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 Difference |
Contract |
Agreement |
| Meaning |
Contract 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. |
| Nature |
Only a legal agreement is known as contract. |
Agreements can be legal or illegal. |
| Basis |
Agreement is the basis for every contract. |
Contact is not the basis of agreement. Offer and acceptance are the basis of agreement. |
| Essential elements |
To 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. |
