AGREEMENT

A valid agreement is one that, if legally enforceable, transforms into a contract and binds
the parties to its terms and conditions. Section 2(e) of the Indian Contract Act, 1872,
defines an agreement as such. It states that “Every promise and every set of promises,
forming the consideration for each other, is an agreement”. Thus, more than often, a valid
agreement becomes a contract.

Various crucial aspects are essential for an agreement includes:

 Parties: An agreement involves at least two parties, and there can be more,
depending on the conditions or circumstances.

 Offer: There must be an offer made by one party to another, which is also
specified in the agreement.

 Acceptance: The party receiving the offer must accept it, and this acceptance
should align with their will, making it vital for the agreement.

 Promises: Both parties must promise to fulfill all the duties and obligations
mentioned in the agreement.

Consideration: Consideration refers to the monetary value or price for the promise made,
essential for the agreement's validity.

The term "promise" is defined in Section 2(b), where it denotes that when a proposal or
offer is accepted, it transforms into a promise. Put simply, a promise is an offer made by
one person to another, and upon acceptance, it evolves into an agreement.

WHEN IS AGREEMENT TERMED AS VOID

Agreement in restraint of marriage

Section 26 of the Act states that an agreement restraining someone’s marriage shall be
void. This means that an agreement stopping a person from marrying by his own choice
or will is void. The exception to this provision is a minor. In the case of
Venkatakrishnaiah v. Lakshminarayana, (1908) it was held that in a situation where the
father is giving consideration for marrying his daughter, such a marriage is void as it
violates Section 23 of the Indian Contract Act.

Agreement in restraint of trade

Section 27 of the Act states that an agreement made to stop a person from doing his work
or profession, in return for some consideration is void. This means that when a person
benefits from someone stopping his/her work, such an agreement shall be in restraint of
trade, hence void. In the case of Niranjan Shankar Golikari v. Century Spg. and Mfg. Co.
Ltd. (1967), it was held by the Court that a person might be restrained from following his
trade, due to an agreement entered into by him. In this case, the term freedom of trade
should be used.

Agreement in restraint of legal proceedings

Section 28 of the Act states that any agreement that stops the other party from enforcing
his/her rights of going to a court for breach of contract, is said to be an agreement in
restraint of legal proceedings.

Wagering agreements
Wagering agreements are declared to be void under Section 30 of the Indian Contract
Act, 1872. In a situation where a suit is filed to claim something won in a wager, which
cannot be enforced by the law.

CONTRACT

Section 2(h) of the Act defines a "contract" as "an agreement enforceable by law." This
definition highlights two essential elements of a contract:

1. There must be an agreement between the parties.

2. The agreement must be enforceable by law.

Thus, a contract is a legally binding agreement that creates rights and obligations for the
parties involved.

WHEN AN AGREEMENT BECOMES A CONTRACT

Not every agreement is a contract. For an agreement to become a contract, it must fulfill
certain essential elements prescribed by the Act. These elements are outlined in Section
10 of the Act, which states:

"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 hereby expressly
declared to be void."

In simpler terms, for an agreement to become a contract, the following essential elements
must be present:

1. Free Consent: The parties must enter into the agreement voluntarily, without any
coercion, undue influence, fraud, misrepresentation, or mistake of fact.

2. Competency to Contract: The parties involved must be legally competent to enter

into a contract, as per the provisions of Sections 11 to 13 of the Act.

3. Lawful Consideration: There must be a valid consideration, which could be an act

or abstinence, as per the provisions of Sections 23 to 25 of the Act.
 4. Lawful Object: The object of the agreement must be lawful and not opposed to
public policy or any statutory provision.

5. Not Expressly Declared Void: The agreement must not fall under any of the
categories of agreements that are expressly declared void by the Act.

If an agreement satisfies all these essential elements, it becomes a legally enforceable

contract.

DIFFERENCE BETWEEN CONTRACT AND AGREEMENT

While the terms "contract" and "agreement" are often used interchangeably in everyday
language, they have distinct legal meanings under the Indian Contract Act, 1872.

The primary difference between a contract and an agreement lies in their enforceability
by law. An agreement is a mutual understanding between parties, but it may or may not
be legally enforceable. On the other hand, a contract is an agreement that is legally
enforceable, provided it satisfies the essential elements prescribed by the Act.

In summary, the key differences between a contract and an agreement are:

1. Enforceability: A contract is legally enforceable, while an agreement may or may

not be enforceable by law.

2. Essential Elements: For an agreement to become a contract, it must fulfill the

essential elements prescribed by the Act, such as free consent, competency to
contract, lawful consideration, and lawful object.

3. Legal Consequences: Breach of a contract can lead to legal consequences, such as

damages or specific performance, whereas a breach of an agreement may not have
any legal consequences, unless it also qualifies as a contract.

It is important to note that not all agreements are contracts, but all contracts are
agreements. An agreement becomes a contract when it satisfies the essential elements
laid down by the Act.

WHEN AGREEMENTS AND CONTRACTS ARE TERMED AS VOID

The Indian Contract Act, 1872 recognizes certain situations where agreements and
contracts may be considered void or invalid. These situations are outlined in various
sections of the Act.

