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All CONTRACTS ARE AGREEMENT BUT ALL AGREEMENTS ARE NOT CONTRACTS
All CONTRACTS ARE AGREEMENT BUT ALL AGREEMENTS ARE NOT CONTRACTS
A statutory contract means a contract of the contents of which some portion is filled under
a statue. [1] And Agreement is the meeting of minds or a mutual understanding between
two or more persons about their reciprocal rights and duties regarding past or future
performances. An agreement is the basis of a contract and contract is the structure
constructed on these bases. An agreement starts from an offer and ends on consideration
while a contract has to achieve another milestone that is enforceability. Later in the article,
we will understand the relation and bifurcation of contract and agreement.
Agreement
An agreement is defined as “Every promise and set of promises, forming the consideration
for each other, is an agreement” in section 2(e) of the Indian Contract ac Act, 1872. When a
proposal is made by one party and the same is accepted by another party, it becomes a
promise and when this promise is with some consideration by any of the parties is an
agreement.
Elements of Agreement
There are four elements necessary for forming an agreement:
1. Presence of Parties: There should be always two or more parties for the formation of
an agreement. An agreement cannot be made by one party or person, two parties
are required as a promise cannot be made by one party only.
2. Promise: When a proposal made by one party is accepted by another party it
becomes a promise. Section 2(b) of the Indian Contract Act, 1872, defines the term
“promise”. It provides: “when one 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”.
3. Consideration: “Consideration” is definable as the “inducement to a contract,” or the
“cause, motive, price, or impelling influence which induces a contracting party to
enter into a contract.” (2)
4. Consensus Parties: The free consent of parties is necessary for forming a valid
agreement.
Types of Agreement