Contracts and Agreements Comparison and Requirements

There are several similarities between contracts and agreements, but there is also significant difference between them. An agreement can be defined as mutual understanding between several parties concerning their rights, obligations, or performance. A contract, in turn, is “a legally binding agreement between two or more parties which, if it contains the elements of a valid legal agreement, is enforceable by law or by binding arbitration”. Thus, it can be argued that all contacts are agreements, but not all agreements are contracts, because agreements have to meet certain requirements in order to become valid contracts.

The requirements that have to be satisfied refer to a number of important criteria. Three main components that have to be included are an offer, an acceptance, and consideration. Offer refers to one party’s willingness or promise to do something “in exchange for another party’s performance”. Offers can be expressed in different forms, including oral and written statements, or even in conduct, demonstrating behavior that would imply an offer. The party making an offer is referred to as an offeror, while the party receiving the offer is known as the offeree. An acceptance, consequently, refers to the second party’s willingness to accept the offer without any modifications. If the party proposes certain changes, that becomes a counter-offer and cannot be qualified as acceptance. Once the offer is accepted by the offeree without any changes, the agreement becomes a legally binding contract, giving both parties legal rights against each other.

Finally, consideration refers to the exchange of values between parties, where “value” can also take different forms, such as money, property, or services. There are also certain things that cannot be used as values. For example, some values that the parties exchanged in the past cannot be considered as consideration. According to common law, duties that already exist among the parties also cannot amount to consideration. If all these elements are present, an agreement is considered to be legally enforceable.

Contrary to contracts, agreements are not enforceable in court, which means that if one party fails to fulfill their arrangement or promise, the other party will not be able to seek legal enforcement. Thus, agreements mostly rely on trust and do not require compliance with specific legal terms. In addition to offer, acceptance, and consideration, the basic elements that are required for an agreement to become a legally enforceable contract are capacity and legality. These elements refer to the minimal mental capacity required by law and the presence of a legal purpose of the contract. Therefore, while both a contract and an agreement refer to certain promises that one party makes to another, these two forms of arrangements differ significantly; while contracts are legally binding for all parties involved, agreements are not.


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"Contracts and Agreements Comparison and Requirements." LawBirdie, 30 Mar. 2023,


LawBirdie. (2023) 'Contracts and Agreements Comparison and Requirements'. 30 March.


LawBirdie. 2023. "Contracts and Agreements Comparison and Requirements." March 30, 2023.

1. LawBirdie. "Contracts and Agreements Comparison and Requirements." March 30, 2023.


LawBirdie. "Contracts and Agreements Comparison and Requirements." March 30, 2023.