{"id":127662,"date":"2023-07-05T14:27:29","date_gmt":"2023-07-05T06:27:29","guid":{"rendered":"https:\/\/web.zegal.com\/?p=127662"},"modified":"2023-07-05T14:27:32","modified_gmt":"2023-07-05T06:27:32","slug":"agreement-vs-contract","status":"publish","type":"post","link":"https:\/\/web.zegal.com\/en-nz\/blog\/post\/agreement-vs-contract\/","title":{"rendered":"Agreement vs. Contract: Understanding the Distinctions and Legal Implications"},"content":{"rendered":"\n
\"agreement
Two businessmen handshaking in office after signing contract<\/figcaption><\/figure>\n\n\n\n

Image by pressfoto<\/a> on Freepik<\/p>\n\n\n\n

All contracts are agreements, but not all agreements are contracts. And to make things more complicated, businesses and legal departments will use the word agreement <\/em>to mean contract. So you might want to enter a contract with a new supplier, but at the meeting, everyone\u2019s calling it an agreement.<\/p>\n\n\n\n

Confusing, right? So how do you build good business relationships while legally protecting yourself at the same time? In this article, we\u2019ll untangle the definitions of agreements vs. contracts, as well as the legal implications and uses of both. <\/p>\n\n\n\n

<\/span>What is an agreement?<\/strong><\/span><\/h2>\n\n\n\n

An agreement is an informal promise between two or more parties to work toward a common goal. There are no legal implications to an agreement; agreements work on trust, not enforcement. <\/p>\n\n\n\n

If one party doesn\u2019t meet their obligations, the other parties have no legal recourse.<\/p>\n\n\n\n

Agreements can work well between people who trust one another, like friends and family. They can also be the first step toward creating a contract. Two or more parties can enter an agreement to test the waters of their relationship before committing to a legally enforceable deal. 
An agreement is a great way for parties to meet and discuss terms without either being legally on the hook for anything. Modern technology means that they don\u2019t have to be physically in the same room; they can use Vonage<\/a> video conferencing.<\/p>\n\n\n\n

<\/span>What is a contract?<\/strong><\/span><\/h2>\n\n\n\n

A contract is an agreement between two or more parties that is legally binding. Generally, a legal department is involved with the drafting of a contract, often using law office case management software.<\/p>\n\n\n\n

If one party doesn\u2019t fulfill the requirements of the contract, there will be legal repercussions. They may be forced to fulfill their obligations or provide some sort of compensation. <\/p>\n\n\n\n

But what makes a contract legally binding?<\/p>\n\n\n\n

<\/span>Requirements of a contract<\/strong><\/span><\/h2>\n\n\n\n

Unlike an agreement, a contract has strict requirements. For a contract to be deemed legally enforceable, it must meet a few specifications.<\/p>\n\n\n\n