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Bangladesh University of Professionals

Mirpur Cantonment, Dhaka

Faculty of Business Studies


Department of Business Administration in Management Studies

Course Name: Legal Environment of Business


Course Code: ALD-2202
Submitted by
ROLL NUMBER NAME
19241095 Sinhaj Noor
Session: 2018-19

Bangladesh University of Professionals.

Submitted to
Farzana Tazin
Lecturer,

Bangladesh University of Professionals.


Date of Submission: 25th July, 2020.
Assignment 2
Contract vs Agreement
An agreement is an expansive concept that includes any arrangement or understanding between
two or more parties about their rights and responsibilities with respect to one another. Such
informal arrangements often take on the form of “gentlemen’s agreements,” where adherence to
the terms of the agreement relies upon the honor of the parties involved rather than exterior means
of enforcement.
A contract is a specific type of agreement that meets certain requirements designed to create
legally binding obligations between parties that are enforceable by a court of law.
Examples
An agreement may simply involve one party accepting another party's offer. Since this scenario
does not involve consideration, it is not a contract. Other common examples of agreements which
are not contracts include gentlemen’s agreements and unlicensed betting pools. The key element
to all non-contract agreements is that they are not legally enforceable.
Common examples of contracts are non-disclosure agreements, end-user license agreements (both
despite being called “agreements”), employment contracts, and accepted purchase orders.
Regardless of how it is named, as long as an agreement contains the required elements of a contract
enumerated above, a court may enforce it as such.

Difference between Agreement and Contract


Basis for Comparison Agreement Contract
Definition An arrangement (usually A formal arrangement
informal) between two or between two or more party
more parties that is not that, by its terms and
enforceable by law. elements, is enforceable by
law.
Validity based on Mutual acceptance by both (or Mutual acceptance by both (or
all) parties involved. all) parties involved.
Does it need to be in No No, except for some specific
writing? kinds of contracts, such as
those involving land or which
cannot be completed within
one year.
Consideration required No Yes
Legal effect An agreement that lacks any A contract is legally binding
of the required elements of a and its terms may be
contract has no legal effect. enforceable in a court of law.
Void Agreement vs Illegal Agreement
Difference between Agreement and Contract
BASIS FOR VOID AGREEMENT ILLEGAL AGREEMENT
COMPARISON
Meaning An agreement, which lacks An agreement whose creation is
legal enforceability is void forbidden by the court of law is an
agreement. illegal agreement.

Consequence An agreement becomes void An illegal agreement is void ab


when it loses its enforceability initio i.e. void from the very
by law. beginning.

Prohibition by IPC No Yes

Scope Wide Narrow

Penalty Parties to void agreement are Parties to illegal agreement are


not liable for any penalty penalized.
under law.

Connected agreements May not necessarily be void, All connected agreements are void.
they may be valid also.

Void vs Voidable Contracts


Essentially, the difference between void and voidable contracts is enforceability: a void contract
is illegal and unenforceable; a voidable contract is legal and enforceable.
Void contracts
A contract that is void is unenforceable, meaning that neither party has legal recourse against the
other for a breach. A contract can be void from the beginning or become void due to certain
circumstances, including:
 It involves illegal activity
 It is against public policy
 It is impossible to perform
 It involves a party who is not legally competent
A contract may be valid when it is executed, but later become void due to changes in the law or
the circumstances of either party make fulfilling the contract impossible. Some issues will make a
contract “void on its face,” meaning that the contract as written is void and cannot be amended to
make it enforceable.
Voidable contracts
A voidable contract is a valid agreement between two parties where usually only one of the parties
is bound to the contract terms. A voidable contract can still be performed under the law; however,
one party has the option to cancel the contract if the contract has one or more legal defects, such
as:
 Fraud or misrepresentation
 Terms are unconscionable
 Duress or undue influence
 Mutual mistake
If defects are found in the contract, a party can reject it. If the contract is not rejected, it remains a
voidable contract that can be ratified.

Express vs Implied contracts


BASIS FOR EXPRESS CONTRACT IMPLIED CONTRACT
COMPARISON

Meaning Express contract is one in Implied contract refers to a


which the proposal and contract wherein the
acceptance, that results in proposal and acceptance,
an agreement, leading to the contract, is
enforceable by law, is expressed non-verbally, i.e.
expressed verbally. through other means.

Contract creation By words By conduct or behavior

Example Leasing Agreement Sale by fall of hammer in an


auction sale.

Executed vs Executory Contract


Executed Contract: An executed contract is a legal document that has been signed off by the
people necessary for it to become effective. The contract is often made between two or more
people, but it can also be between a person and an entity, or two or more entities. Example: An
executory contract would be an apartment lease. When you enter into a lease agreement, you are
promising to pay the rent for a period.
Executory Contract: A contract under which unperformed obligations remain on both sides, and
where both parties have continuing obligations to perform. Example: Most leases or contracts for
the sale of goods where the goods have not been delivered by the seller and the buyer has not paid,
are executory contracts.
There are some differences between Executed contract & Executory contract:

Executed Contract Executory Contract


1) A contract in which the promises are made 1) An executory contract means that the
and completed immediately. promises of the contract are not fully
performed immediately.
2) Example: Purchase of a product or service. 2) Example: An executory contract would be
an apartment lease.
3) Promised Act is to be done or executed not 3) Promised Act and performance remains to
wholly and not immediately. be done or executed after contract formalized.

“All agreements are not contracts but all contracts are Agreement” Do you
agree? Justify your answer with examples.
Yes, I strongly support the statement “All agreements are not contracts, but all contracts are
agreement” due to the following logical reasons
A contract is a legally binding agreement or relationship that exists between two or more parties
to do or abstain from, performing certain acts. A contract can also be defined as a legally binding
exchange of promises between two or more parties that the law will enforce. For a contract to be
formed offer made must back acceptance of which there must be a consideration. Both parties
involved must intend to create legal relation on a lawful matter which must be entered into freely
and should be possible to perform.
An agreement is a form of cross-reference between different parties, which may be written, oral
and lies upon the honor of the parties for its fulfillment rather than being in any way enforceable.
All contracts are an agreement because there must be a mutual understanding between two parties
for a contract to be formed. All parties should agree and adhere to the terms and conditions of an
offer.
For a Contract to be there an agreement is essential; without an agreement, there can be no contract.
As stated above, an agreement to become a contract must give rise to a legal obligation. An
agreement is incapable of creating a duty enforceable by law. It is not a contract. Thus, an
agreement is a wider term than a contract.
Example: Considering person A buying a radio on hire purchase from person B who deals with
electronics and its appliances. Both parties must come to an agreement on payment of monthly
installment within specified period of time. Such an agreement result, to specialty contract which
a contract under seal. All contracts are agreement until avoided for example, avoidable contract
where one of the parties can withdraw from it if s/he wishes. “All contracts are agreements but all
agreements are not contracts,” Agreements of moral, religious or social nature e.g., a promise to
lunch together at a friend’s house or to take a walk together are not contracts because they are not
likely to create a duty enforceable by law for the simple reason that the parties never intended that
they should be attended by legal consequences.

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