According to section 2(a) of Indian Contract Act states that, “every promise on every set of promises forming the consideration for each other an agreement. An agreement is a form of cross reference between different parties, which may be written, oral and lies upon the honor of the parties for its fulfillment rather than being in any way enforceable. It is also a fact that an agreement is a proposal and its acceptance, by which two or more person or parties promises to do abstain from doing an act. But a contract according to section 2(h) of the Indian Contract Act, “An agreement enforceable by law is a contract.
It is clear these definitions that the two elements of a contract are: (a) Agreement Contractual Obligation (b) Enforceability by Law. For Example: X invites his friend to coffee and the latter accepts the invitation. This is a social agreement not a contract because it does not imply any legal obligation. We can say that: (a) All contracts are agreements, (b) But all agreements are not contracts. (a) All Contracts are Agreements For a Contract to be there an agreement is essential; without an agreement, there can be no contract.
As the saying goes, “where there is smoke, there is fire; for without fire, there can be no smoke”. It could be said, “Where there is contract, there is agreement without an agreement there can be no contract”. Just as a fire gives birth to smoke, in the same way, an agreement gives birth to a contract. Another essential element of a contract is the legal obligation for the parties to the contract; there are many agreements that do not entail any legal obligations. As such, these agreements cannot be called contracts. For Example:
Agreement being written and registered, 8. Capacity to contract, 9. Possibility of performance from what has been discussed. It is clear that all contracts are agreements. (b) All Agreements are not Contracts: An agreement is termed a contract only when it is enforceable by law. All agreements are not necessarily legally enforceable. It can rightly be said that an agreement has a much wider scope than a contract. For example that agreements are not legally binding are an invitation to dinner or to go for a walk and its acceptance. These are agreements not contracts.
An agreement does not necessarily imply a legal obligation on the parties to the agreement. It is import here to clarify what exactly is an obligation. Obligation is a legal tie which imposes upon a person or persons the necessity of doing or abstaining from doing definite act or acts. An agreement need not necessarily be within the framework of law and be legally enforceable. If it is, then it is a contract. A promises B to do physical harm to C whom, the latter does not like and B promises to pay A Ksh. 1000 to do that, it cannot be termed as a contract because such an act would be against the law.
Any agreement of which the object or consideration is unlawful is void and cannot be called a contract. It would be clear from what has been said so far that an agreement has a much wider scope than a contract. An Agreement implies fulfilling some agreed condition. It does not necessarily imply that the stipulated conditions conform to the law and are enforceable by it. It may be said that an agreement is the genus of which contract is the species. It also makes it clear that all agreements are not contracts but all contracts are agreements.