All Contracts are Agreements but all Agreements are not Contracts. Explain the statement


All Contracts are Agreements but all Agreements are not Contracts. Explain the statement

Introduction:

Contracts and agreements are related in so many significant ways. Contracts mean agreeing on specific matters weather those are national or international aspects of agreements or not. In a broad sense, [1]contract is an agreement between two or more competent parties in which an offer is made and accepted, and each party benefits. The agreement can be formal, informal, written, oral or just plain understood. Some contracts are required to be in writing in order to be enforced.  Examples of a contract are a lease, a promissory note, or a rental agreement.[2] According to legal scholar Sir John William Salmond, a contract is “an agreement creating and defining the obligations between two or more parties”

Contract:

In law, a contract is a legally binding agreement between two or more parties which, if it contains the elements of a valid legal agreement, is enforceable by law [3]or by binding arbitration. A legally enforceable contract is an exchange of promises with specific legal remedies for breach. These can include compensatory remedy, whereby the defaulting party is required to pay monies that would otherwise have been exchanged were the contract honored, or an Equitable remedy such as Specific Performance, in which the person who entered into the contract is required to carry out the specific action they have reneged upon.

An agreement is said to be reached when an offer capable of immediate acceptance is met with a “mirror image” acceptance (i.e., an unqualified acceptance).[4] The parties must have the necessary capacity to contract and the contract must not be trifling, indeterminate, impossible, or illegal. Contract law is based on the principle expressed in the Latin phrase pacta sunt servanda (usually translated AGREEMENTS TO BE KEPT but more literally “pacts must be kept”).[5] Breach of contract is recognized by the law and remedies can be provided.

As long as the good or service provided is legal, any oral agreement between two parties can constitute a binding legal contract. The practical limitation to this, however, is that generally only parties to a written agreement have material evidence (the written contract itself) to prove the actual terms uttered at the time the agreement was struck. In daily life, most contracts can be and are made orally, such as purchasing a book or a sandwich. Sometimes written contracts are required by either the parties, or by statutory law within various jurisdictions for certain types of agreement, for example when buying a house[6] or land.

Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations (along with tort, unjust enrichment or restitution).

According to legal scholar Sir John William Salmond, a contract is “an agreement creating and defining the obligations between two or more parties”.

As a means of economic ordering, contract relies on the notion of consensual exchange and has been extensively discussed in broader economic, sociological and anthropological terms (see “Contractual theory”, below). In American English, the term extends beyond the legal meaning to encompass a broader category of agreements. [7]

This article mainly concerns contract law in common law jurisdictions (approximately coincident with the English-speaking world and anywhere the British Empire once held sway). Common-law jurisdictions usually offer proceedings in the English language, which has become to an extent a lingua franca of international business.[8] The common law retains a high degree of freedom of contract, with parties largely free to set their own terms, whereas civil-law systems typically apply certain over-arching principles to disputes arising out of contract (see, for example the French Civil Code). It is very common for businesses not located in common-law jurisdictions to opt in to the common law through a Choice of law clause.

However, contract is a form of economic ordering common throughout the world, and different rules apply in jurisdictions applying civil law (derived from Roman law principles), Islamic law, socialist legal systems, and customary or local law.

Agreement:

  1. A mutual understanding between two or more legally competent individuals or entities about their rights and duties regarding their past or future performances and consideration. While an agreement usually leads to a contract, it could also be an executed sale, a gift or other transfer of property, or a promise without a legal obligation.

  1. The understanding between two or more legally competent individuals or entities about the rights and duties regarding their past or future performances and consideration as manifested by their language (oral or written) or by implication from other circumstances such as the usage of trade and the course of performance. See also contract.
Agreement to agree

A mutual understanding between two or more legally competent individuals or entities that they will later enter into a contract even though the contract’s exact terms have not yet been decided; non-binding.

Binding agreement

An enforceable agreement or contract is binding agreement.

Collective bargaining agreement

A contract between an employer and a union or other representative, voluntarily selected by a majority of the employer’s workers within a bargaining group, concerning the wages, hours, and other conditions of employment for that group.

