What constitutes an agreement under the Law of Contracts?

The essence of an agreement under the Law of Contracts is the mutual understanding and performance of terms between two or more parties, which is fundamentally characterized by the elements of offer and acceptance. When one party makes an offer—proposing certain terms—and the other party accepts that offer, a contract is formed. This mutual assent signifies that both parties have a common understanding regarding the obligations and benefits involved in the agreement, establishing the legal framework for their relationship.

In the context of insurance, this means that an insurer's offer to provide coverage and the applicant's acceptance of that offer, typically represented through an application or a policy, is a quintessential example of how contracts operate. The offer and acceptance together form a binding agreement, ensuring that both parties are aware of their roles and responsibilities.

While promises made by the insured are important, they are not sufficient to form an agreement on their own without the counterpart's acceptance. A written agreement can serve as evidence of the contract but is not a necessary component for an agreement to exist, as contracts can be formed verbally or through actions. Lastly, mere approval by the insurer does not encompass the entire contractual agreement process, as without an offer and acceptance from the insured, no binding agreement exists. Therefore, recognizing the integral role of