Proposal:
Section 2(a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.
The word Proposal is synonymous of the English law term Offer.
Acceptance:
Section 2(b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.
Promise:
Section 2(c) When a proposal is accepted it becomes a promise.
The person making the proposal is called the Promisor and the person to whom the promise is made is called the Promisee.
Agreement:
Section 2(e) Every promises and every set of promises forming the consideration for each other is an agreement.
Contract:
Section 2(h) An agreement enforceable by law is a contract.
A contract is an agreement, object of whose is to create an obligation. Thus when a man compels other person to do something or not to do something is contract.
Distinguishes between Contract and Agreement:
| Agreement | Contract | |
| a. | Agreement is discussed in section 2(e) of the Contract Act, 1872 | Contract is discussed in section 2(h) of the Contract Act, 1872 |
| b. | Every promises and every set of promises forming the consideration for each other is an agreement. [ 2(e) ] | An agreement enforceable by law is a contract. [ 2(h) ] |
| c. | Agreement is the previous stage of contract. | Contract is the next stage of agreement. |
| d. | All agreements are not contract. | All contracts are agreement. |
| e. | Agreement always may not create a legal obligation | Contract always creates a legal obligation. |
| f. | Agreement always may not enforceable by law. | Contract always enforceable by law. |
“All contracts are agreements, but all agreements are not contracts.” – Discuss
Agreement:
Section 2(e) Every promises and every set of promises forming the consideration for each other is an agreement.
Contract:
Section 2(h) An agreement enforceable by law is a contract.
| Elements of Agreement | Elements of Contract |
| Two or more parties Offer Acceptance Consideration | Two or more parties Offer Acceptance Consideration Enforceable by law |
There are four elements of an agreement, but five elements of a contract. All the four elements of an agreement are present in a contract. The element ‘enforceable by law’ is extra for the contract to agreement. Agreement is the previous stage of contract and a contract is the next stage of agreement. So, Agreement is genus and contract is species.
For this it is said, ‘All contracts are agreements, but all agreements are not contracts’.
