Indian Contract Act 1872:Difference Between Agreement and Contract

The Indian Contract Act came into being in September 1872. The first part of the Act(Section 1 to 75) contains the general principles of the law of contract, and the next part (Section 124 to 258) contains provisions regarding  special contracts like indemnity and guarantee (Section 124 to 147) bailment and pledge (Section 148 to 181) and agency (Section 182 to 238). Section 73 to 123 and 239 to 266 have been replaced and merged into Indian Sale of goods Act and Indian Partnership Act.

Meaning of Contract

Contracts are the basis of most business transactions. The Indian Contract Act as passed in the year 1872. It is most important and basis of mercantile law. A contract is an agreement to do or not to do an act it is a legally binding agreement which is enforced by law.

Definition of Contract

According to Sec 2(h) if Indian Contract Act defines___ Contract as “An agreement enforceable by law”.

According Salmond says___“Contract is an agreement creating and defining obligations between the parties”.

Nature of Contract

The law of contract is that branch of law which determines the circumstances in which promise made by the parties to a contract shall be legally binding on them. All of use enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some right and duties upon the contracting parties.

Indian contract deals with the enforcement of these rights and duties upon the parties. Indian Contract Act,1872 came into effect from 1st September,1872. It extends to the whole of India except the state Jammu and Kashir.

Difference Between Agreement and Contract



1. Proposal plus acceptance plus consideration becomes an agreement.  1. Agreement plus enforceability at law becomes a contract.
2. Agreement is the foundation for a contract. 2. Contract is the final stage of an agreement.
3. All agreements are not contracts. 3. All contracts are agreements.
4. Agreements becomes a contracts only when its is enforceable law. 4. Agreements which are not enforceable at law will not become contracts.
5. Agreement will not create legal obligation. 5. Contracts creates legal obligation between parties.