In our daily lives, we make many promises and agreements some casual, some serious. But in the world of law, not all agreements are treated equally. To be legally valid, an agreement must meet certain requirements. This is why we often hear the phrase "All contracts are agreements, but all agreements are not contracts." This means that while every contract starts as an agreement, not every agreement can become a contract unless it’s enforceable by law.
What is a Contract?
A contract is a type of agreement that the law recognizes and enforces. According to Section 2(h) of the Indian Contract Act, 1872, “An agreement enforceable by law is a contract.” For an agreement to turn into a contract, it must include an offer, acceptance, consideration (something of value), free consent, a lawful object, and an intention to create legal obligations. For example, if A agrees to sell his horse to B for ₹1,00,000 and B agrees to buy it at that price, it is a valid contract because it includes all the required elements.
All Contracts Are Agreements
Before anything becomes a contract, it starts as an agreement. You can’t have a contract without an agreement. As per Section 2(e) of the Indian Contract Act, “Every promise and every set of promises, forming the consideration for each other, is an agreement.” This means that when two or more people promise to do something for each other, it becomes an agreement. When this agreement is legally enforceable, it turns into a contract. So, every contract must first be an agreement.
All Agreements Are Not Contracts
However, not all agreements meet the conditions to become contracts. Many agreements—especially social, moral, or domestic ones are not meant to create legal obligations, so the law does not treat them as contracts. For example, if A invites B to dinner and B doesn’t show up, A cannot sue B. This is because both parties never intended for this social promise to have legal consequences.
Also, certain agreements are not valid due to legal incapacity. For instance, if a minor tries to sell property, that agreement is not enforceable by law because minors are not legally capable of entering into contracts. So, while such cases involve mutual promises, they don’t become contracts as they are not recognized by the law.
Legal Principle behind it
The line between agreements and contracts lies in legal enforceability. Only those agreements that create legal rights and duties are considered contracts. Others remain as simple agreements with no legal effect. Thus, a contract is a specific type of agreement, one that meets all legal conditions laid out in Section 10 of the Indian Contract Act.
Conclusion
To sum up, while every contract is an agreement, not every agreement is a contract. Agreements become contracts only when they are backed by law. This distinction is important in legal studies because it helps us understand what types of promises can be enforced in court. So, whether you’re forming a business deal or simply planning dinner with a friend, the difference lies in intention, legality, and enforceability.
