinence. Thus, there may be “positive” or “negative” acts which the proposer is willing to do. When an agreement is placed and which is said to be legally enforceable, consideration on both sides is a must. Each party to the agreement must give or promise something and receive something or a promise in return. Consideration is the price for which the promise of the other is sought. However, this price need not be in terms of money.

In case the promise is not supported by consideration, the promise will be nudum pactum (a bare promise) and is not enforceable at law. Moreover, the consideration must be real and lawful. ? Meeting of Minds [consensus ad idem]: “Consensus ad idem [Latin: agreement on the same thing / Meeting of the minds]. The agreement by contracting parties to identical terms that is necessary for the formation for the formation of a legally binding contract. In particular it refers to the situation where there is a common understanding in the formation of the contract.

This condition or element is often considered a necessary requirement to the formation of contract. It is understood that a contract cannot be formed or may not be considered as legally enforceable when there is no common understanding between the parties to the contact. They may not be expressly implied in a contract but the conduct of the parties and their understanding towards performing an act is enough to show that there is consent between both the parties. ? Competency of parties: The parties to a contract should be competent to enter into a contract.

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According to Section 11, every person is competent to contract if he (i) is of the age of majority, (ii) is of sound mind, and (iii) is not disqualified from contracting by any law to which he is subject. Thus, there may be a flaw in capacity of parties to the contract. The flaw in capacity may be due to minority, lunacy, idiocy, drunkenness or status. If a party to a contract suffers from any of these flaws, the contract is unenforceable except in certain exceptional circumstances. ? Legality or lawful object:

The object of the agreement which was entered between the parties must be lawful and not one which the law disapproves. If in case, the said object is to be unlawful then the agreement would become void. All these above elements combined together forms a contract which is legally enforceable. ? Erosion of “Consensus ad idem” : The idea of expounding a contract based on meeting of minds at early stages was made by Sir Frederick Pollock. There were also persons like Oliver Wendell Holmes who criticized the concept of meeting of minds as ‘fiction’.

This concept has been accepted and had been put into use even until now, but there had been some leaps and bounds in early stages of evolution of contract. In “Household Fire and Carriage Accident Insurance Co Ltd v Grant “(1879) 4 Ex D 216, Thesiger LJ said, “Now, whatever in abstract discussion may be said as to the legal notion of its being necessary, in order to the effecting of a valid and binding contract, that the minds of the parties should be brought together at one and the same moment, that notion is practically the foundation of English law upon the subject of the formation of contracts”. In “Carlill v.

Carbolic Smoke Ball Company” [1893] 1 QB 256, Bowen LJ said, “One cannot doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified to the person who makes the offer, in order that the two minds may come together. Unless this is done the two minds may be apart, and there is not that consensus which is necessary according to the English law – I say nothing about the laws of other countries – to make a contract. ” Here in our country, Section 2(e) of Indian contract Act 1872 defines agreement as “every promise and every set of promises, forming the consideration for each other,” i. e. there should be meeting of minds to constitute a contract. There are also several case laws in which the importance of “consensus ad idem” has been upheld. In “M/S Richa Industries Ltd & Ors vs. ICICI Bank Limited & Another”, on 14 October, 2011 Delhi High Court upheld that, “Contract Act, 1872 being contracts which are beyond the law and this court can draw inference by looking into the illegality in the said contracts and their purpose. The plaintiff states that the agreement or the transactions are not valid that the defendant was never authorized to do the derivative transactions on behalf of the plaintiff.

It is submitted on behalf of the plaintiff that the defendant has got some template contracts signed from the plaintiff whereof entered into the transactions on its behalf without proper information and guidance. It is argued that there was no consensus ad idem to enter into any such contract of authorizing the defendant to enter into derivative transaction and the same is vitiated by the consensus ad idem and consent of the plaintiff. The said consent must be taken from the plaintiff by way of informed consent and not by just getting the documents signed without informing the purpose for which they are taken from the plaintiff.

The plaintiff is also aggrieved by the fact that the defendant is seeking to declare the plaintiff as willful defaulter. The plaintiff challenges the defendant’s letter dated 28. 02. 2011, whereby show cause was issued”. In this context, all the countries dealing with contracts has accepted the usage of “consensus ad idem” as it is said to be the key element of contract and also according to the Indian Contract Act 1872. Erosion of this concept was only at early stage of it and now it has been a clear view of that without consent of both parties to the contract it cannot be considered legally acceptable.

The basic principles of contract have been substantially abrogated due to privatization and liberalization. Even then, “consensus ad idem” i. e. , meeting of minds or mutual agreement is a hard nut to crack as without this element there can be no existence of agreement, and it would result in void agreements or at times it becomes voidable. Reference: • Halsbury’s Law on India – Volume II, Butterworths – Lexis Nexis – New Delhi, 2002 • M. Krishna Nair- The Law of Contracts – 5th Edition- Orient Longman Publication – Chennai, 1997, Reprint 1998. Pollock & Mulla- Indian Contract Act & Specific Relief Act – 13th Edition – By Dr. RG – Padia – Lexis Nexis – Butterworth’s Publication, New Delhi, 2006. • Anson – Law of Contract – 28th Edition – Revised by J. Beakson – Oxford University Press Publication – London, 2010. • Cheshire, Fifoot & Frumston – Law of Contract – 13th Edition – M. P. Furmston – Butterworth’s Publication, London, 1996. • Contract – www. wikipedia. org/wiki/Contract • www. indiankanoon. org • www. wisegeek. com • Blog. SilverDane. com

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