A contract is a legally binding agreement or relationship that exists between two or

more parties to do or abstain from performing certain acts. There must be offer and
acceptance for a contract to be formed. An offer must backed by acceptance of which
there must be consideration. Both parties involved must intend to create legal relation
on a lawful matter which must be entered into freely and should be possible to perform.

Definition of contract
According to section 2(h) of the Contract Act 1872:
” An agreement enforceable by law is a contract.”
A contract therefore, is an agreement the which creates a legal obligation i.e., a duty
enforceable by law.
From the above definition, we find that a contract essentially consists of two elements:
(1) An agreement and (2) Legal obligation i.e., a duty enforceable by law.

Example;

A promises to sell a horse to B for Rs.100,000, and B promises to buy horse at that price.

All contracts are agreements:

For a Contract to be there an agreement is essential; without an agreement, there can
be no contract. As the saying goes, “where there is smoke, there is fire; for without fire,
there can be no smoke”. It could will be said, “where there is contract, there is
agreement without an agreement there can be no contract”. Just as a fire gives birth to
smoke, in the same way, an agreement gives birth to a contract.

What is agreement?

An agreement is a form of cross reference between different parties, which may be

written, oral and lies upon the honor of the parties for its fulfillment rather than
being in any way enforceable.

As per section 2 (e) of Contract At 1872:

” Every promise and every set of promises, forming the consideration for each other, is
an agreement.” Thus it is clear from this definition that a ‘promise’ is an agreement.

What is a ‘promise‘?
the answer to this question is contained in section 2 (b) which defines the term.” When
the person to whom the proposal is made signifies his assent thereto the proposal is
said to be accepted. A proposal, when accepted, becomes a promise.”
An agreement, therefore, comes into existence only when one party makes a proposal
or offer to the other party and that other party signifies his assent thereto.
All agreements are not contracts
As stated above, an agreement to become a contract must give rise to a legal
obligation. If an agreement is incapable of creating a duty enforceable by law. It is not a
contract. Thus an agreement is a wider term than a contract.
Agreements of moral, religious or social nature e.g., a promise to lunch together at a
friend’s house or to take a walk together are not contracts because they are not likely to
create a duty enforceable by law for the simple reason that the parties never intended
that they should be attended by legal consequences
On the other hand, legal agreements are contracts because they create legal relations
between the parties.
EXAMPLE: a- A invites B to dinner. B accepts this invitation but does not attend the
dinner. A can not sue B for damages. It is social agreement because it does not create
legal obligation. So it is not a contract.

b- A promises to sell his car to B for one million. It is legal agreement because it creates
legal obligations between the parties. So it is a contrac
According to section 10 of the contract act 1872,
“All agreements are contracts if they are made by the free consent of the parties,
competent to contract, for a lawful consideration and with a lawful object and not
hereby declared to be void.”
Thus an agreement becomes a contract when at least the following conditions are
satisfied.
1-free consent
2-competency of the parties
3-lawful consideration
4- lawful object.

Conclusion:
In a nut shell, an agreement is the basis of a contract and contract is the structure
constructed on these basis. An agreement starts from an offer and ends on
consideration while a contract has to achieve an other milestone that is enforceability.
Due to this, breach of an agreement does not give rise to any legal remedy to the
aggrieved party while breach of contract provides legal remedy to the aggrieved party
against the guilty party. Thus we can say that all contracts are agreements but all
agreements are not contracts.
All Agreements are not Contracts :
An agreement is termed a contract only when it is enforceable by law. All
agreements are not necessarily legally enforceable. It can rightly be said that
an agreement has a much wider scope than a contract. For example that
agreements are not legally binding are an invitation to dinner or to go for a
walk and its acceptance. These are agreements not contracts.

An agreement does not necessarily imply a legal obligation on the parties to

the agreement. It is import here to clarify what exactly is an obligation.
Obligation is a legal tie which imposes upon a person or persons the necessity
of doing or abstaining from doing definite act or acts.

An agreement need not necessarily be within the framework of law and be

legally enforceable. If it is, then it is a contract. A promises B to do physical
harm to C whom, the latter does not like and B promises to pay A Rs. 1000 to
do that, it cannot be termed as a contract because such an act would be
against the law. Any agreement of which the object or consideration is
unlawful is void and cannot be called a contract.

