ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE NOT CONTRACTS |P a g e | 1

ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE NOT

CONTRACTS1

INTRODUCTION

This statement is a true and valid statement. Before discussing the statement critically, we
need to know in the context of law, the exact and fundamental meanings of the two terms
contract and agreement. We need to go to the Contract Act 1872 that is applicable in the
subcontinent to understand the meaning.

A contract is a legally binding agreement or relationship to do or abstain from performing

certain acts between two or more parties. A contract may also be defined as a legally binding
exchange of promises to be enforced by law between two or more parties. In order to form a
contract an offer made must be accepted backed by which consideration must be given.
Both parties must have the intention of establishing legal relationships on a legal matter that m
ust be freely entered into and that should be possible.

An agreement is a form of cross reference between different parties that can be written, oral,
and is based on the parties ' honor for fulfillment rather than being enforceable in any case.

According to Section 2(e) of Contracts Act 1950 “every promise or every set of promises
bring into existence of the consideration for each other an agreement. It is a fact stated that an
agreement is a proposal and its acceptance, by which by more than one person or parties
agreed to do abstain from doing an act. But a contract which is in line with Section 2(h) of the
Indian Contract Act,” An agreement enforceable by law is a contract, it has clearly explained
that the elements of a contract are between Agreement Contractual Obligation and
Enforceability by Law.

1
Aastha Asmita ,4th Year, BA.LLB, Symbiosis Law School, Hyderabad
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Section 10 provides what agreements are contract.

In accordance with Section 10, the following ingredients must be fulfilled in order to be a
contractual agreement

 Competency of parties
 free consent of parties
 lawful consideration
 lawful object
 not expressly declared to be void.

The agreement fulfilling the conditions is a contract if it does not fulfill it is not a contract.
The first condition of section 10 is that the agreement must be concluded by the person
concerned. If agreement is reached by a person who is incapable of contracting pursuant to
Sections 11 and Section 12 of the Contract Act, it is not a contract but, as in the case of
Mohari Bibi v Dharmodash Ghosh,2 it is a void agreement. Such an agreement is void ab
intio.

The second condition is that the parties ' consent must be free within the meaning of Section
13 and Section 14. If the parties ' consent is not free, it is a contract clot, but a voidable
contract.

The third and fourth condition for Section 10 is the legitimate consideration and legal object
within the meaning of Section 23 and Section 24. If the consideration and object is unlawful
then the agreement will not be enforceable by law and will be void.

And the last condition of section 10 is that this The Indian Contract Act itself declares certain
agreement to be void must not explicitly declare the agreement to be void. Section 26 to 30
deals with it .

Thus, based on the analysis of definition of agreement (2 e), promise (2 b), contract (2 h)
and Section 10 conditions, we find the statement “ all contracts are agreement but all
agreements are not contracts” is true in respect of the Indian Contract Act 1872.

A contract includes the agreement, but not only “those agreements that are enforceable by
law”, in other words, that fulfill the condition of Section 10, are contractual.

2
(1903) 30 Cal. 539
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After reviewing the legal definition, we had two key points for both the statements.
 Statement I- All contracts are agreements
 Statement II- Agreements are not necessarily contracts
For Statement I-

1. Mutual understanding between the contracting parties for a contract to be formed —

that is, they agree to be legally bound to each other under the terms and conditions of
their agreement.
2. The contract is a voluntary agreement between the parties that is enforceable in and by
law as a binding legal agreement.
For Statement II-

1. An agreement at the most fundamental level is a form of cross-reference between

different parties for fulfillment by honour rather than being enforceable in any way by
law.
2. It usually lacks one or more of the essential elements needed for a valid contract to be
present.
EXAMPLE: A invites B to dinner. B accepts this invitation but is not taking part in the
dinner. A is unable to sue B for damages. Because it does not create legal obligation, it is
social agreement. It's not a contract, therefore. (Statement II)
A promises to sell his car to B for one million. As it creates legal obligations between the
parties, it is legal agreement. It's a contract, therefore. (Statement I)

SIGNIFICANT DESCRIPTION OF THE STATEMENTS BELOW-

All Contracts are Agreement

An agreement is essential for a contract to be in place; there can be no contract without an

agreement. As the saying goes, “where there is smoke, there is fire; for without fire, there can
be no smoke”. It could will be said, “where there is contract, there is agreement without an
agreement there can be no contract”. Just as a fire gives birth to smoke, a contract is born in
the same way as an agreement.
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Another essential element of a contract is the contracting parties’ legal obligation, many
agreements do not involve any legal obligations. As such, it is impossible to call these
agreements contracts.

All Agreements are not Contracts :

Only when it is enforceable by law is an agreement called a contract. Not all agreements are
legally enforceable necessarily. It can rightly be said that there is a much broader scope for an
agreement than a contract. For example, it is an invitation to dinner or to go for a walk and its
acceptance that agreements are not legally binding.

These are agreements that are not contracts.

An agreement does not necessarily imply that the parties to the agreement have a legal
obligation. Clarifying what exactly is an obligation is imported here. Obligation is a legal tie
that imposes the necessity of doing or abstaining from doing certain acts or acts on a person or
persons.

CONCLUSION

Lastly, we can say that all agreements are not contracts, the agreements that are being treated
as contracts under within the framework of contract law.On the other hand, there must be a
agreement in all contracts because without an agreement no contract can be formed.
So it can be said without a doubt that- “All contracts are agreement but all agreements are not
contract”.

From what has been said so far, it would be clear that an agreement has a much broader scope
than a contract.An agreement implies fulfillment of a condition agreed upon.It does not necess
arily imply that the conditions stipulated are law - compliant and enforceable by it.

An agreement can be said to be the genus of which the species is the contract. A contract is
the basis of a contract in a nut shell, and the contract is the structure built on that basis. An
agreement begins with an offer and ends on consideration while another milestone that is
enforceability has to be achieved by a contract.

Thus we can say that “all contracts are agreements but all agreements are not contracts”.
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BIBLIOGRAPHY-

Articles Referred-

1. „Brief notes on All Contracts are Agreements but All Agreements are not Contracts by
Sudhir Singh, Available at http://www.preservearticles.com/2012012621479/brief-no’tes-
on-all-contracts-are-agreements-but-all-agreements-are-not-contracts.html
2. „All Contracts are agreements but all Agreements are not Contracts. Explain the
statement‟ by Rafi Ahmed, Available at http://www.lawyersnjurists.com/article/all-
contracts-are-agreements-but-all-agreements-are-not-contracts-explain-the-
statement/#_ftnref9
3. „Difference Between Agreement And Contract’ by Satyam Available at
https://www.citehr.com/200242-difference-between-agreement-
cntract.html#axzz17HIJrzRn

Books Referred-

1. Contract and Specific Relief, 11th Edition by Avtar Singh

2. The Indian Contract Act, 15th Edition by Sir Dinshaw Mulla