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Difference Between Agreement and Contract

The document discusses the differences between agreements and contracts. An agreement becomes a contract when it is enforceable by law. Key differences include: 1) Agreements require only offer and acceptance, while contracts require agreement and enforceability. 2) Agreements are not always in writing, but contracts normally are. 3) Agreements do not create legal obligations, but contracts do. 4) Not all agreements are contracts, but all contracts are agreements. The document provides examples to illustrate these differences between agreements and contracts under Indian law.

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491 views3 pages

Difference Between Agreement and Contract

The document discusses the differences between agreements and contracts. An agreement becomes a contract when it is enforceable by law. Key differences include: 1) Agreements require only offer and acceptance, while contracts require agreement and enforceability. 2) Agreements are not always in writing, but contracts normally are. 3) Agreements do not create legal obligations, but contracts do. 4) Not all agreements are contracts, but all contracts are agreements. The document provides examples to illustrate these differences between agreements and contracts under Indian law.

Uploaded by

SIIB SURAT
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Difference Between Agreement and Contract

There is an old statement, “All contracts are an agreement, but all


agreements are not contracts” which implies that agreement is different
from a contract. Without knowing the fact, we enter into hundreds of agreement
daily, which may or may not bound us legally. Those which bind us legally are
known as a contract, while the rest are agreement.

In this way, the Indian Contract Act came into force, which was enacted by the
British Government because at that time they were ruling on India. The act gives
a base to all the agreements and contracts. This act was applicable in all over the
country except in the state of Jammu & Kashmir.

Now let’s understand the basic and special differences between Agreement and
Contract concerning the Indian Contract Act, 1872.

Comparison Chart
BASIS FOR
AGREEMENT CONTRACT
COMPARISON

Meaning When a proposal is accepted by the When an agreement is enforceable


person to whom it is made, with by law, it becomes a contract.
requisite consideration, it is an
agreement.

Elements Offer and Acceptance Agreement and Enforceability

Defined in Section 2 (e) Section 2 (h)

In writing Not necessarily Normally written and registered

Legal obligation Does not creates legal obligation Creates legal obligation

One in other Every agreement need not be a All contracts are agreement
contract.

Scope Wide Narrow

Definition of Agreement
When a person (promisor) offers something to someone else (promisee), and the
concerned person accepts the proposal with equivalent consideration, this
commitment is known as the agreement. When two or more than two persons
agree upon the same thing in the same sense (i.e. Consensus ad idem), this
identity of minds is agreement. The following are the types of agreement are as
under:

 Wagering Agreement
 Void Agreement
 Voidable Agreement
 Implied Agreement
 Express Agreement
 Conditional Agreement
 Illegal Agreement.

It can also be defined as the contract which lacks enforceability by law is known as
the agreement.

Definition of Contract
To be precise, a legally enforceable agreement for doing or not doing an act is
known as a contract. A contract must contain these elements: Offer and
Acceptance, Adequate and Unconditional Consideration, Free Consent, Capacity,
Lawful object, Certainty, Intention of creating legal obligations, and the
Agreement should not be declared void.

The contract may be oral or written. The major types of contract are as under:

 Void Contract
 Voidable Contract
 Valid Contract
 Unilateral Contract
 Bilateral Contract
 Express Contract
 Tacit Contract
 Contingent Contract
 Implied Contract
 Executed Contract
 Executory Contract
 Quasi Contract etc.

Key Differences Between Agreement and Contract


The points given below are substantial so far as the difference between agreement
and contract is concerned:

1. Promises and commitments forming consideration for the parties to the


same consent is known as an agreement. The agreement, which is legally
enforceable is known as a contract.
2. The agreement is defined in section 2 (e) while a Contract is defined in
section 2 (h) of the Indian Contract Act, 1872.
3. The major elements of an agreement is the offer and its acceptance by the
same person to whom it is made, for adequate consideration. Conversely,
the major elements of an agreement are agreement and its enforceability
by law.
4. Every agreement is not a contract, but every contract is an agreement.
5. An agreement needs not to be given in writing, but the contracts are
normally written and registered.
6. The agreement does not legally bound any party for the performance. In
the Contract, the people are legally bound to perform their part.
7. The scope of the agreement is wider than a contract because it covers all
types of agreement as well as contract. On the contrary, the scope of a
contract is relatively narrower than an agreement because it covers only
that agreement which have legal enforceability.
Similarities

 Proposal
 Acceptance
 Consideration

Examples

1. Mohan and Rishabh decided to go for lunch on Sunday. Mohan did not
come for lunch, and this resulted in the waste of Rishabh’s time. Now
Rishabh cannot compel Mohan for the damages as the decision to go for
the lunch is not a contract but a domestic agreement.
2. Varun promises his younger brother Anuj to pay his debts, and the
agreement was in writing as well as registered. This is a valid agreement
and can be enforceable.

Conclusion

At the beginning of this article a question is asked whose answer is here, i.e. only
the legally enforceable agreements are contracted means they must have a
consideration, a lawful object, the parties makes their consent freely, they are
competent to contract, and the agreement is not declared void. If any one of the
above conditions does not satisfy, the agreement will cease to become a contract.
Therefore, it can be said that all agreements are not contracts.

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