It would be clear from what has been said so far that an agreement has a
much wider scope than a contract. An Agreement implies fulfilling some
agreed condition. It does not necessarily imply that the stipulated conditions
conform to the law and are enforceable by it. It may be said that an
agreement is the genus of which contract is the species. It also makes it clear
that all agreements are not contracts but all contracts are agreements.
ALL CONTRACTS ARE AGREEMENTS BUT ALL
AGREEMENTS ARE NOT CONTRACTS. EXPLAIN
THE STATEMENT
All Contracts are Agreements but all Agreements are not Contracts. Explain the statement

Introduction:

Contracts and agreements are related in so many significant ways. Contracts mean agreeing on
specific matters weather those are national or international aspects of agreements or not. In a broad
sense, [1]contract is an agreement between two or more competent parties in which an offer is made
and accepted, and each party benefits. The agreement can be formal, informal, written, oral or just
plain understood. Some contracts are required to be in writing in order to be enforced. Examples of a
contract are a lease, a promissory note, or a rental agreement.[2] According to legal scholar Sir John
William Salmond, a contract is “an agreement creating and defining the obligations between two or
more parties”

Contract:

In law, a contract is a legally binding agreement between two or more parties which, if it contains the
elements of a valid legal agreement, is enforceable by law [3]or by binding arbitration. A legally
enforceable contract is an exchange of promises with specific legal remedies for breach. These can
include compensatory remedy, whereby the defaulting party is required to pay monies that would
otherwise have been exchanged were the contract honored, or an Equitable remedy such as Specific
Performance, in which the person who entered into the contract is required to carry out the specific
action they have reneged upon.

An agreement is said to be reached when an offer capable of immediate acceptance is met with a
“mirror image” acceptance (i.e., an unqualified acceptance).[4] The parties must have the necessary
capacity to contract and the contract must not be trifling, indeterminate, impossible, or illegal. Contract
law is based on the principle expressed in the Latin phrase pacta sunt servanda (usually translated
AGREEMENTS TO BE KEPT but more literally “pacts must be kept”).[5] Breach of contract is
recognized by the law and remedies can be provided.

As long as the good or service provided is legal, any oral agreement between two parties can constitute
a binding legal contract. The practical limitation to this, however, is that generally only parties to a
written agreement have material evidence (the written contract itself) to prove the actual terms uttered
at the time the agreement was struck. In daily life, most contracts can be and are made orally, such
as purchasing a book or a sandwich. Sometimes written contracts are required by either the parties,
or by statutory law within various jurisdictions for certain types of agreement, for example when buying
a house[6] or land.

Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations
(along with tort, unjust enrichment or restitution).

According to legal scholar Sir John William Salmond, a contract is “an agreement creating and defining
the obligations between two or more parties”.
As a means of economic ordering, contract relies on the notion of consensual exchange and has been
extensively discussed in broader economic, sociological and anthropological terms (see “Contractual
theory”, below). In American English, the term extends beyond the legal meaning to encompass a
broader category of agreements. [7]

This article mainly concerns contract law in common law jurisdictions (approximately coincident with
the English-speaking world and anywhere the British Empire once held sway). Common-law
jurisdictions usually offer proceedings in the English language, which has become to an extent a lingua
franca of international business.[8] The common law retains a high degree of freedom of contract, with
parties largely free to set their own terms, whereas civil-law systems typically apply certain over-
arching principles to disputes arising out of contract (see, for example the French Civil Code). It is very
common for businesses not located in common-law jurisdictions to opt in to the common law through
a Choice of law clause.

However, contract is a form of economic ordering common throughout the world, and different rules
apply in jurisdictions applying civil law (derived from Roman law principles), Islamic law, socialist legal
systems, and customary or local law.

Agreement:

1. A mutual understanding between two or more legally competent individuals or entities about
their rights and duties regarding their past or future performances and consideration. While an
agreement usually leads to a contract, it could also be an executed sale, a gift or other transfer
of property, or a promise without a legal obligation.

1. The understanding between two or more legally competent individuals or entities about the
rights and duties regarding their past or future performances and consideration as manifested
by their language (oral or written) or by implication from other circumstances such as the usage
of trade and the course of performance. See also contract.

