All contracts are agreement but all agreements are not contract.
This statement is of Anson who emphasizes that without agreement there will be no contract, so existence of contract means existence of agreement. Every contract includes agreement so every contract is an agreement.
Anson is of opinion that all agreements are not contract because for being a contract, compliance of certain legal conditions is necessary the agreements which fulfill such conditions are contract; and agreements which does not fulfill the conditions are not contract. So it has been said that “all agreements are not contracts. “
This statement is also correct in the view of The Indian Contract Act 1872. The conclusion of Section 2(h) also support this.
According to Section 2(h) for contract two elements are necessary.
• An agreement [section 2(e)]
• Enforceable by law [section 10]
As the definition given under Section 2 clause (h) of the Contract Act, there will be no contract without agreement; agreement takes the place of contract. This definition clears that all contracts are agreements.
According to
Section 2 (e) every promise and set of promises forming the consideration for each other is an agreement.
This definition gives two points.
• every promise is an agreement.
• and every set of promises is also an
agreement
and promises are consideration to each other.
It means that if there is one promise this is agreement, if promises are from both sides (set of promises) is called agreement. It depends on the facts and circumstances, whether consideration is past, present or future. If consideration is past or present, there is only one promise. If consideration is future promise, there is two promises.
When the promisee in lieu of promise of promisor gives the consideration as promise such as price of future payment, doing any work in future then there are two promise for performance
- Proposal which become promise
- Acceptor gives consideration as promise.
This is set of promises and is agreement.
In order to know agreement we must understand promise. Section 2(b) defines promise as ” a proposal when accepted becomes a promise.” It means proposal gets the form of promise, in other words the proposal which has become promise is known as agreement. This is the situation when every promise is an agreement.
Thus we find that proposal when accepted becomes promise and promise is an agreement and agreement enforceable by law is contract.
Agreement may be divided into two categories
- Enforceable by law [ known as Contract ]
- Not enforceable by law [ known as void ]
So only those agreements are contracts which are enforceable by law.
Section 10 of the Indian Contract Act 1872
Section 10 provides what agreements are contract. According to Section 10 for being a contract agreement must fulfill following ingredients-
• Competency of parties
• free consent of parties
• lawful consideration
• lawful object
• not expressly declared to be void.
The agreement which fulfill these conditions is contract if it does not fulfill it isn’t not contract.
The first condition of section 10 is that the agreement must be made by competent person. If agreement is made by a person who is incompetent to contract as per section 11 and 12 of the Contract Act, it is not a contract but it is a void agreement as per the
Mohari Bibi V. Dharmodash Ghosh case. Such an agreement is void ab initio.
The second condition is that the consent of parties must be free within the meaning of Sections 13 and 14. If the consent of the parties are not free then it is not a contract but a voidable contract.
The third and fourth condition of section 10 is the lawful consideration and lawful object within the meaning of section 23 and 24 . If the consideration and object are unlawful then that agreement is not enforceable by law and it is void agreement.
And last condition of section 10 is that the agreement must not be expressly declared to be void by this act. The Indian Contract Act itself declares certain agreement to be void. Section 26 to 30 deals with it .
Thus on the basis of analysis of definition of agreement (2 e), promise ( 2 b) , contract (2 h) and the conditions of Section 10 we find that the statement of Anson ” all contracts are agreement but all agreements are not contract ” is true in respect of the Indian Contract Act 1872. A contract includes the agreement but all the agreement are not contract only those agreements are contract which are enforceable by law in other words which fulfill the condition of Section 10.
