Why All Contract Are Agreement

As a professional, I have witnessed a common mistake made by people when referring to contract and agreement. Many people tend to use these words interchangeably, but they are not synonymous.

In its simplest form, a contract is a legally binding agreement between two or more parties that creates an obligation to do or not to do something. It involves an offer, acceptance, and consideration. On the other hand, an agreement is a broader term that refers to any mutual understanding or arrangement between two or more parties.

The confusion usually arises when people assume that all agreements are contracts. However, this assumption is incorrect. Not all agreements are enforceable in court, and thus they are not contracts. But, all contracts are agreements.

An agreement can be legally binding or non-binding, depending on the circumstances and the intention of the parties involved. For example, a verbal agreement between two friends to go hiking on the weekend is a non-binding agreement. If one friend bails out, there are no legal consequences. However, a written agreement between two businesses to supply goods or services is a legally binding contract. If one party fails to fulfill their obligations, there are legal consequences.

The main difference between a contract and an agreement is the intention to create legal obligations. A contract is designed to create legal enforceability, whereas an agreement may or may not. Without the intention to create legal obligations, an agreement is not a contract.

In conclusion, it is important to understand the distinction between a contract and an agreement. While the terms are sometimes used interchangeably, all contracts are agreements, but not all agreements are contracts. It is always advisable to ensure that all agreements are drafted in a manner that reflects the intention of the parties involved. This will prevent any confusion or legal issues that may arise in the future.