Question

"It has been contended that all contracts must be agreements but not all agreements need to be contracts"

Comment on the validity of this statement.

Support with references.

Answer 1

“It has been contended that all contracts must be agreements but not all agreements need to be contracts”

This statement is valid in my humble opinion; but before I support this with references, I would like to briefly explain the two terms – Contract & Agreement.

A contract is a legally binding agreement or relationship that exists between two or more parties to do or abstain from performing certain acts. There must be offer and acceptance for a contract to be formed. An offer must be backed by acceptance of which there must be consideration. Both parties involved must intend to create legal relation on a lawful matter which must be entered freely and should be possible to perform.

An agreement is a form of cross reference between different parties, which may be written, oral and lies upon the honour of the parties for its fulfilment rather than being in any way enforceable.

Now. Let’s look at the following example of a Simple Contract:

John gives his car to a Workshop for repair and the Workshop asks for $ 100 for the repair works. John agrees to pay the price and the workshop agrees to repair the car. The agreement imposes an obligation on both. The third element of a contract is that the agreement must be enforceable by Law. If one party fails to keep his promise, the other has the right to go the court and force the defaulter to keep his promises. There are other elements:

• An offer.
• An acceptance.
• Competent parties who have the legal capacity to contract.
• Lawful subject matter.
• Consideration.
• Mutuality of obligation and Agreement.

All contracts are agreements because of two key things: —

Mutual understanding between the contracting parties for a contract to be formed — that is, they agree to be legally bound to each other under the terms and conditions of their agreement.

The contract is a voluntary agreement between the parties that is enforceable in and by law as a binding legal agreement. Therefore, contract law is also classified as a branch of the law of obligations such as in the Civil Code jurisdictions.

ITS CLEAR THAT ALL CONTRACTS ARE AGREEMENTS.

Now. Let’s look at the following example of a Simple Agreement:

John agrees to meet Jenny at The Diner at 1 p.m. for lunch. That’s an agreement, but it’s not a contract because it doesn’t have consideration. If John doesn’t show up, Jenny has no basis to sue him for breach of contract, and Jenny doesn’t show up, John has no basis to sue her.

Agreements are not necessarily contracts because of two key things:

An agreement at the most fundamental level is a form of cross-reference between different parties for fulfilment by honour rather than being enforceable in any way by law.

It usually lacks one or more of the essential elements that are required to be present to form a valid contract.

HENCE ALL AGREEMENTS NEED NOT BE CONTRACTS.

So, in a nutshell,

Any agreements which can be enforced by law is called contract.

Now if an agreement can't be enforceable by law, then it won't be called a contract.

Agreement is the set and contract is its subset, only thing to keep in mind is that whether you can enforce it by law or not. If yes, then it's a contract otherwise it remains an agreement.

Hope the aforementioned is free of any ambiguity and is useful to you.

Thanks