Agreement to agree
A mutual understanding between two or more legally competent individuals or entities that they will
later enter into a contract even though the contract’s exact terms have not yet been decided; non-
binding.

Binding agreement
An enforceable agreement or contract is binding agreement.

Collective bargaining agreement

A contract between an employer and a union or other representative, voluntarily selected by a majority
of the employer’s workers within a bargaining group, concerning the wages, hours, and other
conditions of employment for that group.

Divorce agreement
An agreement between spouses made during a divorce concerning child custody, child and spousal
support, property distribution, and other matters. Such agreements are usually incorporated into the
parties’ divorce decree. See separation agreement.
Gentlemen’s agreement
An agreement not intended by the parties to be legally enforceable, but that is expected to be
performed or followed as a matter of friendship or honor. May or may not involve illegal subject matter
such as gambling bets.

Postnuptial agreement
An agreement between spouses made during their marriage to determine the right to support and
each other’s property in case of death or divorce. Such agreements are not enforceable unless each
party makes a full disclosure to the other of their assets and has consulted with their own attorneys.
Even then, most such agreements are not enforceable unless made by spouses who are in the midst
of a separation or divorce.

Prenuptial agreement
An agreement between spouses made before their marriage to determine the right to support and
each other’s property in case of death or divorce. Generally, such agreements are enforceable,
especially if both parties make a full disclosure of individual assets and have consulted with their own
attorneys. See also postnuptial agreement and separation agreement.

Separation agreement
An agreement between spouses made during a divorce or while obtaining a legal separation
concerning child custody, child and spousal support, property distribution, and other matters is called
separation agreement. Such agreements are usually incorporated into the parties’ divorce decree or
into a judicial decree granting a separation to the parties. It is frequently referred to as property
settlement agreement (PSA).

Simple agreement
An agreement for which nothing is legally required to make it enforceable other than some evidence
that the agreement was made and the parties consent to it.

Differences between Contract and Agreement:

Contract- According to section 2 (h) of the Indian contract act ” an agreement enforceable by law is a
contract”.

Hence every agreement and promise enforceable by law is a contract.

Agreement- According to section 2(e) of the Indian contract act ” Every promise and every set of
promise forming the consideration for each other is an agreement”.

When there is a proposal from one side and the acceptance of that proposal by other side. It results
in a promise. This promise from the two parties to one another is known as an ”agreement”.

As noted above, an agreement enforceable by law is a contract.

All such agreement which satisfy the conditioned mentioned in sec 10 of Indian contract Act is
contracts. Section 10 is as under–

”10. all agreements are contract if they are made by the free consent of parties competent to contract
for a lawful consideration and with a lawful object , and are not hereby expressly declared to be void”.

For the validity of contract section 10 requires the following essentials to satisfy[9]—

1- There should be an agreement between two parties. An agreement arises when one party makes
a proposal or present and the other party accepts the offer.
2- The parties to the agreement should be proficient to contract.
3- There should be lawful deliberation and lawful object in respect of the agreement.
4- There should be free consent of the parties, when they enter in to agreement.
5- The agreement must not be one, which has been declared to be void.

Void Agreement:

Definition:

Literally: Void means having no legal value and agreement means Arrangement, promise or contract
made with somebody. So, void agreement means an agreement that has no legal value.

Traditionally: “An agreement not enforceable by law is said to be void”. [Sec 2(g)]

A void agreement has no legal effect. An agreement which does not satisfy the essential elements of
contract is void. Void contract confers no rights on any person and creates no obligation.

Example of void agreement:

An agreement made by a minor, agreement without consideration, certain agreements against public
policy etc.

Agreement which become void:

An agreement, which was legal and enforceable when it was entered in to, may subsequently become
void due to impossibility of performance, change of law or other reason. When it becomes void the
agreement ceases to have legal effect.

