When it comes to legal documents, many people use the terms “contract” and “agreement” interchangeably. However, there are distinct differences between the two terms that anyone looking to enter into a legal arrangement should be aware of.

Definition of a Contract

A contract is a legally binding agreement between two or more parties. It is a written or spoken agreement that identifies the obligations and expectations of each party involved. The purpose of a contract is to make sure that all parties are aware of their responsibilities and can be held accountable if they fail to meet them.

A contract must contain certain elements to be considered valid, such as an offer, acceptance, and consideration. The offer is a promise to perform some act or provide a service. The acceptance is the agreement to the terms of the offer, and the consideration is something of value exchanged between the parties.

Definition of an Agreement

An agreement is similar to a contract, but it may not always be legally binding. An agreement is a verbal or written understanding between two or more parties that outlines the terms and conditions of a particular arrangement. It can be a simple agreement or a complex one.

Agreements can be used to establish the terms of a business relationship, a partnership, or a joint venture. They can also be used in non-business settings such as rental agreements or employment contracts.

Unlike a contract, an agreement does not always require consideration. An agreement may be legally enforceable if it fulfills certain criteria, such as being in writing, being signed by both parties, and having a mutual understanding of the terms.

Key Differences between a Contract and an Agreement

The primary difference between a contract and an agreement is enforceability. A contract is legally binding and enforceable by law. If one party fails to fulfill their obligations, the other party can seek legal remedies such as compensation, damages, or specific performance.

In contrast, an agreement may not always be legally binding. It depends on the circumstances under which it was created. If the agreement is in writing, signed by both parties, and contains all the necessary elements of a contract, then it may be legally binding.

Another difference is the level of complexity. Contracts tend to be more complex than agreements, especially when it comes to commercial contracts. Agreements can be as simple as a handshake agreement between friends.


In summary, contracts and agreements are two legal terms used to describe relationships between parties that involve certain obligations and expectations. The primary difference between them is enforceability. Contracts are legally binding and enforceable by law, whereas agreements may or may not be legally binding, depending on the circumstances. Understanding the differences between the two terms can help you make informed decisions when entering into legal arrangements.