Contracts vs Agreements: The Big Difference for Your Business

No one can dispute the pivotal role of contacts and agreements in our daily lives. And while these may seem interchangeable, there are important nuances. It is never more important to understand how contracts vs agreements differ than when you are relying on these “meetings of the minds” for important personal and business ventures.

This article will explain some of the key differences between “agreements” and “contracts.” By understanding these tools you will be empowered to approach your own ventures sure in the knowledge that you know what to expect, and what you can rely upon if things go wrong. For further information on the nuances inherent in business contracts and agreements, or to discuss your own business issue, contact the business litigation attorneys at Suncoast Civil Law.

Contract definition

When you need more than a hope, more than an “understanding” and a handshake between friends – you need the security of a legally binding contract.

Contracts are the lifeblood of so many business relationships. They ensure that both sides receive the benefit of the agreed upon action of the other. A contract is a formal, legally binding agreement that is made between two or more consenting parties. Everything that there is to know about the contract should be found “within the four corners” of the contract. Any agreement or terms should be laid out in the agreement document itself. It can be thought of like a roadmap that describes the expectations of the parties.

Formal contracts help parties to avoid misunderstandings and help to ensure that the agreement is carried out in accordance with what has been agreed upon.

Elements of a Contact

A legally binding contract will contain multiple elements:

• Offer: A contract is only struck when one party makes an offer to the other.
• Acceptance: For a contract to be created and legally binding, the second party must properly accept the offer.
• Consideration: A legally binding contract will be marked by an element of “consideration.” This means that something is promised and traded between the promise. Both sides must retain some benefit for consideration to be valid. This means that if consideration goes one way, for instance, – that is like a gift and does not form a non-binding contract.
• Mutual Intent: Both parties must enter into the contract with the intention to create a legal obligation.
• Capacity: Each party must have adequate legal capacity to enter into the contract.
• Legality: You cannot form a legally enforceable contract to perform an illegal act or something that goes against public policy.

It is wise to enter into a contract when you need a job done, with the capability to legally enforce the agreement.

Agreement Definition

Now what is an agreement, and how does it differ from a contract?

An agreement could be thought of as a mutual understanding reached between parties that does not have the formalities and legal bindings associated with a legally binding contract.

Agreements are less formal than legally binding contracts, and are therefore generally more flexible.

Key Takeaways: Contract vs Agreement

A properly executed contract will be legally binding and enforceable in a court of law. The nature of a contract will lead to a (usually written) formal document with detailed terms and consideration for completion of the contract.

An agreement is a basic understanding between two parties that will likely not be enforceable in a court of law. These arrangements are generally more flexible and do not necessarily require consideration.

Contact Suncoast Civil Law for Business Contract Issues

Contracts often play a central role in Business litigation. Whether you want to ensure that your contract is sound, or bring suit against a real or impending breach – contact the esteemed Sarasota business litigation attorneys at Suncoast Civil Law.

Sources:

9news.com/article/news/local/attorney-landowners-wild-animal-sanctuary-contract/73-5a44bf8d-3d50-40b8-9039-96dc9730c3db

law.virginia.edu/scholarship/publication/alex-m-johnson-jr/479756