Difference between Agreement and Contract
Basis |
Agreement |
Contract |
---|---|---|
Meaning | The meaning of agreement can be understood as an acceptance of an offer given by one party to another. | A contract can be defined as an agreement that is enforced by law. |
Definition | Section 2(e) of the Indian Contract Act, 1872 defines an agreement as, “Every promise and every set of promises, forming the consideration for each other, is an agreement.” | Section 2(h) of the Indian Contract Act, 1872 defines a contract as, “an agreement enforceable through the law.” |
Elements | Agreement = Offer + Acceptance | Contract = Agreement + Enforceable by Law |
Written Form | The agreement can not necessarily be in written form. | A contract is normally written and registered. |
Scope | An agreement has a wider scope than a contract. | A contract has a narrower scope as compared to an agreement. |
Risk | It involves a higher risk factor because it is not enforceable by law. | A contract is abided by the law, so it ensures a low-risk factor. |
One in Another | All agreements cannot be considered a contract. | All contracts can be considered an agreement. |
Legal Obligation | An agreement does not create a legal obligation. | Contracts are meant to create a legal obligation. |
Consideration | Agreements can be formed without consideration. | There should be some consideration to form a contract. |
Difference between Agreement and Contract
Agreement and Contract are often used together most of the time; however, in legality, they are two different things. A legal agreement can be formal, which means nothing needs to be witnessed or written down. On the other hand, a Contract is more formal and legally binding. Hence, both an Agreement and Contract represent specific arrangements between two or more parties. The main distinction lies in their flexibility and enforceability.