Differences Between Agreement and Contract

Last Updated: April 27, 2024

Differences Between Agreement and Contract

You may or may not have heard about the statement “all contracts are agreements, but all agreements are not contracts”. You may be confused between the two since they share they same purposes, but keep in mind that they are also very different. Know the key differences between an agreement and a contract with the help of this article. You may also see the  Drafting Joint Promotion Agreements.

Defining Agreements and Contracts

1. Defining Agreements

An agreement is defined as an expansive concept that includes an arrangement or a common understanding between two or more parties regarding their rights and responsibilities with respect to one party to another. You may also see commercial agreement.

Agreements are like promises wherein the fulfillment of the agreement only relies on the honor and honesty of the people involved other than the exterior form of enforcement like in a paper that is legally binding. An agreement could also be defined as an offer which is offered by an individual and its approval and denial depend on the other individual. You may also see partnership agreement.


2. Defining Contracts

A contract is an agreement, however, it is enforceable by law.

Contracts have a more narrow scope compared to an agreement since there are certain conditions or elements which makes an agreement into a contract, the elements are as follows:

  • There have to be two or more parties involved in the agreement.
  • There has to be a consent in terms of the acceptance of the offer.
  • The agreement between the parties is enforced by law.
  • The agreements in the contract have to be detailed.
  • The agreement must not contain any unlawful things.


The Key Differences Between Agreements and Contracts

1. Formality

When it comes to formality, agreements are less formal than contracts. Agreements can be done informally as it is like making a promise to another person. On the other hand, contracts are formal agreements and are usually created for business purposes to ensure the safety of both parties. While you can easily break promises, you cannot breach contracts because these are legally binding. You may also see the Website Hosting Agreement Checklist Examples.

2. Universal rule

Both agreements and contracts follow a universal rule when it comes to both parties fulfilling their end of the agreement or contract. Although there is a greater chance that agreements can’t be fulfilled especially when agreements are not placed into writing. You may also see the Checklist – The Franchise Agreement.

3. Obligation

In terms of obligation, agreements have a more social or domestic role while contracts consist of a legal obligation of the performance of an action. You may also see the Why Business Associate Agreement Templates are Useful.


4. Nature and scope

In terms of its nature and scope, contracts have a wider scope and are very complex in nature especially when used in a business or legal setting. For example, lease contracts where numerous payment and usage terms are incorporated, and legal judgment contracts where the convicted individual needs to comply to a specific set of community and prison obligation terms. You may also see the Roommate Agreement Examples.

5. Registration and writing

For agreements, you do not have to go to a legal or government entity to make it official although there are agreements that require writing (but these written agreements are not notarized). Contracts on the other hand, are written and notarized by a registered lawyer making the document legally binding. Contracts are useless unless they are not notarized, and one or both parties in the contract is not liable for any task or deliverable which cannot be not accomplished after the contract is up. You may also want to know the  Rental Agreement Templates as a Landlord.

6. Legal bounds

Unfortunately, agreements do not possess the capability of being a legal contract. In contracts, the parties involved are legally bound to each other and have to perform each and every item agreed in the contract. Failure to do so may require legal action. You may also see the Contract Templates For The Freelance Designer.

7. Benefits

Agreements are more flexible compared to contracts. It cannot be avoided that there are instances wherein promises are broken due to unavoidable circumstances. Whenever the need for adjustments would come into play, agreements are much better and can be easily negotiated. You may also see business agreements.



Contracts are obviously more detailed compared to agreements. When you have a contract and one party fails to deliver the terms that were listed, it can be a basis for court action which can be a major hassle for both parties. Time and money will be wasted and sometimes there is no clear resolution regarding the issue. On the other hand, agreements are much more flexible and can be adjusted since they are not placed into writing. Despite that, both parties should not run away from their responsibilities even if only an agreement was made. You may also want to know Service Contract Checklists.

The bottom line is that you just have to keep in mind that an agreement is not a contract but a contract is an agreement. We hope you have learned the key differences between agreements and contracts with the help of this article. You may also see management agreements.

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