Agreement Vs Contract – Understanding the Differences in India
Agreements and contracts are two legal terms that are often used interchangeably. However, there is a difference between the two. Whether you are a business owner or an individual, it is essential to understand the distinctions between an agreement and a contract.
In India, an agreement is an oral or written expression of a meeting of minds between two or more parties. It is a mutual understanding between two parties which may or may not be enforceable by law. For instance, if you agree to lend your friend money without any formal documentation, it is considered an agreement.
On the other hand, a contract is a legal binding agreement between two or more parties. It is an agreement that is enforceable by law, and the court can compel the parties to fulfill their obligations under the contract. A contract can be in writing, verbal, or inferred from the conduct of the parties.
The key difference between an agreement and a contract is enforceability. An agreement may not be enforceable, but a contract is legally binding. In India, contracts are governed by the Indian Contract Act, 1872. This act lays down the provisions for the formation of a contract, the rules for its performance, and the remedies available to the parties in case of a breach.
Another difference between an agreement and a contract is the level of formality. An agreement may be verbal or written, and it may not require any specific formalities. However, a contract often requires more formalities, such as signatures, witnesses, and notarization, depending on the nature of the agreement.
In conclusion, agreements and contracts are two distinct legal terms. An agreement is a mutual understanding between two or more parties, while a contract is a legally binding agreement that is enforceable by law. It is essential to understand the difference between the two and choose the right legal instrument to protect your interests. When in doubt, it is always advisable to consult a legal professional who can guide you through the process.