Contract vs Agreement: Key Legal Differences
All contracts are agreements, but not all agreements are contracts. Let's compare agreements and contracts under the Indian Contract Act, 1872.
head-to-Head Comparison
| Basis | Agreement | Contract |
|---|---|---|
| Definition | Every promise and every set of promises forming consideration for each other: Section 2(e) | An agreement enforceable by law: Section 2(h) |
| Enforceability | Not legally enforceable by default (e.g., social or domestic promises) | Must be legally enforceable (creates legal obligation) |
| Scope | Wider scope (includes both legal and social agreements) | Narrower scope (only includes legally binding agreements) |
| Legality | May or may not be legal | Must be legal and satisfy Section 10 essentials |
The 'Social Agreement' Trap
A promise to take a friend out for dinner is an **Agreement**, but not a **Contract**. Because there is no intention to create a legal relationship (domestic/social nature), it cannot be enforced in a court of law.
Common Ground (Similarities)
- Both require a proposal (offer) and an acceptance by the parties.
- Both represent a consensus ad idem (meeting of the minds).
Test Your Understanding
Q1: Which of the following is correct?
All agreements are contracts
All contracts are agreements ✅
No contracts are agreements
None of the above
Explanation: A contract is created only from an agreement that is legally enforceable, so all contracts must be agreements first.