The Indian Contract Act recognizes two different legal concepts- agreement and contract. While these terms are often used interchangeably, they have different meanings and implications in the realm of law.
Agreement:
An agreement is essentially a meeting of the minds between two or more parties on a specific subject matter. It could be an oral or written document, and it`s not necessarily legally binding. For an agreement to be valid, it must have certain elements such as free consent, lawful consideration, competent party, and lawful object.
An agreement is said to be formed when one person makes a proposal or offer to another person, and that offer is accepted. Once an agreement is reached, both parties are bound by the terms and conditions stated in the agreement. However, an agreement does not necessarily create any legal obligation, and any breach of the agreement does not result in legal liability.
Contract:
On the other hand, a contract refers to a specific type of agreement that is legally enforceable. A contract has all the essential elements of an agreement, and it must have the additional feature of enforceability by law. In other words, a contract creates legal obligations and responsibilities for the parties.
In India, a contract is formed when an offer is made, and it is accepted. The acceptance of the offer must be communicated to the offeror, and it must be made with the intention of creating legal relations. Once a contract is formed, both parties must fulfill their obligations as stated in the contract. Failure to fulfill the obligations may result in legal action.
Key differences between Agreement and Contract:
1. Legal enforceability – An agreement is not necessarily legally enforceable, while a contract is legally enforceable in court.
2. Obligation – An agreement does not create any legal obligation, while a contract creates legal obligations and responsibilities for the parties.
3. Consent – An agreement requires free and mutual consent, while a contract requires legally binding consent.
4. Lawfulness – An agreement can be lawful or unlawful, while a contract must have a lawful object and consideration.
Conclusion:
In conclusion, while the terms agreement and contract are often used interchangeably, they have different meanings and implications in the realm of law. An agreement is essentially a meeting of the minds on a specific subject matter, while a contract is a legally enforceable agreement that creates obligations and responsibilities for the parties involved. Understanding the difference between the two concepts is crucial in terms of legal liability and protection.