What is the Difference Between Contract and Agreement

The main difference between contract and agreement is that an agreement refers to an arrangement between two or more parties, whereas a contract is a specific formal and legal agreement between two or more parties.

When compared to an agreement, a contract is legally binding and, most importantly, enforceable in a court of law. Both contracts and agreements involve two or more parties.

Key Areas Covered

1. What is a Contract  
     – Definition, Features
2. What is an Agreement
     – Definition, Features
3. Similarities – Contract and Agreement
     – Outline of Common Features
4. Difference Between Contract and Agreement
     – Comparison of Key Differences

Key Terms

Agreement, Contract

Difference Between Contract and Agreement - Comparison Summary

What is a Contract

A contract is a legal and formal agreement that binds obligations between parties that are enforceable in a court of law. Compared to an agreement, the requirements of a contract are relatively stricter and more precise.

Contract vs Agreement

It is essential that every contract clearly indicates a specific offer and the affirmation of that specific offer. Here, it is important that the offer and the acceptance of the offer are willingly accepted by the parties without any force implemented on them externally. It is important that both the parties understand the grounds and also what the contract will necessitate. Further, all parties involved must accept the same terms in order to form a binding agreement. Moreover, a contract will not be valid if any party involved is a minor under eighteen, a drug addict, an alcoholic, a mentally deficient person, or a person with any other issue which would stop him/her from fully understanding the terms of a particular contract.

What is an Agreement

The term ‘agreement’  refers to the broader version of a  ‘contract.’  Simply put, every contract is an agreement, but every agreement is not a contract. Further elaborating, every contract includes the elements of an agreement, such as the offer and acceptance. Nevertheless, not each and every agreement includes the most required element that is unavoidable in a contract: legal enforceability. That is why not every agreement is a contract.

Contract and Agreement - What is the difference?

Basically, there are two main elements of any agreement. One is the offer.  Here, a person makes an offer, with which he/she expresses his/her willingness to accept an obligation in exchange for abstinence, a promise, or an act. Acceptance is the other principal element of an agreement. Here, the offeree gives his offeror directly or indirectly. It is essential that the acceptance is clearly communicated to the offeror, in the mentioned mode, within a reasonable time frame.

Similarities Between Contract and Agreement

  • A contract is a specific formal type of agreement, while agreement generally refers to all types of agreements, whether they are legally bound or not.
  • Offer and acceptance are two essential elements in a contract or any other agreement in general.
  • Both contract and agreement involve two or more parties.

Difference Between Contract and Agreement

Definition

An agreement refers to an arrangement between two or more parties, whereas a contract is a specific formal and legal agreement reached between two or more parties.

Legal Enforceability

Compared to an agreement, a contract is legally binding and, most importantly, enforceable in a court of law.

Nature of the Requirements

The requirements of a contract are stricter and more precise than those of an agreement. 

Conclusion

In brief, the main difference between contract and agreement is that a contract is a formal and legal agreement that is enforceable in a court of law, whereas the agreement refers to any agreement in general. Simply put, every contract is an agreement, but not all agreements are contracts. However, whether it is a legally bound contract or not, any kind of an agreement involves two or more parties which include offeror/s and the offerees.

Reference:

1. “What Is an Agreement?” Business Jargons, 24 Jan. 2020.
2. LaMance, Ken. “What Is a Contract?” LegalMatch Law Library, LegalMatch, 3 Feb. 2020.

Image Courtesy:

1. “Business Contract” (Public Domain) via PublicDomainPictures.net
2. “Document-agreement-documents-sign” (CC0) via Pixabay

About the Author: Anuradha

Anuradha has a BA degree in English, French, and Translation studies. She is currently reading for a Master's degree in Teaching English Literature in a Second Language Context. Her areas of interests include Arts and Literature, Language and Education, Nature and Animals, Cultures and Civilizations, Food, and Fashion.

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