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October 17, 2021

Contract Vs. Agreement

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When it comes to legal terms, words like contract and agreement may seem interchangeable to some people. However, in the legal world, there is a difference between the two. In this article, we`ll take a closer look at the differences between a contract and an agreement.

Definition of a Contract

A contract is a legally binding agreement between two or more parties. It outlines the terms and conditions of the agreement and sets out the obligations and responsibilities of each party. Contracts can be verbal or written, but it`s always a good idea to have a written contract as it provides clear evidence of the terms of the agreement.

A contract must have several elements to be legally binding, including:

– Offer: One party must make an offer to the other.

– Acceptance: The other party must accept the offer.

– Consideration: The parties must exchange something of value, such as money, goods, or services.

– Legal capacity: The parties must have the legal capacity to enter into a contract.

– Intent: The parties must have the intent to create legal relations.

Definition of an Agreement

An agreement is a broader term that refers to any arrangement between two or more parties. It can be formal or informal, written or verbal. Unlike a contract, an agreement may not necessarily be legally binding. For example, two friends may make an agreement to meet for lunch, but this agreement is not legally enforceable.

One key difference between a contract and an agreement is that a contract requires all parties to have legal capacity and intent to create a legally binding agreement. An agreement, on the other hand, does not necessarily require legal capacity or intent. For example, an agreement between a parent and child may not be enforceable in court, but it still represents an arrangement between the two parties.

Which One Should You Use?

If you`re entering into a business arrangement or any other agreement that involves money or legal obligations, it`s always a good idea to use a contract rather than an agreement. A contract provides clear evidence of the terms of the agreement and can be enforced in court if necessary. On the other hand, if you`re just making a casual agreement with someone, such as agreeing to help a friend move, an informal agreement can suffice.

In conclusion, while the terms “contract” and “agreement” are often used interchangeably, they have different meanings in legal terms. A contract is a legally binding agreement that requires certain elements to be met, while an agreement refers to any arrangement between two or more parties, whether legally binding or not. Always make sure to use the appropriate term depending on the nature of your agreement.

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