Definition

Literally:
Arrangement, promise or contract made with somebody. 

Traditionally:
1. Section 2(e) of the Contract Act-1872:
“Every promise and every set of promises forming the consideration of each other is an agreement”.

2. Sir Pollock: “An act in the law where by two or more persons declare their consent as to any act or thing to be done or forborne by some or one of those persons for the use of other or others of them. 

All true contracts begin with an agreement. By an agreement is meant the meeting of the minds of the contracting parties in a common assent to certain definite conclusion. But what he says and does must judge the state of the mind of a party.

Lober writes, “I will sell you 10000 bushels of wheat at eighty cents a bushel.” Anson, in honest reliance upon the offer, replies, “I will accept your offer.” Lober asserts that he intended to write, and thought he said written “1000 bushels” Labor is bound to deliver 10000 bushels or pay damages for non-delivery.

A person can not definitely agree to a thing and afterward escape upon the plea that he had not said exactly what he intended o say. Neither can he plead that any act of his indicated an agreement, which he did not intend.
Holland lays out a watch and says to Locke, “I will sell you this watch for$40”. Locke answers, “I will take it at that price”. Holland discovers he has laid out a watch he did not intend to sell. Holland is bound.

Agreement must be definite and clear enough to enable a court to understand and enforce the terms. Indefinite and uncertain agreements are unenforceable, because the court will not make or complete contracts for the parties.

“I will sell you one hundred acres of land for $1000” “I accept”. This too uncertain, because no definite one hundred acres are indicated.

“I will sell you one hundred bushels best-grade Irish potatoes for $100” “I accept”. This is definite enough because no particular one hundred bushels need be specified.    

A contract is a legally binding agreement. This agreement results when one person, the offeror or promisor, makes a proposal or offer and the person to whom the offer is made the offeree or promisee, accepts it. For an agreement to arise there must be two or more parties to the transaction as it is impossible for one person to make an agreement with himself. To illustrate, when a person in his official capacity, a managing Director of a company, makes a promise to himself, as an individual, no agreement is formed by an acceptance in the latter capacity. Plurality of persons is an essential characteristic of an agreement. These persons must come to an understanding with a view to creating a right in one party and a corresponding duty on the other. The contract act [S.2 (e)] defines an agreement as “Every promise and every set of promises forming the consideration of each other, is an agreement”.

To constitute an agreement or a contract there must be a meeting of the mind of them parties and both must agree to the same, thing in the same sance. This means the wills of the parties must meet, or there must be consensus ad idem.

“A” a painter, agrees to paint the house of “B” and “B” agrees to pay “A” the sum of Rs.2000 upon the satisfactory completion of the work in this case there is a meeting of the minds of “A & B” on the subject of what is to be done and at what price. Generally speaking it is true that the minds of the parties must meet, but it is not literally or universally true, for in a few peculiar situations the finds an agreement even though the minds of the parties have not in fact meant.

An auctioneer may say, “Who will pay Rs.100 for this beautiful vase?” If a person in the crowd present there raises his hand while looking at the auctioneer, his action is regarded by the law as an offer to pay Rs.100; and if the auctioneer then brings down his hammer and says, “Sold for Rs100” there is an acceptance and a binding contract .the man who raised his hand can not be allowed to say that, when he raised it, he did not need to make an offer but was merely stretching his arm. What was in his mind is immaterial because it was reasonable for the auctioneer to assume that the men’s motion was an offer. The real test therefore, is not whether the minds of the parties met but whether under the circumstances one party was reasonably entitled to believe that there was an offer and the other to believe that their was an acceptance. 

When we say that there must be a meeting of the mind of the parties, we are not thinking of the subjective thing know as meeting of the minds, but the objective thing- manifestation of mutual assent. Therefor, it is not the meeting of the minds, but the expression of mutual and final assent. That is necessary to complete a binding agreement. The reason for this rule is that the inner intention of parties to a conversation can not be taken to bind the parties, but it is what is said or done. Innermost thoughts of a party are known only to him and the other party can depend upon what is said or done. Thus if A signs an agreement to purchase certain gold watch for Rs.1000from B. The agreement is binding although a latter testifies that he never actually intended to buy it. By his contract he led be as a reasonable man to think that he would buy it. Such conduct is all that the law requires. To repeat the phrase meeting of the minds does not mean that the parties must have arrived at a common mental state touching the matter in hand. The standard by which their conduct is judged and their rights are limited is not internal but external. In the absence of fraud or incapacity, the question is what did the parties say and do? In other words there is an agreement when the parties lead each other reasonably to believe that they are of the sane mind about agreement transaction; they have come to the point of agreement and the offer and acceptable have considered.  

An agreement may be expressed or implied. When there is an offer coming from one party, which is accepted by the other, the agreement is express. An agreement is called implied when the acts of offer and acceptance are not clearly expressed but have to be gathered from the conduct of the parties or from surrounding circumstances. Let us take one illustration of each. A says to B “will you buy my watch for Rs.150”. B says “yes”. The agreement thus made is express. But if ‘A’ mention a figure at an auction bid, he is deemed is in law to have made an offer. If the auctioneer drops his hammer, his conduct implies that he accept the offer of A. There is at once an implied agreement between them.  

According to clause (e), an agreement may be either a promise or group of promises. Thus, a promise to pay interest on a loan amounts to an agreement. In order to constitute a binding agreement, be intention of the parties must be distinct and common to both. An agreement does not admit of defense. Where in a land acquisition case, there was a correspondence between the collector and the owner of the property, and the collector in one of his letters offered a certain price, while the owner all alone claimed more, it was held that in view of the entire correspondence it was clear that there was never a concluded agreement as to the value. The doctrine of “accord and satisfaction” of the English law in not adopted as the law under the act, sec63 under which a promise may in his discretion, dispense with or remit performance or extend time fixed for performance or accept anything in full satisfaction of performance, without consideration. No agreement is required by law as enacted in the act sec.63 and there is no warrant in the language of that section to enlarge its scope by any implication of the English doctrine of accord and satisfaction. The contrary view taken in Adajisitaram v. Trimbak Municipality is not good law. An agreement to give up claim is not required to be supported by consideration.