Difference between contract and agreement
Contract vs agreement:
Contract and agreement are two words that are often heard of in legal contexts where two or more parties are involved in certain kinds of transactions and partnerships of all sorts. They can be deemed as parts of life as contracts and agreements exist in every path that one decides to take. However, it must be stated that contracts and agreements are not synonymous for one another at all and each term stands for an individual, independent purpose all by themselves.
What is a contract?
A contract is a legally binding agreement that is enforceable by law, between two or more entities which can be either written or oral. A document is considered to be a contract that is legally binding once three conditions are met. Those three conditions can be stated as Offer and Acceptance, Intention to create legal relation and Consideration. It is usually comprised of terms and representations on which the parties agree on prior to the signing of documents. A contract can be terminated through performance, breach of contract, frustration and by another contract. Some types of contracts that are commonly made can be named as financing contracts, project management contracts, building contracts, service contracts and etc.
What is an agreement?
An agreement can be described as a written or verbal contract between two or more parties that is not enforceable by law. Agreements can be made on business views, commercial views or domestic views and are usually made over small matters where one’s word is taken in to account rather than sign documents. Usually, when several parties enter in to an agreement, the terms and conditions of that agreement are defined by themselves. Agreements are based on trust that the other party will complete their part of the agreement as promised.
What is the difference between agreement and contract?
While every contract is an agreement of some sort, every agreement is not a contract. However, both contracts and agreements are made for similar purposes but the differences arise when it comes to the formality of the contract and the personalization of an agreement. An agreement becomes a contract if it is made legally binding on three conditions such as Offer and Acceptance, Intention to create legal relation and Consideration. In other words, a contract is a legally binding document made between two or more entities whereas an agreement is not legally binding.
Due to the fact that a contract is enforceable by law and an agreement is not enforceable by law, a contract is often signed for matters of considerable importance where mutual consent and a binding is needed. An agreement on the other hand, will be prepared for much smaller matters where the subject would not be as grave. Thus, a contract is an official document that is made regarding important issues where a promise just would not suffice whereas an agreement would not be regarded as an official document.
Contracts are usually made between business partners, companies and such whereas agreements are often entered into between relations and family members. This is due to the trust issue that exists between the persons who enter in to a contract with. If a contract is broken, legal percussions will ensue. If an agreement is broken, no such legal percussions will ensue. In this sense, an agreement is more similar to a promise. A promise, just like an agreement can be broken with no legal percussions whatsoever.
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