In this article you will learn about the Difference Between Agreement and Contract.
Difference Between Agreement and Contract
An agreement and a contract are fundamental concepts in contract law, and they form the basis for understanding the legal relationships between parties. While these terms are often used interchangeably, they have distinct meanings and implications within the legal framework. In the context of the Indian Contract Act, 1872, and more broadly in contract law, it's crucial to comprehend the differences between an agreement and a contract.
Definition
An agreement is defined under Section 2(e) of the Indian Contract Act as "every promise and every set of promises, forming the consideration for each other." This essentially means that an agreement is a meeting of minds between two or more parties, where they express their willingness to do or abstain from doing something. It involves an offer by one party and the acceptance of that offer by another.
On the other hand, a contract, as per Section 2(h) of the Indian Contract Act, is "an agreement enforceable by law." This implies that not all agreements are contracts; for an agreement to become a contract, it must have the essential elements required by law.
Essential Elements
One of the primary distinctions between an agreement and a contract lies in the essential elements required for the latter.
A contract must have :
Offer and Acceptance : There must be a clear offer made by one party and a corresponding acceptance by the other party. The terms of the offer and acceptance should be certain and unambiguous.
Intention to Create Legal Relations : The parties must intend their agreement to be legally binding. Social agreements or agreements made in a domestic setting are generally presumed not to have this intention unless expressly stated.
Lawful Consideration : The contract must involve a lawful consideration, meaning something of value exchanged between the parties. It could be money, goods, services, or a promise to do or not do something.
Lawful Object : The purpose or object of the contract must be lawful. If the object is illegal or against public policy, the contract is void.
Competent Parties : The parties entering into the contract must be competent to contract. They should be of sound mind, not disqualified by law, and, in some cases, of a certain age.
Free Consent : The consent of the parties must be free, not obtained through coercion, undue influence, fraud, misrepresentation, or mistake. If consent is vitiated, the contract may be voidable.
Enforceability
The most significant difference between an agreement and a contract is enforceable. An agreement may or may not be legally binding, and it doesn't necessarily give rise to legal consequences. However, a contract is legally enforceable, meaning that if one party fails to fulfil its obligations, the other party can seek legal remedies.
Void and Voidable Contracts
Contracts can be categorised as void, voidable, or valid. A void contract is one that lacks essential elements from the beginning and is deemed as never having come into existence. A voidable contract is valid until one party decides to void it due to factors like misrepresentation, fraud, coercion, or undue influence.
Conclusion
In essence, while an agreement is a broader term encompassing any arrangement between parties, a contract is a subset of agreements that is legally enforceable. An agreement may or may not lead to legal consequences, but a contract creates legal rights and obligations. Understanding the distinctions between these concepts is crucial for parties entering into arrangements and for the legal system to uphold the principles of justice and fairness in contractual relationships.
This article on Difference Between Agreement and Contract is contributed by Dipshikha Anand. If you like LawStudyPoint.com do follow us on our Twitter handle.