EXPRESSLY DECLARED VOID AGREEMENT

there are certain agreements, which are expressly declared to be void.
They are as follows:
(1) Agreement by a minor or a person of unsound mind.[Sec(11)]
(2) Agreement of which the consideration or object is unlawful[Sec(23)]
(3) Agreement made under a bilateral mistake of fact material to the agreement[Sec(20)]
(4) Agreement of which the consideration or object is unlawful in part and the illegal part cannot
be separated from the legal part [Sec(24)]
(5) Agreement made. without consideration.[Sec(25)]
(6) Agreement in restraint of marriage [Sec(26)]
(7) Agreement in restraint of trade [Sec(27)]
(8) Agreement in restrain of legal proceedings[Sec(28)]
(9) Agreements the meaning of which is uncertain [Sec(29)]
(10) Agreements by way of wager [Sec(30)]
(11) Agreements contingent on impossible events [Sec(36)]
(12) Agreements to do impossible acts [Sec(56)]

Void Contract:

Definition

A void contract is one which has no legal effect whatsoever owing to the fact that a transaction which
is void is without any legal effect, it I a misuse of terms to call transaction a void contract. It may be
called accurately a void transaction or a void agreement.

For an example, a storekeeper agrees to purchase stolen goods. The thief has no recourse at law
because the agreement to purchase the goods was void as it assisted a thief to get the benefit or his
crime.

Void and illegal contracts distinguished:

A void contract is one which has no legal effect. An illegal contract, like the void contract has no legal
effect as between the immediate parties, but has this further effect that transactions collateral become
tainted with illegality and therefore become enforceable.

Wagering contract: in Bombay presidency wagering contract are unlawful by statute, and taint
collateral transactions rendering themes void. In the rest of India wagering contract are only void, and
thus collateral contracts are not affected.

Conclusion:

Contract is an agreement between two or more person creating rights and duties between them and
which is enforceable by law. Pollock defines contract as every agreement and promise enforceable at
law is contract.

A contract is an agreement creating and stating responsibility between the parties. According to
section2b of the contract act, an agreement enforceable by law is contract. So it is clear the contract
consist of two elements:
• An agreement
• The agreement should be enforceable by law.

According to section 2e every promise and combination of promises making the consideration for each
other is an agreement. It is clear from the definition that promise is an agreement. Section 2 defines
the promise as when any person with the suggestion is made indicate his assent thereto, it means the
proposal is accepted. A proposal when accepted becomes a promise. We can say that an agreement
is an accepted proposal. The process of definition shows that a contract is an agreement, an
agreement is a promise and a promise is an accepted proposal. An agreement therefore comes into
existence only when one party makes a proposal or offer to the other and that other signifies his assent
thereto. In short every agreement is the result of a proposal from one side and its acceptability by the
other.

Bibliography:

1. http://www.lectlaw.com/def/c123.htm

2. http://en.wikipedia.org/wiki/Contract

3. Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall.
2003. pp. 523. ISBN 0-13-063085-3.

4. International Principle: Trans-Lex.org

5. Hans Wehberg, Pacta Sunt Servanda, The American Journal of International Law, Vol. 53, No.
4 (Oct., 1959), p.775.; Trans-Lex.org Principle of Sanctity of contracts

6. e.g. In England, s. 52, Law of Property Act 1900

7. 2008 Merriam-Webster online dictionary

8. Catherine Nickerson, “English as a lingua franca in international business contexts”, in English

for Specific Purposes, Volume 24, Issue 4, 2005, Pages 367-380

9. http://www.citehr.com/200242-difference-between-agreement-contract.html#axzz17HIJrzRn

Prepared by:

Rafi Ahmed

Id# 062 551 030

Prepared for:

A. M. Masum(Amu)

Barrister.

style=”text-align: justify;” size=”1″ />

[1] http://www.lectlaw.com/def/c123.htm

[2] http://en.wikipedia.org/wiki/Contract
[3] Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall.
2003. pp. 523. ISBN 0-13-063085-3.

[4] International Principle: Trans-Lex.org

[5] Hans Wehberg, Pacta Sunt Servanda, The American Journal of International Law, Vol. 53, No. 4
(Oct., 1959), p.775.; Trans-Lex.org Principle of Sanctity of contracts

[6] e.g. In England, s. 52, Law of Property Act 1900

[7] 2008 Merriam-Webster online dictionary

[8] Catherine Nickerson, “English as a lingua franca in international business contexts”, in English for
Specific Purposes, Volume 24, Issue 4, 2005, Pages 367-380

[9] http://www.citehr.com/200242-difference-between-agreement-contract.html#axzz17HIJrzRn