Agreement and Contract

As people we have heard or heard about the contract in our day to day life, maybe some of us also entered into a contract in that phase all have a little confusion about agreement and Contract. Now, one might think both these terms are one and the same, many times it’s not the case, throwing some lights on agreement and Contract and what is the difference between of both the Terms.

The Indian Contract Act, 1872

All contracts done in India are regulated by the Indian Contract Act 1872. This enactment makes sure that a contract is well regulated and legal.

What is an Agreement?

Sec 2(e) of Indian Contract Act 1872 defines agreement as “every promise and every set of promises, forming the consideration for each other is an Agreement”.

  • Here what is Promise?

We can say that the accepted proposal or offer becomes a promise.

  • Offer Means:- To give a Chance to somebody to take Something, and offer is also called a proposal

For example- if person A offers to sell his car to B for Rs. 200000 then it is offered.

Acceptance: –

if someone agreed to receive something given to them or offered to them.

For example- if person A offers to sell his car to B for Rs. 200000, B accepts the offer given by A of selling the car then it is acceptable.

As soon as the B accepts the offer then it becomes Agreement. Familiarity is base for agreement.

                                    Offer +Acceptance=Agreement

What is a Contract?

Sec 2(h) of the Indian Contract Act 1872 defines a contract as “An agreement enforceable by law”. In other words, we can say that a contract is anything that is an agreement and enforceable by law of the land. The contract is a legal document that bestows upon the party’s special rights.

                                   Agreement +Enforceable by law= Contract

Enforceable by law:

here we can say that as per the said Act agreement to change into a contract it must give rise to a legal obligation (means with legal commitment). In other words, it must be within the scope of the law.

For Example: – If you’re Taking a Loan from the Bank or any NBFC then you rebound to sign the Agreement and it for legal purposes so it can be called a “Contract”.

Examples of the standard contracts are as follows:-

  • Employment Contract
  • Lease Agreement
  • Insurance Agreements
  • Financial Agreements
  • Section 10 of the Indian Contract Act 1872, mentions certain conditions which we need to follow for the contract to be valid and legal. This is the main condition that fulfils the contract, and it becomes the basis for the contract.

Free Consent: –

both the parties should agree to a thing in the same sense of mind and with their own free will if the consent is by coercion (Section-15), undue influence (Section-16), fraud (section-17), misrepresentation (Section-18), or mistake (Section-20), then contract is unlawful and considered to be voidable.

Competence: –

both the parties should be major and stable and in a condition to understand what is a contract. If any one of the parties is not competent then the contract is declared to be void (no longer accepted), as per the Indian Contract Act 1872 parties should be major i.e., 18 years or above the 18 years.

Consideration:

it’s human nature to expect anything in return. This is an important Condition. (Section-23) of the said act says that consideration given for contract must be lawful. Consideration should be of cash or cheque or any other thing.

Offer and Acceptance

for a contract it is the most important condition, if one party made an offer and another one accepted it then it becomes a contract. If another party does not accept the offer then we can’t consider a contract come into existence.

Is an Agreements Part of Contracts

Yes, an Agreement is part of a Contract we can say that agreement is also the first stage of a contract, an agreement is not enforceable by law. A contract is called a specific agreement, so we can say that contract includes an agreement.

When Agreements becomes Contracts

First of all, the agreement is made between two parties and the said agreement is supported by consideration and with a legal Commitment then it becomes a contract. The agreement becomes a contract when it follows offer and acceptance, consideration, and legal purposes.

Which Agreements are not contracts

Agreement without consideration and lawful object then it is not a contract, agreement without consideration except it is written or registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law.

  • Agreements in restraint of marriage
  • → Agreements in restraint of trade
  • Agreements in restraint of legal proceedings

Which Contract is Invalid?

If the contracts is illegitimate and unenforceable, may the object of the agreements be illegal or against public policy and the terms of the agreements are impossible to fulfil and the lack of consideration also turn the contracts invalid.

  • Contract with Minor
  • Contract of crimes

Agreement and Contract: The difference

Agreement Contract
A Casual Arrangements between two or more parties is known as an Agreement An official arrangement between two or more parties is known as Contract
An agreement is must be socially acceptable, it may not be enforceable by law A contract must be legally enforceable
The agreement is a wide concept (Scope) A contract is a narrow concept (Scope)
Every agreement is not a contract Every contract is an agreement
The agreement is not binding on the parties to it The contract is binding on the parties to it
Agreement Does not include contract The contract includes an agreement
Requirements of an agreement are not strict, clear and accurate requirements of a contract are strict, clear and accurate
An agreement may not create legal rights and obligations between parties The contract creates legal rights and obligations between parties

Conclusion

The Indian Contract Act, 1872 can be interpreted to cover all kinds of possible agreements and contracts. But, in several cases, it depends upon the facts and circumstances whether an agreement is a contract or not. In a nutshell, all the agreements which are legally enforceable become contracts. This concludes that there can be agreements that are not contracted but there can be no contracts that are not agreements.

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