The distinction between Agreement and Contract

The Contract Law of Bangladesh states that a promise that can create consideration is called consent. On the other hand, Article 2(h) of the...

Agreement and Contract

The Contract Law of Bangladesh states that a promise that can create consideration is called consent. On the other hand, Article 2(h) of the Contract Act states that a contract is an agreement enforcible by law.

Apparentlly, agreement and contract seem to be the same, but there is a wide gap between the two. So here I am highlighting the difference between the two for your convenience.

Let's see what the differences are.



The distinction between agreement and contract

Agreement and Contract both terms are widely used in commercial and other financial transactions. These seem to have the same meaning. But when they are analyzed from a legal point of view, considerable differences are observed between them. These are as follows:

(1) The definition of Contract is given in section 2(a) of the Contract Act, 1872. Similarly, the difinition of the Agreement is also given in section 2(h). Therefore, their separate entities have been recognized in the contract law.

(2) According to the given definition, an ‍agreement is a set of promises that can form a consideration between each other. Conversely, all the agreements which are enforceable by law only those can be the contracts.

(3) From the given definition it is understood that an agreement is the previous stage of contract or the basis of the contract. Contract, on the other hand, is the next stage of an agreement. As a whole, agreement is the class and contract is the branch.

(4) If one party expresses a desire to refrain from doing or doing something to the other party and the other party agrees to it, a promise is made between them. If there is a reciprocal consideration in support of this promise, it becomes an agreement. Conversely, such a promise becomes a contract if the elements described in section 10 of the contract law are present. According to the provisions of that section, in addition to the promise, all the elements required are - 
  • The free consent of the parties, 
  • The legal qualifications of the parties, 
  • The legitimate purpose of the contract; and 
  • The such contract has not been declared void in the prevalent law.
(5) In addition, an agreement is created by the reciprocal promise. On the other hand, contract is created by the agreement enforceable by the law. 

(6) An agreement is a consent between two or more people in the same sense. Contract, on the other hand, is a matter of mutual consent and legal obligation. 

(7) The essential elements of an agreement are offer, acceptance and consideration. On the conteray, the essential elements of the contract are free consent of the parties, the legal capacity, the legitimate purpose and not prohibited by any other law apart from the offer, acceptance and legitimate consideration.

(8) Only agreement is worthless in the eyes of the law. Because it has no legal obligation. For example, If "A" says to "B" let's go to the cinema and "B" accepts the offer, then there is a promise between them and if there is mutual consideration in support of it, then there is an agreement between them. But it has no legal obligation. So it cannot be enforced by law.

However, agreement involving financial transactions create legal constraints and can be enforced through the courts. If "A" offers to sell his bicycle to "B" for two thousand rupees and "B" agrees, then there is a legal obligation in this case.

(9) Agreement does not create any rights and obligations. Because it is an expression of the consensus of the parties. Contracts, on the other hand, create legal rights and obligations because they are formed as directed by law.

(10) The scope of the agreement is comparatively wider than the scope of the contract.

(11) Agreement is not dependent on contracts, it means agreement can be formed without contract. But the contract is dependent on the acre, this means agreement is the precondition of the contract. Therefore, it is not possible to form a contract without an agreement. Therefore, it has been said that all contracts are agreement but not all agreements are contract.

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