An agreement or contract may be termed as void in the following circumstances:

1. Free Consent (Sections 13-22): If the consent of any party to the agreement is
obtained through coercion, undue influence, fraud, misrepresentation, or mistake, the
agreement becomes voidable at the option of the party whose consent was vitiated.

2. Lawful Object (Sections 23-24): If the object or consideration of the agreement is

unlawful or opposed to public policy, the agreement is void.

3. Lawful Consideration (Sections 23-25): If the agreement lacks lawful consideration

or if the consideration is unlawful, the agreement is void.

4. Unlawful Agreements (Sections 26-28): If the agreement is related to any unlawful

act, such as restraint of trade, marriage, or legal proceedings, it is considered void.

5. Agreements in Restraint of Marriage (Section 26): Any agreement that restrains a

person from marrying is void.

6. Agreements in Restraint of Trade (Section 27): Agreements that impose

unreasonable restrictions on trade or business are void, subject to certain exceptions.

7. Agreements in Restraint of Legal Proceedings (Section 28): Agreements that restrict

any party from enforcing their legal rights or instituting legal proceedings are void.

8. Agreements Void as Being Opposed to Public Policy (Section 23): Agreements that
are opposed to public policy or are immoral or against the provisions of any law are void.

9. Uncertainty (Section 29): Agreements with uncertain or ambiguous terms are void
due to the lack of certainty.

10. Contingent Contracts (Sections 31-36): Certain types of contingent contracts, such
as wager agreements or agreements contingent on an impossible event, are void.

It is important to note that the Act distinguishes between void agreements and voidable
agreements. Void agreements are considered invalid and unenforceable from the outset,
while voidable agreements are valid until they are rescinded or cancelled by the party
entitled to do so.

WHY ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE

NOT CONTRACTS

We've observed the meanings of both these terms, and it might seem that they are quite
similar and nearly identical. Both documents require two parties, involve considerations,
offers, acceptances, etc. However, it's been demonstrated that they are subtly different.

A contract is a formal agreement between two or more parties that is legally enforceable.
On the other hand, an agreement may or may not be formal. For instance, in a business
transaction, merely accepting an offer is insufficient; it must be documented, complying
with legal requirements, and include considerations from both parties to be considered a
contract. Conversely, if a friend asks to borrow your laptop for a few days and you agree
without any formalities or considerations, it constitutes an informal agreement. However,
if you specify a payment for the laptop's use, it transforms into a contract.

Therefore, a contract necessitates an offer, acceptance, mutual consent, considerations,

and legal enforceability, whereas an agreement can be valid even without meeting all
these criteria. Consequently, all legally enforceable agreements are contracts, but not all
contracts are agreements since some agreements can be informal, as illustrated in the
above example.

CASE LAWS

Several landmark cases have been decided by the Indian courts to interpret and apply the
provisions of the Indian Contract Act, 1872, regarding the validity of agreements and
contracts. Here are some relevant case laws:

1. Mohori Bibee v. Dharmodas Ghose (1903) 30 Cal. 539: This case dealt with the issue
of free consent in contracts. The court held that if the consent of a party is obtained
through coercion, undue influence, fraud, or misrepresentation, the contract becomes
voidable at the option of the party whose consent was vitiated.

2. Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly (1986) 3 SCC
156: In this case, the Supreme Court discussed the concept of lawful consideration and
held that if the consideration is unlawful or opposed to public policy, the agreement is
void.

3. Gherulal Parakh v. Mahadeodas Maiya (1959) AIR 781: This case dealt with the issue
of agreements in restraint of trade. The court held that agreements that impose
unreasonable restrictions on trade or business are void, subject to certain exceptions.

4. Kedar Nath Bajoria v. Gorie Mohomed Seraj (1958) AIR 1950 Cal 279: In this case,
the court discussed agreements in restraint of legal proceedings and held that agreements
that restrict any party from enforcing their legal rights or instituting legal proceedings are
void.

5. Guntu Laxmi Mandhara v. Guntu Ramanjaneyulu (2018) 14 SCC 352: This case dealt
with the issue of agreements opposed to public policy. The court held that agreements
that are immoral or against the provisions of any law are void as being opposed to public
policy.

6. Mohan Lal v. Brijlal (1962) AIR 1782: In this case, the court discussed the concept of
uncertainty in agreements and held that agreements with uncertain or ambiguous terms
are void due to the lack of certainty.
7. Gajanan Moreshwar v. Moreshwar Madan Pradhan (1942) AIR 257: This case dealt
with contingent contracts and held that certain types of contingent contracts, such as
wager agreements or agreements contingent on an impossible event, are void.

These case laws provide valuable insights into the interpretation and application of the
provisions of the Indian Contract Act, 1872, regarding the validity of agreements and
contracts.

CONCLUSION

The Indian Contract Act, 1872 is the primary legislation that governs the formation,
performance, and enforcement of contracts in India. It provides clear definitions for the
terms "agreement" and "contract" and outlines the essential elements required for an
agreement and contract.