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What is contract ? Explain the difference between a contract and an agreement.

Answer»

The word ‘contract’ has its origin from the Latin word ‘Contractum’, which means to draw together, combine, make an agreement. Contract is a voluntary, deliberate, legally-binding agreement between two or more competent parties, which defines the legal obligation and authorities of parties.

According to Sir William Anson ; 

“A legally binding agreement between two or more persons by which rights are acquired by one or more to act or forbearance on the part of others.”

Section 2(h) defines a contract as an agreement enforceable by law. Contract consists of two essential elements : 

1. An agreement, 

2. Enforceability by law. 

According to section 10 of Indian Contract Act, 1872, the juristic concept of contracts consists of proper offer and acceptance.

Difference between Contract and Agreement

Basis of DifferenceContractAgreement
MeaningContract is an agreement between two parties, that has a legal obligation and which is enforceable by law.All the promises/offers when accepted by the other person become an agreement.
NatureOnly a legal agreement is known as contract.Agreements can be legal or illegal.
BasisAgreement is the basis for every contract.Contact is not the basis of agreement. Offer and acceptance are the basis of agreement.
Essential elementsTo be a valid contract, it should include an agreement, contractual presence of two parties, contract capacity, free consent of the parties, etc.For an agreement, only offer made by one and its acceptance by the other is required.


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