The Latin term consensus ad idem, an “agreement of the minds,” is used to describe a situation where people fully understand a contract and their role in it. Consensus or agreement on a contract is considered a necessary condition of a valid contract in many legal systems, under the argument that people who are not aware of or do not understand a contract cannot be held responsible for it. In a written contract, the presence of clauses spelling out the specifics of the contract is used to show that a consensus ad idem was reached during the development of the contract, as anyone who signs the contract should have read and understood the terms.
When people develop a contract, an offer is extended and accepted, and the terms of the offer are worked out. This is the stage where the consensus ad idem comes in, as the parties to the contract discuss the specifics and the details, and focus on developing a contract all are satisfied with. The contract must include adequate consideration, something of value exchanged by all parties, and the capacity for consent must be demonstrated. The final qualification needed for legality is legality of the contract itself; the other conditions may be satisfied, but if the contract is for something illegal, it cannot stand up in court.
The concept of consensus ad idem has been a contentious one at times. Many people fail to read contracts closely when they sign them, and do not understand the concepts they are signing their names to. These individuals may argue that they did not fully understand the contract when it was signed, and cannot be held liable for breaches. However, signing a contract is also assumed in the legal community to indicate that someone read, understood, and renegotiated any unfavorable terms, so this defense may not be accepted.
People involved in transactions involving a contract should strive for a consensus ad idem to ensure they understand what is expected of them while also learning about their legal rights in relation to the other parties on the contract. If a contract is hard to understand, a lawyer can be asked for advice. People can ask to take home copies of contracts for review and can request time to fully comprehend a contract before signing. Coercive situations where people are encouraged to sign documentation without fully reviewing it may violate the conditions for legality in some jurisdictions.
