It is a well established principle of Contract law that all contracts are agreements but all agreements are not contract. This might seem a little confusing, so, we will first learn about agreements and contracts.
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What is an Agreement?
An Agreement is a promise backed by consideration. Section 2(e) of the Indian Contract Act, 1872 states that, ” Every promise and every set of promises forming the consideration for each other is an agreement”. But What is a promise under the contract law?
Section 2(b) of the Indian contract Act defines promise as, “When one person to whom a proposal is made, signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise”.
Therefore, to sum it up all together, when one person promises to do something or abstains from doing something and such promise is backed by a consideration it is said to be an agreement.
What is a Contract?
A Contract is any agreement enforceable by law. Section 2(h) states that,” An agreement enforceable by law is a contract”. The meaning is very clear when it comes to what agreements are contracts?
The only essential ingredient necessary is the enforceablity part.
Not all agreements can be enforced by law. For example: An agreement to commit an offence cannot be enforced by law because it is in breach of law. Similarly, agreements of domestic nature are not enforceable by law.
Conditions for enforceablity are stated in section 10 of the Indian Contract Act, 1872 and are as follows:
10. "What agreements are contracts.—All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. —All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void."
Therefore, the conditions as has been laid down are:
- The agreement must be a result of free consent of the parties.
- There must be a lawful consideration.
- The agreement must not be expressly declared to be void.
Generally, this is the rule but other laws may require some additional conditions for an agreement to be enforceable. For example: Land laws or Marriage laws may require writing, presence of witness and registration.
All contracts are agreement but all agreements are not contracts
Because for something to be a contract it must be an agreement enforceable by law. But for something to be an agreement there need not be a contract. An agreement is only converted to a contract at the later stages when conditions laid down in section 10 of the Contract act are fulfilled.
Therefore, we come to the inference that all contracts are agreements and not all agreements are contracts.
FAQ
An agreement is a promise backed by consideration between parties. On the other hand, a contract is a specific type of agreement that can be enforced by law. Therefore, All contracts are agreements but all agreements are not contract.
Not necessarily. An agreement is a mere promise backed by consideration. It may or may not be legally binding.
All the conditions specified in section 10 of the Indian Contract Act, 1872 must be fulfilled for an agreement to be a contract. That is 1. Free Consent. 2. Lawful consideration. 3. Must not be declared void.
Any agreement that cannot be enforced at the court of law are not contracts. For example: Agreement in restraint of marriage is not enforceable because it is expressly declared to be void.
Yes, all contracts are enforceable because an essential condition to constitute a contract is that it is backed by the law.
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