Business Law

Difference Between Agreement And Contract Under Business Law

Agreement – Section 2(e) of the Act defines it as : Every promise and every set of promises forming the consideration for each other is an agreement.

  • Example : If Anil promises to sell his scooter to Krishan for Rs 5000 and Krishan promises to pay Anil the said amount, both promises together constitute an agreement.

Contract – Section 2(h) defines a contract as ” an agreement enforceable by law.”

Difference Between Agreement And Contract

Sr. No.BasisAgreementContract
1SectionIs defined in Section 2 (e)Is defined in Section 2(h)
2DefinitionEvery promise or every set of promises forming the consideration for each other is an agreement.An agreement enforceable by law is a contract.
3ScopeHas a very wide scope because each contract is first an agreement.The scope is limited because all agreements are not contracts.
4NatureCovers legal and extra-legal affairs.Covers only legal affairs.
5BaseIs based on proposal and acceptance of proposal.Is based on agreement.
6LegalityParties have no legal obligation.Parties have legal obligations that are defined in the contract.
7EffectIs not enforceable by lawIs enforceable by law.

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