What Is Agreement and Contract Explain with the Help of Example
Agreement and contract are two terms that are often used interchangeably, but they are not the same thing. An agreement is an understanding between two or more parties, while a contract is a legally binding agreement that outlines the terms and conditions of a specific transaction. In this article, we will explain the differences between agreement and contract, and provide examples of each.
Agreement
An agreement is a mutual understanding between two or more parties regarding a particular matter. It is not necessarily a legally binding document, but it sets the framework for the relationship between the parties. An agreement can be verbal or written, and it can be as simple as a handshake or an email exchange.
For example, if two friends agree to split the bill at a restaurant, they have made an agreement. This agreement is not legally binding, but it sets the expectations for both parties. Another example of an agreement is a letter of intent between a buyer and a seller. This document outlines the general terms of a potential transaction, but it is not a legally binding contract.
Contract
A contract is a legally binding agreement that outlines the terms and conditions of a specific transaction. It is a written document that is signed by all parties involved, and it sets out the obligations, rights, and responsibilities of each party. A contract can be used in a variety of contexts, including employment, real estate, and business transactions.
For example, if a person hires a contractor to remodel their home, they will sign a contract that outlines the scope of the work, the payment terms, and the timeline for completion. This contract is legally binding, and both parties are obligated to fulfill their obligations outlined in the document. Another example of a contract is a lease agreement between a landlord and a tenant.
Key Differences
The main difference between an agreement and a contract is enforceability. A contract is a legally binding agreement that can be enforced in court if one party fails to fulfill their obligations. An agreement, on the other hand, is not necessarily legally enforceable, but it sets the expectations for the relationship between the parties.
Another difference between an agreement and a contract is the level of detail. A contract is a detailed document that outlines the specific terms and conditions of a transaction, while an agreement can be more general and open-ended.
Conclusion
In conclusion, an agreement is a mutual understanding between two or more parties that sets the framework for a relationship. A contract, on the other hand, is a legally binding agreement that outlines the terms and conditions of a specific transaction. It is important to understand the differences between an agreement and a contract, as each serves a different purpose and has different legal implications. When entering into a transaction, it is important to carefully consider whether an agreement or contract is appropriate for the situation.