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SEMESTER 3RD

Difference between Agreement and Contract ?

AGREEMENTS
An agreement is defined as an expansive concept that includes an arrangement or a common
understanding between two or more parties regarding their rights and responsibilities with
respect to one party to another. You may also see commercial agreement .

Agreements are like promises wherein the fulfillment of the agreement only relies on the honor
and honesty of the people involved other than the exterior form of enforcement like in a paper
that is legally binding. An agreement could also be defined as an offer which is offered by an
individual and its approval and denial depend on the other individual. You may also see
partnership agreement .

CONTRACTS
A contract is an agreement, however, it is enforceable by law.

Contracts have a more narrow scope compared to an agreement since there are certain
conditions or elements which makes an agreement into a contract, the elements are as follows:

There have to be two or more parties involved in the agreement.

There has to be a consent in terms of the acceptance of the offer.

The agreement between the parties is enforced by law.

The agreements in the contract have to be detailed.

The agreement must not contain any unlawful things.

THE KEY DIFFERENCES BETWEEN AGREEMENTS AND CONTRACTS

1.FORMALITY
When it comes to formality, agreements are less formal than contracts. Agreements can be done
informally as it is like making a promise to another person. On the other hand, contracts are
formal agreements and are usually created for business purposes to ensure the safety of both
parties. While you can easily break promises, you cannot breach contracts because these are
legally binding. You may also see the Website Hosting Agreement Checklist Examples.

2. UNIVERSAL RULE
Both agreements and contracts follow a universal rule when it comes to both parties fulfilling
their end of the agreement or contract. Although there is a greater chance that agreements can’t
be fulfilled especially when agreements are not placed into writing. You may also see
the Checklist – The Franchise Agreement.

3. OBLIGATION
In terms of obligation, agreements have a more social or domestic role while contracts consist of
a legal obligation of the performance of an action. You may also see the Why Business Associate
Agreement Templates are Useful.

4. NATURE AND SCOPE

In terms of its nature and scope, contracts have a wider scope and are very complex in nature
especially when used in a business or legal setting. For example, lease contracts where numerous
payment and usage terms are incorporated, and legal judgment contracts where the convicted
individual needs to comply to a specific set of community and prison obligation terms. You may
also see the Roommate Agreement Examples.

5. REGISTRATION AND WRITING

For agreements, you do not have to go to a legal or government entity to make it official although
there are agreements that require writing (but these written agreements are not notarized).
Contracts on the other hand, are written and notarized by a registered lawyer making the
document legally binding. Contracts are useless unless they are not notarized, and one or both
parties in the contract is not liable for any task or deliverable which cannot be not accomplished
after the contract is up. You may also want to know the  Rental Agreement Templates as a
Landlord .

6. LEGAL BOUNDS
Unfortunately, agreements do not possess the capability of being a legal contract. In contracts,
the parties involved are legally bound to each other and have to perform each and every item
agreed in the contract. Failure to do so may require legal action. You may also see the Contract
Templates For The Freelance Designer.

7. BENEFITS
Agreements are more flexible compared to contracts. It cannot be avoided that there
are instances wherein promises are broken due to unavoidable circumstances. Whenever the
need for adjustments would come into play, agreements are much better and can be easily
negotiated. You may also see business agreements .

BASIS FOR
VOID AGREEMENT VOID CONTRACT
COMPARISON

Meaning Void agreement refers to Void contract implies a valid

an agreement which as contract, that ceases to be
per law, is unenforceable enforceable by law, becomes
and has no legal a void contract, when it lacks
consequences. enforceability.

Void ab-initio It is void from the very It is valid at the beginning but
beginning. later on becomes void.

Period of validity It is never valid. It is valid, till it does not cease

to be enforceable.

Causes Due to absence of one of Due to impossibility of

more essentials. performance.

Prerequisite of When the agreement is When the contract is entered

contract created, all the
prerequisite of the
contract are not satisfied,
thus making it void.
into, all the prerequisite of
the contract are satisfied,
which due to certain
circumstances, subsequently
becomes void.

Restitution In general, restitution is Restitution is allowed when

not allowed, however, the the contract is discovered as
court may grant void.
restitution on equitable
grounds.