Under the Indian Contract Act, 1872, a valid contract is built step by step: Offer â Acceptance â Consideration â Legal Enforceability. At its core, an agreement consists of reciprocal promises between two or more parties.
Source: Indian Contract Act, 1872, Section 2(e).
Definition: Every set of reciprocal promises forming consideration for each other.
Formula: Agreement = Offer + Acceptance.
Key Difference: Agreement becomes a contract only when legally enforceable.
Section 2(e) of the Indian Contract Act defines: 'Every promise and every set of promises forming the consideration for each other is an agreement.'
Simple meaning: Agreement = Offer + Acceptance = A set of Reciprocal Promises.
Reciprocal promises means both parties make promises TO each other. It's not one-sided.
Example:
These two promises form the basis of a bilateral agreement. Both parties are both promisor and promisee.
| Aspect | Agreement | Contract |
|---|---|---|
| Formation | Offer + Acceptance | Agreement + Enforceability |
| Legally binding? | Not necessarily | Yes |
| Example | Friendly promise | Written business deal |
Every contract is an agreement, but not every agreement is a contract.
An agreement consists of reciprocal promises â where both parties exchange promises that form the consideration for each other. (Section 2(e), Indian Contract Act 1872).
An agreement is formed by offer + acceptance. A contract is an agreement that is legally enforceable. Every contract is an agreement, but not every agreement is a contract.
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