Legal Definitions - obligation, mutuality of

Obligation, mutuality of refers to the agreement of both parties in a contract to be bound in some way. It is also known as mutuality of contract. This means that both parties must be bound by the terms of the contract, or neither party is bound.

• Example 1: A and B enter into a contract where A agrees to sell a car to B for $10,000. Both parties are bound by the terms of the contract. A is obligated to sell the car, and B is obligated to pay $10,000. If A fails to sell the car, B is not obligated to pay the $10,000, and vice versa.
• Example 2: C and D enter into a contract where C agrees to provide consulting services to D for $5,000. However, the contract only binds C, and D is not obligated to pay the $5,000. This contract does not have mutuality of obligation, and therefore, it is not a valid contract.

The examples illustrate that for a contract to be valid, both parties must be bound by the terms of the contract. If one party is not obligated to fulfill their part of the contract, then the contract is not valid. This is the concept of mutuality of obligation.