An agreement and a contract are related concepts in law but have some distinctions in terms of legal enforceability and elements. Here are five key differences between an agreement and a contract:
Enforceability:
Agreement: An agreement may not always be legally enforceable. It represents a meeting of minds between two or more parties on a particular issue but may lack the necessary legal elements to create obligations or rights.
Contract: A contract is a legally binding agreement. It is an agreement that meets specific legal requirements, such as offer, acceptance, consideration, legal capacity, and a lawful purpose. Contracts are enforceable by law, and breach of contract can lead to legal remedies.
Legal Formalities:
Agreement: An agreement may be formal or informal and may not necessarily adhere to specific legal formalities. It could be an oral agreement or even based on conduct.
Contract: A contract typically requires specific legal formalities to be valid. These include a clear offer and acceptance, intention to create legal relations, consideration (something of value exchanged), legal capacity of the parties, and legality of purpose.
Intent to Create Legal Relations:
Agreement: An agreement may or may not express an intention to create legal relations. Social agreements or agreements between family members, for example, may lack the intent to be legally binding.
Contract: A contract is characterized by an express or implied intent of the parties to create legal relations. The presumption is that commercial and business agreements are generally intended to be legally binding.
Consideration:
Agreement: While an agreement may involve mutual promises, it may lack the element of consideration, which refers to something of value exchanged between the parties.
Contract: Consideration is a crucial element of a contract. Both parties must provide something of value (benefit or detriment) as part of the exchange for the contract to be valid.
Examples:
Agreement: A casual discussion or negotiation between friends about where to go for dinner may be considered an agreement but is unlikely to be legally binding.
Contract: Signing a lease agreement for an apartment, purchasing goods or services, or entering into an employment contract are examples of situations where a contract is likely to be formed, and legal obligations are created.
In summary, while all contracts are agreements, not all agreements are contracts. A contract is a specific type of agreement that meets the legal criteria for enforceability, while an agreement is a broader term that encompasses both binding and non-binding arrangements.