Agreement vs. Contract: Understanding the Differences
When it comes to legal agreements, it can be easy to confuse the terms “agreement” and “contract.” While they may seem similar, there are significant differences between the two that can affect your legal rights and obligations. In this article, we’ll explore the differences between an agreement and a contract in the United States.
Agreement
An agreement refers to a mutual understanding or arrangement between two or more parties. It can be made verbally or in writing and does not necessarily require a formal legal document. For example, a handshake agreement between two business partners can be considered a valid agreement.
However, it’s important to note that an agreement is not enforceable by law unless it meets certain criteria. In general, an agreement must:
– Be entered into voluntarily by all parties involved
– Have a lawful purpose
– Be supported by consideration (i.e., something of value exchanged by each party)
In addition, some agreements must meet specific legal requirements to be enforceable. For example, certain agreements must be in writing and signed by all parties to be legally binding, such as real estate contracts or prenuptial agreements.
Contract
A contract is a legally binding agreement between two or more parties that creates an obligation to perform certain actions or refrain from certain behaviors. Unlike an agreement, a contract must be in writing and signed by all parties involved.
A valid contract must include:
– Offer: One party must make an offer that the other party can accept or reject.
– Acceptance: The other party must accept the offer made.
– Consideration: Both parties must exchange something of value (money, goods, services, etc.) to support the contract.
– Competency: All parties involved must be legally competent to enter into the contract.
– Legal purpose: The purpose of the contract must be legal and not against public policy.
– Mutual agreement: Both parties must come to a mutual agreement on all aspects of the contract.
In addition, contracts can be either express or implied. An express contract is one that is explicitly discussed and agreed upon by both parties. An implied contract is one that is inferred by the actions and behaviors of the parties involved.
Conclusion
In summary, the key difference between an agreement and a contract is that a contract is a legally binding agreement that must meet specific legal requirements, while an agreement can be informal and not necessarily enforceable by law.
Whether you’re entering into an agreement or a contract, it’s important to understand your legal rights and obligations. Consulting with an attorney can help ensure that your agreements and contracts are legally valid and protect your interests.