Difference between Agreement and Contract

Difference between Agreement and Contract

Difference between Agreement and Contract

An agreement is any understanding or arrangement reached between two or more parties. When a proposal is accepted by the person to whom it is made, with requisite consideration, it is an agreement. A contract is a specific type of agreement that, by its terms and elements, is legally binding and enforceable in a court of law. When an agreement is enforceable by law, it becomes a contract.

Agreement –

  • Definition – An arrangement (usually informal) between two or more parties that is not enforceable by law.
  • Validity based on mutual acceptance by both (or all) parties involved.
  • Does not need to be in writing.
  • No Consideration required.
  • Legal effect – An agreement that lacks any of the required elements of a contract has no legal effect.
  • Legal obligation – Does not create a legal obligation

Contract –

  • Definition – A formal arrangement between two or more party that, by its terms and elements, is enforceable by law.
  • Validity based on mutual acceptance by both (or all) parties involved.
  • Does not need to be in writing, but, except for some specific kinds of contracts, such as those involving land or which cannot be completed within one year.
  • Consideration is required.
  • Legal effect – A contract is legally binding and its terms may be enforceable in a court of law.
  • Legal obligation – Creates legal obligation.

The following are the types of agreement are as under: Wagering Agreement, Void Agreement, Voidable Agreement, Implied Agreement, Express Agreement, Conditional Agreement, Illegal Agreement etc.

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.

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