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Indian Contract Act 1872: Difference Between Agreement and Contract

Indian Contract Act

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 the Indian Sale of Goods Act and the 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 the most important and basic of mercantile law. A contract is an agreement to do or not to do an act it is a legally binding agreement that is enforced by law.

Definition of Contract

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

According to 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 us enter into several contracts everyday knowingly or unknowingly. Each contract creates some rights 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 Kashmir.

Indian Contract Act,1872

Difference Between Agreement and Contract



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