All CONTRACTS ARE AGREEMENT BUT ALL AGREEMENTS ARE NOT CONTRACTS


Introduction
A statutory contract means a contract of the contents of which some portion is filled under a statue. [1] And Agreement is the meeting of minds or a mutual understanding between two or more persons about their reciprocal rights and duties regarding past or future performances. An agreement is the basis of a contract and contract is the structure constructed on these bases. An agreement starts from an offer and ends on consideration while a contract has to achieve another milestone that is enforceability. Later in the article, we will understand the relation and bifurcation of contract and agreement.

Agreement
An agreement is defined as “Every promise and set of promises, forming the consideration for each other, is an agreement” in section 2(e) of the Indian Contract ac Act, 1872. When a proposal is made by one party and the same is accepted by another party, it becomes a promise and when this promise is with some consideration by any of the parties is an agreement.

Elements of Agreement
There are four elements necessary for forming an agreement:
  1. Presence of Parties: There should be always two or more parties for the formation of an agreement. An agreement cannot be made by one party or person, two parties are required as a promise cannot be made by one party only.
  2. Promise: When a proposal made by one party is accepted by another party it becomes a promise. Section 2(b) of the Indian Contract Act, 1872, defines the term “promise”. It provides: “when one person to whom the proposal is made, signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise”.
  3. Consideration: “Consideration” is definable as the “inducement to a contract,” or the “cause, motive, price, or impelling influence which induces a contracting party to enter into a contract.” (2)
  4. Consensus Parties: The free consent of parties is necessary for forming a valid agreement.
Types of Agreement
There are many types of Agreement, on the grounds of enforceability agreement
has two types which are as follows:

(i) Valid Agreement:
All agreements are valid agreements that are enforceable by a court of law. The agreements that can be enforced legally are valid agreements.

(ii) Void Agreement:
According to Section 2(g) of the Indian Contract Act, 1872 and agreement is not enforceable by law is said to be void. Section 24 to 31 and 56 of the Indian Contract Act, 1872 lay down the provisions relating to the agreements which are declared void are as follows:
  • If consideration and objects are unlawful in part. ( Section 24)
  • Agreement without consideration(Section 25)
  • Agreement in restraint of marriage (Section 26)
  • Agreement in restraint of trade (Section 27)
  • Agreement in restraint of legal proceedings (Section 28)
  • Uncertain Agreements (Section 29)
  • Wagering Agreement (Section 30)
  • Agreement contingent on an impossible event (Section 31)
  • Agreement to do impossible acts (Section 56)
  • Agreement to minor
  • When both parties are under the mistake of law.
All agreements are not enforceable by law and therefore, all agreements are not contracts.

Contract
A contract is defined as “an agreement enforceable by law” in Section 2 (h) of The Indian Contract Act, 1872. An agreement between private parties creating mutual obligations enforceable by law. The basic elements required for the agreement to be a legally enforceable contract are mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality.

Elements of Contract
The necessary elements for forming a legally enforceable contract are:
  1. Offer: An offer is a proposal made by one party to the other party which expresses the willingness of the party to be bound on terms.
  2. Acceptance: Acceptance means the offer has been accepted with the terms of the offer by the party to whom an offer was made.
  3. Consideration: A Consideration is to be made by the parties after acceptance of the offer.
  4. Intention: There must be a clear intention of both parties that the agreement is a legally binding contract.
  5. Certainty: The terms or conditions of the contract must be clear and may be discussed between the parties and may be understood in the same manner by both parties. The terms or conditions should not be unlawful or unenforceable.
All Contracts are Agreements
All Contracts are agreements as for the formation of a contract, an agreement is always necessary. There cannot be a contract where there is no agreement. Without an agreement, a contract cannot be formed. Therefore, All Contracts are Agreements. 

All Agreements are not Contracts 
Only those agreements become contract which gives rise to a legal obligation. If no legal duty is enforceable by an agreement, it can never be a contract. And hence agreement is a broader term than Contract.

When Agreement becomes Contract
An agreement is regarded as a contract when it is enforceable by law. The conditions of enforceability are stated in S. 10 of the Indian contract act 1872. According to this
section, an agreement becomes a contract when the agreement is made for some consideration between the parties which are competent to contract and are entering
into Contract with their free consent and has a lawful objective. A lease agreement between two bodies corporate was held legal where it was signed
by one only, representing both sides because he was a director in both the legal entities. [2]

What Agreements are Contracts?
All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not expressly declared to be void.
An agreement becomes a contract when the following conditions are satisfied:-

(i) There is some consideration for it. (S. 2(d) and S. 25)
In return for accepting an offer and making a promise, consideration has to be made to make a valid agreement that could be enforceable by law and thus can become a valid contract. An agreement without consideration is void and it cannot form a valid Contract as a void agreement is not enforceable by law and every valid Contract is enforceable by law.
For example, if a promises to give to B Rupees 10,000 without any consideration, it will be a void agreement. And in another example where A supports B's infant son and B promises to pay A's expenses in doing so will be a contract.

(ii) The parties are competent to contract. (S. 11 and S. 12)
Every person is competent to contract who has attained the age of majority, is of sound mind and is not disqualified by any law from contracting.

(iii) Their consent is free. (S. 13-22)
The parties should enter into a contract by their free consent. There should not be any kind of pressure on the parties to enter into a contract.

(iv) Their object is lawful. (S. 23-30)
The object and consideration need to be lawful. Any unlawful or impractical thing cannot be made an object or consideration in a contract. Every agreement of which object or consideration is unlawful is a void agreement. In B. Rajamani v. Azhar Sultana AIR 2005 AP 260: 2005 2 An LD 862, the contract was enforceable where an agreement to sell the property was reduced to writing but it was not signed by the parties. The contract came into existence when both parties agreed and the fact of non-signing did not mean there was no contract. 
For example, A, B, and C enter into an agreement for division among them of the gains acquired by them by fraud will form a void agreement as the object is unlawful.

References
[1] Indian Thermal Power Ltd. V State of MP 2000 SCC 379: AIR 2000 SC 1005 
[2] Mehta Alloy & Steel Works V Mehta Finance & Leasing Company Ltd. 1987 AIHC 1327 Del 

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