Divorce agreement

An agreement between spouses made during a divorce concerning child custody, child and spousal support, property distribution, and other matters. Such agreements are usually incorporated into the parties’ divorce decree. See separation agreement.

Gentlemen’s agreement

An agreement not intended by the parties to be legally enforceable, but that is expected to be performed or followed as a matter of friendship or honor. May or may not involve illegal subject matter such as gambling bets.

Postnuptial agreement

An agreement between spouses made during their marriage to determine the right to support and each other’s property in case of death or divorce. Such agreements are not enforceable unless each party makes a full disclosure to the other of their assets and has consulted with their own attorneys. Even then, most such agreements are not enforceable unless made by spouses who are in the midst of a separation or divorce.

Prenuptial agreement

An agreement between spouses made before their marriage to determine the right to support and each other’s property in case of death or divorce. Generally, such agreements are enforceable, especially if both parties make a full disclosure of individual assets and have consulted with their own attorneys. See also postnuptial agreement and separation agreement.

Separation agreement

An agreement between spouses made during a divorce or while obtaining a legal separation concerning child custody, child and spousal support, property distribution, and other matters is called separation agreement. Such agreements are usually incorporated into the parties’ divorce decree or into a judicial decree granting a separation to the parties. It is frequently referred to as property settlement agreement (PSA).

Simple agreement

An agreement for which nothing is legally required to make it enforceable other than some evidence that the agreement was made and the parties consent to it.

Differences between Contract and Agreement:

Contract- According to section 2 (h) of the Indian contract act ” an agreement enforceable by law is a contract”.

Hence every agreement and promise enforceable by law is a contract.

Agreement- According to section 2(e) of the Indian contract act ” Every promise and every set of promise forming the consideration for each other is an agreement”.

When there is a proposal from one side and the acceptance of that proposal by other side. It results in a promise. This promise from the two parties to one another is known as an ”agreement”.

As noted above, an agreement enforceable by law is a contract.

All such agreement which satisfy the conditioned mentioned in sec 10 of Indian contract Act is contracts. Section 10 is as under–

”10. all agreements are contract if they are made by the free consent of parties competent to contract for a lawful consideration and with a lawful object , and are not hereby expressly declared to be void”.

For the validity of contract section 10 requires the following essentials to satisfy[9]

1- There should be an agreement between two parties. An agreement arises when one party makes a proposal or present and the other party accepts the offer.
2- The parties to the agreement should be proficient to contract.
3- There should be lawful deliberation and lawful object in respect of the agreement.
4- There should be free consent of the parties, when they enter in to agreement.
5- The agreement must not be one, which has been declared to be void.

Void Agreement:

Definition:

Literally: Void means having no legal value and agreement means Arrangement, promise or contract made with somebody.  So, void agreement means an agreement that has no legal value.

Traditionally: “An agreement not enforceable by law is said to be void”. [Sec 2(g)]

A void agreement has no legal effect. An agreement which does not satisfy the essential elements of contract is void. Void contract confers no rights on any person and creates no obligation.

Example of void agreement:

An agreement made by a minor, agreement without consideration, certain agreements against public policy etc.

Agreement which become void:
An agreement, which was legal and enforceable when it was entered in to, may subsequently become void due to impossibility of performance, change of law or other reason. When it becomes void the agreement ceases to have legal effect.

