AGREEMENT
Introduction
An agreement is a mutual understanding between two or more persons about their relative rights and duties regarding past or future performances; a manifestation of mutual assent by two or more persons.
Definition
Section 2(e) of the Contract Act defines an Agreement as follows;
An agreement is every promise and every set of promises forming the consideration for each other.
According to Samuel Willson;
An agreement as the courts have said is nothing more than a manifestation of mutual assent) by two or more parties legally competent persons to one another. The agreement is in some respects a broader term than contract, or even than bargain or promise. It covers executed sales, gifts, and other transfers of property.
Explanation:
An agreement is a promise between two or more persons to do or not to do anything against some consideration.
Conditions for an Agreement
For an agreement, the following conditions must be fulfilled.
- There must be a promise
- There must be some consideration for both the parties
When the proposal offered by one party is accepted by the other party, it becomes an agreement.
[Agreement = Proposal + Acceptance]
Essentials of an Agreement
The essentials of an agreement are the following.
1. Plurality of Persons
There are at least two persons to make, an agreement because one person cannot agree with himself. It should be bilateral in nature.
2. Consensus ad Idem
For a valid agreement, there must be consensus ad idem between the parties, ie, their minds are meeting in the sense that they understand the same thing in the same sense.
Example
‘A’ promises to sell his car to ‘B; for Rs. 3 lac. This promise is an agreement between A and B because a promise takes place when an offer of one person or party is accepted as it is by another person or party.
In the above example, a promise between A and B is also forming the consideration for both parties. Here, an amount of Rs. 3 lac is the consideration for A and a car is a consideration for B.
CONTRACT
Introduction
A contract is an exchange of promises by two or more persons that will result in an obligation to do or refrain from doing a particular act. This obligation is recognized and enforced by law.
Definition
Section 2(h) of the Contract Act defines a contract as follows;
An agreement enforceable by law is a contract.
According To Pullok;
Every agreement and promise enforceable at law is a contract.
Example
A agrees to sell his bicycle for Rs.3000 to B. It is a contract because when they register their agreement between A and B is enforceable by law and the law treats their agreement to sell or buy the bicycle as valid.
Essentials of a Valid Contract
The following are the essentials of a valid contract.
- An agreement must be there for the parties to enter into a contract
- Genuine assent of parties is also very important during the formation of a contract
- There must be some consideration for both the parties
- The object must be lawful
- The parties must be competent enough to enter into the contract
Obligations that are not Contracts
Sometimes, the obligations are not contractual in nature. The obligations resulting from the following are not contractual.
- Torts or Civil Wrongs
- Quasi Contracts
- Judgments of Courts
- Husband-Wife relationship
Distinction b/w Agreement and Contract
The contract is differentiated from the agreement on the basis of the following;
1. Scope
Agreement: The scope of the agreement is wider than that of a contract.
Contract: The term contract has a narrow scope than the term agreement.
2. Legal Obligations
Agreement: An agreement may exist without any legal obligation.
Contract: A contract is the result of an agreement and obligation combined.
3. Enforceability
Agreement: An agreement can be a contract only when it is enforceable by law.
Contract: A contract is an agreement that is already enforceable by law.
4. Combination
Agreement: An agreement is a combination of proposal and acceptance.
Contract: The contract is a combination of agreement and enforceability.
5. Position
Agreement: All agreements are not necessarily contracts.
Contract: All contracts are agreements.
Final Note
Agreement and Contract are two different terms. However, it can be said that all contracts are agreements but all agreements are not contracts.
FREQUENTLY ASKED QUESTIONS
Define the term “Agreement” and “Contract” and distinguish between the two.
REFERENCES
- The Contract Act, 1872
- N-Series by M.A. Chaudhary
- Law of Contract by Avtar Singh
