‘All Contracts Are Agreements but All Agreements Are Not Contracts.’ Discuss.

697 Words Dec 1st, 2010 3 Pages
A contract is a legally binding agreement or relationship that exists between two or more parties to do or abstain from performing certain acts. A contract can also be defined as a legally binding exchange of promises between two or more parties that the law will enforce. For a contract to be formed an offer made must backed acceptance of which there must be consideration. Both parties involved must intend to create legal relation on a lawful matter which must be entered into freely and should be possible to perform.
An agreement is a form of cross reference between different parties, which may be written, oral and lies upon the honor of the parties for its fulfillment rather than being in any way enforceable.
All contracts are agreement
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From the above definition, we find that a contract essentially consists of two elements: (1) An agreement and (2) Legal obligation i.e., a duty enforceable by law. We shall now examine these elements detail.

1. Agreement. As per section 2 (e): "Every promise and every set of promises, forming the consideration for each other, is an agreement." Thus it is clear from this definition that a 'promise' is an agreement. What is a 'promise'? The answer to this question is contained in section 2 (b) which defines the term." When the person to whom the proposal is made signifies his assent thereto the proposal is said to be accepted. A proposal, when accepted, becomes a promise." An agreement, therefore, comes into existence only when one party makes a proposal or offer to the other party and that other party signifies his assent (i.e., gives his acceptance) thereto. In short, an agreement is the sum total of 'offer' and 'acceptance'.

On analyzing the above definition the following characteristics of an agreement become evident:
i. At least two persons. There must be two or more persons to make an agreement because one person cannot inter into an agreement with himself. ii. Consensus-ad-idem. Both the parties to an agreement must agree about the subject matter of the agreement in the same sense and at the same time.

2. Legal obligation. As stated above, an agreement to become a contract must give rise to a legal

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