mutuality of obligation.The agreement of both parties to a contract to be bound in some way. — Also termed mutuality of contract. See mutual assent under ASSENT. [Cases: Contracts 10.
C.J.S. Contracts § 108.]
“[The] so-called doctrine of ‘mutuality of obligation’ in bilateral contracts … unfortunately has been the cause of no little confusion. This confusion is evident from the fact that, while it is commonly admitted there is such a doctrine, there is a lack of unanimity, both in the statement of it and in regard to its application. The most common mode of statement is: ‘In a bilateral agreement both promises must be binding or neither is binding.’ This statement is obviously ambiguous, since it does not indicate in what sense the promises must be binding. The fact is that it has been variously interpreted and applied by the courts with results that have sometimes been inconsistent with other well settled principles of the law of consideration. Usually it has been held to mean that a promise that is not legally obligatory cannot be consideration in spite of the fact that it may satisfy all the usual requirements of consideration. However, at times it has in effect been held to involve the requirement that the undertaking of the promise relied upon as a consideration must be reasonably commensurate with, or equivalent to, the undertaking of the promise which it supports, before it can constitute consideration — a kind of doctrine of mutuality of undertaking.” John Edward Murray Jr., Murray on Contracts§ 90, at 190–91 (2d ed. 1974).
“The doctrine of mutuality of obligation is commonly expressed in the phrase that in a bilateral contract ‘both parties must be bound or neither is bound.’ But this phrase is over-generalization because the doctrine is not one of mutuality of obligation but rather one of mutuality of consideration. Phrasing the rule in terms of mutuality of obligation rather than in terms of consideration has led to so-called exceptions and judicial circumventions …. It has been suggested that the term ‘mutuality of obligation’ should be abandoned and we must agree in the light of the confusion that this term has engendered.” John D. Calamari & Joseph M. Perillo, The Law of Contracts § 4–12, at 226 (3d ed. 1987).
[Blacks Law 8th]