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Agreement and Contract under Indian Law:

By Sandigdha Mishra, Adv.
Paydirt Professionals
Shivaji Nagar, Gurugram, Haryana- 122001



“All contracts are agreements, but all agreements are not contracts”

This indicates 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 contracts, while the rest are agreements.

Differentiation:

BASIS FOR COMPARISON
AGREEMENT
CONTRACT
Meaning
When a proposal is accepted by the person to whom it is made, with requisite consideration, it is an agreement.
When an agreement is enforceable by law, it becomes a contract.
Elements
Offer and Acceptance
Agreement and Enforce-ability
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 contract.
All contracts are agreement
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:
  • Void Agreement
  • Voidable Agreement
  • Implied Agreement
  • Express Agreement
  • Wagering Agreement
  • Conditional Agreement
  • Illegal Agreement.
It can also be defined as the contract which lacks enforce-ability by law is known as the agreement.

Definition of Contract:-
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 enforce-ability 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. Kishore and Abinash decided to go for a Movie on Sunday. Kishore did not come for the Movie, and this resulted in the waste of Abinash’s time. Now Abinash cannot compel Kishore for the damages as the decision to go for the Movie is not a contract but a domestic agreement.
  2. Kishore promises his younger brother Kamal to pay his Bank Loan, 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,

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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