All contracts are agreements but all agreements are not contracts -

Table of Contents

Introduction

The question ” All contracts are agreements, but not all agreements are contracts, in terms of the Contract Act, sometimes creates confusion in our minds. Most of the time, people have the wrong concept regarding agreements and contracts, but there is a difference between a contract and an agreement. They have a problem differentiating them. As a result of that, they must face a lot of unnecessary problems. To avoid the hassle in your legal practice, you need to check all details of the conditions when an agreement becomes a contract.

Contract

In this regard, before you come to know about an agreement, you should know the definition of a contract. Under section 2(h) of the Indian Contract Act 1872, the contract is :

‘An agreement enforced by the law is a contract.’

According to Sir Fredrick Pollock, the Contract goes as follows:

“Contract becomes very active from each & every agreement and promise can also be covered under the law that can be enforceable.”

According to Anson, the contract comes with the following words.

‘A contract goes with an actionable promise or promises. Such type of promise involves two parties, such as a promisor and a promisee, with an expression of the common intention as well as expectation according to the act or forbearance promised.

According to Salmond, ‘Contract becomes an agreement making and defining obligation between parties.

For example, when A promises to sell a Television to C @ Rs. 6,000, then it is called an agreement, and C promises to buy the Television at the same price. Here it goes as an ‘Enforceability of the agreement ‘.

According to the law of agreement under section 2(e) of the Act: Each word under promise goes under consideration from one to another, and the complete matter becomes an agreement. After checking the definition of the agreement, it can be surely told that a promise is an agreement.”

Different types of contracts can be executed between the contracting parties as per their understanding or business requirements.

Promise

Under section 2(b), according to the Indian Contract Act, 1872, the term promise comes as follows.” If a person goes with consideration for a proposal, then it denotes his assent, and simply the proposal goes for acceptance. That means when a proposal is accepted, it turns into a promise. To check whether all agreements are contracts or not, go through the below.

Surely, an agreement is a bilateral transaction among persons, and it involves a proposal or even an offer by one person, and there must be an acceptance of such proposal by another one. On the other hand, it requires a ‘plurality of persons’ as a single person does not agree with himself.

According to the details mentioned above, an agreement turns itself into a contract if it comes to be raised for the lawful obligation. The thing is that if an agreement does not go under the law enforceable, it will not go for a contract.

Agreement under Enforceability

Under Section 10, the Act comes to deal with the conditions of enforceability of an agreement. According to it, “All agreements come as contracts when they are under the free consent of the parties which gives competence to the contract. For a lawful consideration and object, these are not declared to be void.

Nothing in the contract will affect any law in force in India and not expressly repealed and by which the contract should come in writing or the presence of witnesses or, moreover, any law regarding the registration of documents. The Agreement without consideration is void in the eyes of the law.

In this way, under section 10 of the Act, the following conditions should also be essential for a valid contract: –

Competent Parties

According to sections 11 and 12 of the Act, the following persons are not competent to contract, which means ‘all agreements are contracted’ is not possible.

(i) In the case of Minors (Mohori bibee v. Dharmodas Ghose) – It happened that an agreement with the minor was void)

(ii) Persons have a sound mind

(iii) Persons disqualified from contracting by the law to which they are subject.

They must agree to something

They must come to agree on something in the same sense, and the consent of the party must not be obtained by

Coercion (S. 15 of the Contract Act ) – An act is forbidden by the Penal Code.

(In Chikam Amiraju V. Chickam Seshamma) It was held that the threat of suicide amounts to coercion under Section 15 of the Contract Act.

Undue Influence (S.16 of the Contract Act ) – The influence in which a person is induced for an act otherwise than by their own will or without the necessary attention to the consequences.

Fraud – (S.17 of the Contract Act)- Fraud is defined under section 17 of the Indian Contract Act, 1872.

Misrepresentation – (S.18 of the Contract Act) – Negligent, Fraudulent, or innocent misstatement, even an incomplete statement of a material.

Mistake – Here, both the parties to an agreement are under a mistake, as there must be an essential element to the void agreement.

Consideration and lawful object

For the formation of a contract, where the fact does not go for “all agreements are contracts”, it is important that the consideration and the object under a contract must be lawful. Consideration, as well as object, is said to be unlawful if-

It is completely forbidden by law

It would come to defeat the provisions of any law,

It is fraudulent

It implies or involves an injury to the person or property of another.

The court comes as immoral or against public policy.

The agreement that must be made for some consideration (S.25 of the Contract Act)

Section 25 of the Act declares that an agreement without consideration becomes void. However, there are certain conditions enumerated in Section 25 under which a contract without consideration becomes a valid one.

The agreement must not be declared void

Under the Indian Contract Act, the following agreements come to be declared void –

Where the parties both to an agreement are under a mistake of the fact that is essential to the agreement. (Section 20)

An agreement comes without consideration ( Section 25)

An agreement in restraint of the marriage of any person without minority. ( Section 26)

The agreement is in restraint of trade (Section 27)

An agreement becomes an absolute restraint of judicial proceedings ( Section 28)

The meaning of an agreement is uncertain and incapable ( Section 29)

Agreement by way of a wager ( Section 30)

Agreement contingent for impossible matter ( Section – 36)

An agreement becomes to do an act that is not possible or which is subsequently impossible in itself without any default of a party. ( U/S 56)

Other legal requirements

An agreement will fulfil all the requirements of formalities necessitated by the particular law. The agreement must come in writing, be attested, and be registered if so required by the law in force in India. Certain agreements, such as :

An agreement to pay for a time-barred debt;

An agreement for transfer in case of an immovable property.

An agreement refers to the matter of arbitration in case of a dispute.

Such agreements must be reduced to writing and registered.

Conclusion

A contract becomes a legally binding agreement that exists between two or more parties to do something or not. An agreement that stays between two or more parties to do or not to do something. An agreement begins with an offer and ends with consideration, but a contract goes beyond that to achieve enforceability. For this breach of contract, a legal remedy comes to the aggrieved party against the guilty party. That means we can say that all contracts undoubtedly are agreements, but it is not that ‘all agreements are contracts’.