DIFFERENCE BETWEEN AGREEMENTS AND CONTRACTS FOR SMALL BUSINESSES

DIFFERENCE BETWEEN AGREEMENTS AND CONTRACTS

AGREEMENT

When a person offers something to someone else, and the concerned person accept the proposal with equivalent consideration, this is known as agreement. When two or more person agreed upon same thing in the same way. In short it is defined as the contract which lack enforceability by law is known as agreement.

 Types of agreement are as under:

  • Void Agreement
  • Wagering Agreements
  • Contingent Agreement
  • Voidable Agreement
  • Illegal agreement
  • Implied Agreement
  • Express Agreement

Example: Harsh and Harshita decided to go for shopping on Saturday. Harsh did not come for shopping, and this resulted in the waste of Harshita’s time. Now Harshita can’t compel Harsh for the damages as the decision to go for shopping is not a contract but a mutual agreement.

CONTRACT

A legally enforceable agreement for doing or not doing an act is known as contract.  A contract must contain offer and acceptance, intention of creating legal obligation, adequate and unconditional consideration. 

Types of contracts are as under:

  • Void Contract
  • Voidable Contract
  • Contingent Contract
  • Express Contract
  • Implied Contract
  • Bilateral Contract
  • Unilateral Contract
  • Executory Contract
  • Executed Contract

Example: Siddharth promises his friend to pay his debt, and the agreement was in writing as well as registered. This is a valid agreement and can be enforceable.

                                        DIFFERENCE BETWEEN CONTRACTS AND AGREEMENTS

Basis for Comparison

Contracts

Verbal Agreements

   

Meaning

When an agreement is enforceable by law, it becomes a contract

When a proposal is accepted by a person to whom it is made, with requisite consideration

Section

Section 2 (h) of Indian Contract Act, 1872

Section 2(e) Indian Contract Act, 1872

Elements

Agreement and enforceability

Offer and acceptance

Scope

Narrow

Wide

Consideration

There must be a consideration

Agreement can be made without any consideration

Preferred mode

Contract must be in writing 

Agreements may be made in orally or in writing

Legality

There is a legal obligation in every contract

Legal obligation may or may not be included in verbal agreement

One in other

All contracts are agreements

But all agreements need not to be a contract

Clarity & Details

Can provide specific and detailed terms and conditions

Relies on memory and subjective interpretation

Modification

Amendments or modifications may require written consent

Can be modified verbally, but proving the modification may be difficult

Legal Protection

Offer greater legal protection and clarity in case of disputes or breaches

Lack of written evidence may make it challenging to resolve disputes or prove the terms

Complexity

Suited for complex agreement that require detailed provision

Suitable for simpler or informal agreements

Professionalism

Indicate a high level of professionalism 

Less formal and may indicate a more casual approach

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