10 Differences Between agreement and contract

Agreement vs. Contract: Understanding the Differences

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What is an Agreement?

An agreement is a mutual understanding or arrangement between two or more parties regarding their rights, obligations, or terms of a particular matter. It can be oral, written, or implied through conduct.

Examples of Agreements:

  • A verbal agreement between friends to meet at a restaurant for dinner.
  • A written agreement between an employer and an employee outlining job responsibilities and compensation.
  • An implied agreement between a customer and a shop owner to exchange money for goods or services.

Uses of Agreements:

Agreements serve various purposes, such as:

  • Establishing terms and conditions for a business partnership.
  • Defining the scope of work between a client and a service provider.
  • Outlining the rules and regulations for renting a property.

What is a Contract?

A contract is a legally binding agreement between two or more parties that creates obligations and enforceable rights. It typically involves the exchange of something of value and requires mutual consent.

Examples of Contracts:

  • A written contract between a buyer and a seller for the purchase of a car.
  • An employment contract signed by an employee and an employer, specifying terms and conditions of employment.
  • A rental agreement signed by a tenant and a landlord, outlining the terms of occupancy.

Uses of Contracts:

Contracts serve various purposes, such as:

  • Protecting the rights and interests of parties involved.
  • Minimizing disputes and misunderstandings by clearly defining obligations.
  • Providing a legal framework for business transactions.

Differences between Agreement and Contract:

Difference Area Agreement Contract
Legality May or may not be legally enforceable. Legally enforceable.
Consent Can be implied or explicit. Requires mutual consent.
Formation No specific requirements for formation. Requires offer, acceptance, and consideration.
Obligations May or may not create legal obligations. Creates legally binding obligations.
Enforceability Enforceability may vary based on legal requirements. Can be enforced through legal remedies.
Remedies May offer limited remedies in case of breach. Provides legal remedies for breach.
Specificity Can be vague or ambiguous. Requires clarity and specificity in terms.
Inclusion of Terms May include both written and oral terms. Primarily relies on written terms.
Notarization Does not require notarization. May require notarization for certain types of contracts.
Legal Capacity No legal capacity requirements. Parties must have legal capacity to enter into a contract.


In summary, agreements and contracts differ in terms of their enforceability, consent requirements, legal capacity, and obligations. While agreements can be informal and lack legal consequences, contracts are legally binding and involve specific elements to ensure enforceability. Understanding the distinctions between these two terms is crucial in various professional and personal contexts.

People Also Ask:

Here are five common questions readers might have about agreements and contracts:

Q: What is the difference between an agreement and a contract?

A: The main difference lies in their enforceability. An agreement may or may not be legally enforceable, whereas a contract creates legally binding obligations.

Q: Do all agreements need to be in writing?

A: No, agreements can be oral or implied through the parties’ conduct. However, certain agreements, such as real estate transactions or contracts lasting more than a year, may require written documentation to be enforceable.

Q: Can an agreement be enforced in court?

A: It depends on the nature of the agreement and its enforceability. Some agreements may be enforceable through legal remedies, while others may not hold up in court.

Q: Is a contract always formal and complex?

A: Not necessarily. Contracts can range from simple to complex, depending on the nature of the transaction and the parties involved. Some contracts can be as straightforward as a one-page agreement.

Q: What happens if one party breaches an agreement or contract?

A: The consequences of breach vary depending on the terms of the agreement or contract. Generally, the non-breaching party may seek remedies such as damages, specific performance, or termination of the contract.

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