What is the difference between agreement and contract? In our daily life, we enter into numerous agreements like buying vegetables, selling goods, etc. These types of agreements are commonly known as Domestic Agreements.
Example: A invites B for dinner. B promised to come. But, B did not come for dinner. Then, A cannot sue for breach of agreement, as there was no legal relationship between the parties. Such agreements are known as Domestic Agreements.
An agreement becomes a contract if it fulfils all the conditions as we studied in the essential elements of a valid contract. The agreement which legally binds contracting parties is the contract. Look at this statement, "All contracts are agreements but all agreements are not contracts" this is an old statement that provided that the agreement is different from the contract.
In this article, we have discussed the difference between contract and agreement. Before this, let's see the meaning of agreement and contract.
What is an Agreement?
What is agreement? The term 'agreement' has been defined under section 2 (e) of the Indian Contract Act, 1872, the Act defines the term agreement as “every promise and every set of promises, forming the consideration for each other is an agreement”.
Hence, here we have simplified the definition of an agreement into a formula;
Agreement = Promise 2(b) + Consideration 2(d)
Following are the different types of agreements;
- Valid Agreement
- Void Agreement
- Voidable Agreement
- Express and Implied Agreement
- Domestic Agreement
- Wagering Agreement
- Conditional Agreement
- Unenforceable or Illegal Agreement
What is a Contract?
The term 'contract' has been provided under section 2 (h) of the Indian Contract Act, 1872 as “An agreement enforceable by law is a contract”. The definition of contract consist of two important words that is 'agreement' and 'enforceable by law'. These create legally binding obligations to the contracting parties involved in the contract.
In other words, the agreement which is legally enforceable in a court of law is a contract. We have defined contract in the simple formula;
Contract = Agreement 2(e) + Enforceable by law 2(j)
Here are some types of contracts given below;
- Valid Contract
- Void Contract
- Voidable Contract
- Unilateral and Bilateral Contract
- Express and Implied Contract
- Executed and Executory Contract
- Contingent Contract
- Quasi Contract
As per section 10 of the Contract Act, the essential elements of contracts are free to consent of the parties, competent parties to contract, lawful consideration and object, and should be not expressly declared as void by law.
Difference Between Contract and Agreement (Agreement vs Contract)
| AGREEMENT |
CONTRACT |
|---|---|
| The agreement is made from the valid and mutual free consent of parties to the contract. | The contract is formed from a valid agreement. |
| The definition of an agreement is found under section 2 (e) of the Indian Contract Act, 1872. | The definition of a contract has been provided under section 2 (h) of the Indian Contract Act, 1872 |
| An agreement is defined as “Every promise and every set of promises forming consideration for each other is an agreement” | The contract is defined as “An agreement enforceable by law is a contract” |
| Agreement = Promise 2(b) + Consideration 2(d) | Contract = Agreement 2(e) + Enforceable by law 2(j) |
| The agreement is itself an ingredient of a Contract and hence there are no ingredients of agreement. |
Essential Elements of a Contracts - 1. Two or more parties 2. Offer and acceptance 3. Competent parties 4. Free consent 5. Lawful Consideration 6. Lawful object 7. Legal relationship 8. Not expressly declared as void |
| All agreements are not contracts | All contracts are agreements |
| The agreement is not enforceable by any Law. | A contract is enforceable by Law. |
| An agreement is an informal document. | The contract is a formal document. |
| An agreement can be verbal or written. | The contract must be in writing. |
Conclusion
At the beginning of this article, we see the question what is the difference between agreement and contract? So, the short answer is only those agreements are enforceable in the court which fulfils the conditions of section 10 of the Act, and these are free consent of the parties, competent parties to the contract, lawful consideration and object, and should not be declared as void by law. Therefore, an agreement becomes a contract if the above conditions are fulfiled.
- Law of Contract - Bare Act 2021 Edition Professional
- The Indian Contract Act 1872 Bare Act 2021 Edition
- Law of Contract & Specific Relief Dr Avtar Singh Latest Edition-2020
- Pollock & Mulla - The Indian Contract Act, 1872
- CONTRACT Paper I - By R.K. Bangia [Edtion 2019 - 2020]
- CONTRACT Paper-II - By R. K. Bangia
- NOTES ON INDIAN CONTRACT ACT 1872: BEST NOTES FOR LAW STUDENTS