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Difference between Agreement & Contract – CA Foundation Business Law

CA Foundation Paper-II Business Law

Normally in our day to day life, we use both word agreement and contract in the same sense. But under the eye of the law, both words have a separate meaning. So let’s understand the difference between Agreement and Contract (CA Foundation Business Law) under The Indian Contract Act 1872.

Differences between Agreement and Contract

SectionGiven in Section 2(e)Given in Section 2(h)
DefinitionEvery promise and every set of promises, forming the consideration for each other.Contract means an agreement enforceable by law.
EnforceabilityAgreements are not legally enforceable.Contracts are enforceable in the eye of law.
Intention to create Legal ObligationAn agreement may or may not have intentions to create legal obligations.The contract must have the intention of the parties to create legal obligations.
ScopeIt has wide scope than the contract.It has a narrow scope.
ExclusionThe word agreement has a wider scope than contract, it also includes social as well as domestic agreements.Contracts doesn’t includes social agreements and domestic agreements.
ComponentsAgreement = Offer + AcceptanceContract = Agreement + Enforceability
RelationEvery agreement is not a contract.Every contract is an agreement.

So after the reading above differences, it is clear that term agreement and contract are very much different in their meaning and Nature. Where agreement gives a foundation stone to contract, contracts give the agreement to an end destination.

Difference between Agreement & Contract – CA Foundation Business Law

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Meaning of Contract under The Indian Contract Act 1872

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