The Difference Between Contracts and Agreements

These two terms tend to overlap each other as people tend to use them interchangeably in common usage. An agreement is an informal promise or understanding between two or more parties. The agreement is made from the valid and mutual consent of both parties. Also, the contract is not enforced by any law.

A contract is a specific formal agreement between two or more parties, usually in writing and signed. Generally, the parties in a contract intend to have a legal relationship; hence the contract is enforced by law.

If Two parties enter into an agreement(contract), and any party fails to adhere to the terms, the other party can file or sue legal action from the court. In other words, all contracts are agreements, but not all agreements are contracts. An agreement starts with an offer and ends on consideration, but a contract has to achieve the legal target.

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Contracts have certain essential elements, which is a must. They appear to make them legal. They include;

Offer and Acceptance

It can also define as a stage where two parties come into a meeting of the minds. Offers can either be unilateral as in the case of insurance policies or bilateral, meaning that it is a promise for a promise as in the case of sales contracts. 

One party desire something, and the other party comes to fulfill that desire hence offering the offer. The offer can be terminated or altered at any time before acceptance. When the offer is accepted, the two parties are now making an agreement and then legalizing it. Approval may be expressed through words, deeds, or performance.


This is something of value that is exchanged or bargained for exchange between parties. They can take the form of tangible goods (money), intangible (services), performance, or even protection from harm. Both parties must provide something of value for a contract to be made. The existence of consideration distinguishes a contract from a gift.

Mutual Consent

The offer must be freely accepted by the parties, with no force involved. Therefore, any agreement made under pressure may be termed invalid. It should be a smooth process. Both parties must understand and agree to the same terms of the contracts.


The contract must abide by legal conduct and must be legally enforced. These contracts must be for a lawful purpose; hence nothing illegal will take place between the two parties.

Additionally, the following are different critical levels that differentiate between an agreement and a contract.

Different at The Level of Action 

An example of the difference between a contract and an agreement is that we assume you have a friend John. You tell John you will help him do a certain job because he is held up. This will be an agreement because you are not exchanging something in return after helping him. There is no legal binding in this example. But when you consider that the work you are doing to help John is too much work, you can tell John to pay you to help him with the work. You can include signatures now that you are doing the work upon being paid.  Because of the signature, you must complete the given task, and hence this becomes a contract.

Different at The Level of Writing

Agreements can be written down, signed but this doesn’t make their contracts because they don’t have the essential elements of a contract as discussed above. On the other hand, contracts can be written or even verbal as long as they contain the elements of a contract. 

The most advisable type of contract to go with is the written contract. A verbal contract relies on the good faith of both parties, and an important tip is to trust no one. If someone fails to abide by the terms of the contract, you will be able to provide evidence, but for a verbal contract, there Is no proof, which might end up hard solving in court. A written contract will always be more accessible to enforce than a verbal contract. 


The scope of an agreement is said to be narrow, while the scope of a contract is said to be relatively more comprehensive since all contracts are agreements.

Final Words

To sum up, it can be said that agreements and contracts are the same but surely not the same. An agreement is all cool if you know the person well and are certain they won’t go against the agreed deal, and the deals are just informal. However, if you are getting into severe deals with a person, contracts are the better option.

Before having thoughts of entering into a legal relationship(contract) with another party, seek advice first from a contracts lawyer. Always know that contracts are complex, and it is crucial that you fully understand the terms of a contract before signing anything.

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