All of understand that the terms “Agreement” and “Contract” means one and same thing.
But, do these two terms have same meaning?
To understand this, we have to look at the definition of these two words in English Dictionary.
The Online Oxford English Dictionary defines “Agreement” as:
It defines “Contract” as:
So, from above definitions it is clear that both terms are interchangeable in English language.
But, is there any difference between the two terms under Indian Contract Act, 1872 (“ICA”)?
Let’s check out.
Section 2(e) of the ICA defines an “agreement” as:
“Every promise and every set of promises, forming the consideration for each other”
Section 2(h) of the ICA defines a “contract” as:
“An agreement enforceable by law is a contract.”
Section 10 of the ICA further clarifies “What agreements are contracts” as:
“All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void”.
So, under the ICA, an “agreement” is not a “contract” unless it fulfils all conditions under the Sections 2(h) and 10 of the ICA.
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