EXPRESSLY DECLARED VOID AGREEMENT
there are certain agreements, which are expressly declared to be void.
They are as follows:
(1)      Agreement by a minor or a person of unsound mind.[Sec(11)]
(2)      Agreement of which the consideration or object is unlawful[Sec(23)]
(3)      Agreement made under a bilateral  mistake of fact material to the agreement[Sec(20)]
(4)      Agreement of which the consideration or object is unlawful in part and the illegal  part cannot be separated from the legal part [Sec(24)]
(5)      Agreement made. without consideration.[Sec(25)]
(6)      Agreement in restraint of marriage [Sec(26)]
(7)      Agreement in restraint of trade  [Sec(27)]
(8)      Agreement  in restrain of legal proceedings[Sec(28)]
(9)      Agreements the meaning of which is uncertain [Sec(29)]
(10)    Agreements by way of wager [Sec(30)]
(11)    Agreements contingent on impossible events [Sec(36)]
(12)    Agreements to do impossible acts [Sec(56)]

Void Contract:

Definition

A void contract is one which has no legal effect whatsoever owing to the fact that a transaction which is void is without any legal effect, it I a misuse of terms to call transaction a void contract. It may be called accurately a void transaction or a void agreement.

For an example, a storekeeper agrees to purchase stolen goods. The thief has no recourse at law because the agreement to purchase the goods was void as it assisted a thief to get the benefit or his crime.

Void and illegal contracts distinguished:

A void contract is one which has no legal effect. An illegal contract, like the void contract has no legal effect as between the immediate parties, but has this further effect that transactions collateral become tainted with illegality and therefore become enforceable.

Wagering contract: in Bombay presidency wagering contract are unlawful by statute, and taint collateral transactions rendering themes void. In the rest of India wagering contract are only void, and thus collateral contracts are not affected.

Conclusion:

Contract is an agreement between two or more person creating rights and duties between them and which is enforceable by law. Pollock defines contract as every agreement and promise enforceable at law is contract.

A contract is an agreement creating and stating responsibility between the parties. According to section2b of the contract act, an agreement enforceable by law is contract. So it is clear the contract consist of two elements:
• An agreement
• The agreement should be enforceable by law.

According to section 2e every promise and combination of promises making the consideration for each other is an agreement. It is clear from the definition that promise is an agreement. Section 2 defines the promise as when any person with the suggestion is made indicate his assent thereto, it means the proposal is accepted. A proposal when accepted becomes a promise. We can say that an agreement is an accepted proposal. The process of definition shows that a contract is an agreement, an agreement is a promise and a promise is an accepted proposal. An agreement therefore comes into existence only when one party makes a proposal or offer to the other and that other signifies his assent thereto. In short every agreement is the result of a proposal from one side and its acceptability by the other.

Bibliography:

1.      http://www.lectlaw.com/def/c123.htm

2.      http://en.wikipedia.org/wiki/Contract

3.      Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. 2003. pp. 523. ISBN 0-13-063085-3.

4.      International Principle: Trans-Lex.org

5.      Hans Wehberg, Pacta Sunt Servanda, The American Journal of International Law, Vol. 53, No. 4 (Oct., 1959), p.775.; Trans-Lex.org Principle of Sanctity of contracts

6.      e.g. In England, s. 52, Law of Property Act 1900

7.      2008 Merriam-Webster online dictionary

8.      Catherine Nickerson, “English as a lingua franca in international business contexts”, in English for Specific Purposes, Volume 24, Issue 4, 2005, Pages 367-380

9.      http://www.citehr.com/200242-difference-between-agreement-contract.html#axzz17HIJrzRn

Prepared by:

Rafi Ahmed

Id# 062 551 030

Prepared for:

A. M. Masum(Amu)

Barrister.

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[1] http://www.lectlaw.com/def/c123.htm

[2] http://en.wikipedia.org/wiki/Contract

[3] Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. 2003. pp. 523. ISBN 0-13-063085-3.

[4] International Principle: Trans-Lex.org

[5] Hans Wehberg, Pacta Sunt Servanda, The American Journal of International Law, Vol. 53, No. 4 (Oct., 1959), p.775.; Trans-Lex.org Principle of Sanctity of contracts

[6] e.g. In England, s. 52, Law of Property Act 1900

[7] 2008 Merriam-Webster online dictionary

[8] Catherine Nickerson, “English as a lingua franca in international business contexts”, in English for Specific Purposes, Volume 24, Issue 4, 2005, Pages 367-380

[9] http://www.citehr.com/200242-difference-between-agreement-contract.html#axzz17HIJrzRn