What is the Difference Between Contract and Agreement?
🆚 Go to Comparative Table 🆚The main difference between a contract and an agreement is that a contract is a form of agreement that is always legally enforceable, while an agreement can be informal and may not be legally binding. Here are some key differences between the two:
- Formality: Contracts are typically more formal and written, while agreements can be informal and even verbal.
- Enforceability: Contracts are legally binding and enforceable in a court of law, while agreements may not be.
- Consideration: Contracts always involve consideration, which means something of value changing hands between the parties, such as money or goods and services. Agreements may not necessarily involve consideration.
- Elements: Contracts must contain essential elements such as mutual assent, offer and acceptance, consideration, capacity to contract, and legality of the contract. Agreements, on the other hand, only require a meeting of the minds and an offer and acceptance.
- Scope: Agreements generally cover a broader scope, including all types of arrangements, while contracts specifically cover legally enforceable documents.
In summary, contracts are formal, legally binding documents that contain specific elements and involve consideration, while agreements can be informal, non-binding, and may not involve consideration. All contracts are agreements, but not all agreements are contracts.
Comparative Table: Contract vs Agreement
The main difference between a contract and an agreement is that a contract is a legally binding and enforceable agreement between two or more parties, whereas an agreement may or may not be legally binding. Here is a table comparing the differences between a contract and an agreement:
| Feature | Agreement | Contract |
|---|---|---|
| Definition | An agreement is an understanding or arrangement reached between two or more parties. A contract is a specific type of agreement that, by its terms and elements, is legally binding and enforceable in a court of law. | |
| Validity | An agreement is an expansive concept that includes any arrangement or understanding between two or more parties, and it is not enforceable by law. A contract is a legally binding agreement between two or more parties, and it is enforceable by law. | |
| Flexibility | Agreements can be informal and may be oral or written. Contracts are generally formal, written documents that spell out the terms and conditions of the agreement. | |
| Elements | An agreement requires a manifestation of mutual assent by two or more persons to one another, made with an offer and an acceptance. A contract must contain essential elements, such as offer, acceptance, consideration, intention to create legal relations, and capacity to give consent. | |
| Scope | An agreement has a wider scope than a contract. A contract has a narrower scope as compared to an agreement. | |
| Risk | Agreements involve a higher risk factor because they are not enforceable by law. Contracts ensure a low-risk factor as they are abided by the law. |
In summary, all contracts can be considered agreements, but not all agreements can be considered contracts. The key distinction lies in their flexibility and enforceability.
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