In Business Law (specifically the Indian Contract Act, 1872), the terms 'Agreement' and 'Contract' are often used interchangeably in everyday language, but they have distinct legal differences. The famous phrase goes: 'All contracts are agreements, but all agreements are not contracts.'
For an agreement to become a contract, it must have 'lawful consideration' and 'free consent'.
Agreements made by minors are generally void and cannot become contracts.
A social invitation accepted by someone is an agreement, not a contract.
| Basis of Difference | Agreement | Contract |
|---|---|---|
| Enforceability | May or may not be enforceable by law. | Must be enforceable by law. |
| Scope | It is a wider concept. | It is a narrower concept (a subset of agreement). |
| Legal Obligation | Does not necessarily create a legal obligation. | Always creates a legal obligation. |
| Written | Can be informal and verbal. | Usually requires proper terms, consideration, and sometimes written registration. |
Because many agreements (like social plans with friends or family) lack the intention to create legal relations and are not enforceable in a court of law.
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