What Is An Agreement ? Everything You Need To Know!


Content Creator, Zoopsign

January 23, 2024

What Is An Agreement ? Everything You Need To Know!

An agreement is a pledge between two parties that subjects them to legal duties. The Indian Contract Act, 1872 defines an agreement as "the collection of pledges comprising mutual consideration" under Section 2(e).

An agreement must include the following criteria to be formed:

1. Parties: Two or more parties are required to make an agreement.

2. Offer: According to Section 2(a) of the Indian Contract Act of 1872, a person makes an offer to another to gain that other's consent when they declare their willingness to do so.

3. Acceptance: According to Section 2(b) of the Indian Contract Act of 1872, acceptance occurs when the person to whom the proposition is made expresses his consent to the same thing as specified by the offer.

4. Promise: According to Section 2(b) of the Indian Contract Act of 1872, a proposition becomes a promise when accepted.

5. Consideration: According to Section 2(d) of the Indian Contract Act of 1872, consideration is defined as the agreements made in exchange for the law's ability to be implemented.

How A Contract Differs From An Agreement

A contract is substantially different from an agreement. The following are the primary distinctions between an agreement and a contract:

  • An offer made by one party and accepted by another on a specific matter is referred to as an agreement. On the other hand, an agreement that binds two or more parties on particular terms is known as a contract.
  • A contract must be in writing and recording, but an agreement can be reached between two parties by inferred or stated communication.
  • In contrast to a contract, which binds the parties to carry out their commitments, a simple agreement does not impose any legal obligations on the parties.
  • A contract's scope is more limited than that of an agreement. As a result, while every contract is not every agreement, every agreement is every contract.

What Makes A Contract Bidding?

An agreement that creates reciprocal rights between two parties and duties is known as a contract. Not all contracts must be in writing to be enforceable. However, not all written agreements are binding on the law. A deal must meet several requirements to be considered a contract with legal force. In rare cases, even though all conditions have been met, the court will not uphold the agreement because the contract is void.

If a contract is not in writing when it ought to be, it may be ruled void. A contract can also be deemed void if any criminal activity is involved, it was entered into fraudulently, by accident, or by someone who lacked mental capacity or was a juvenile. A correctly drafted contract, on the other hand, free of these errors, is enforceable in a court of law.

Key Elements of a Contract

To be legally binding, a contract must contain certain key elements:

1. Offer

An offer must always precede a contract - as stated in Section 2(a) of the Indian Contract Act of 1872. It demonstrates a party's desire or effort to engage in a contract with a party or parties under specific terms and circumstances.

The offers are specific and straightforward rather than hazy or unclear. The person who makes the offer is referred to as the Offeror or Promiser, and the individual being offered something is referred to as the Offeree or Promisee.

2. Acceptance

The offeree has two choices after the offer has been made - to either accept or reject the offer. According to Section 2(b) of the Indian Contract Act, 1872, acceptance is the approval of an offer by the offeree by any form of communication, including email, post, call, and social networking sites like WhatsApp.

Conflict can often develop over the timing of acceptance. Therefore, even if the offeror has not received the offeree's acceptance, the offer is nevertheless regarded as accepted.

3. Meeting of the Minds

The term "meeting of minds" refers to the situation where two or more parties agree on the reasons why and the effects of entering into a contract with all its terms and conditions.

The agreement would be deemed void if the parties engaged in the agreement without agreeing. According to Section 14 of the Indian Contract Act of 1872, the offeree's approval after meeting the minds must be freely granted.

It is free when no undue pressure, fraud, error, or deception is used to get permission. However, if the offer is not explicit to the offeror, just silence cannot be regarded as acceptable.

4. Consideration

As defined by Section 2(d) of the Indian Contract Act, 1872, every contract must have consideration. Therefore, the promise of providing anything of value, such as cash, goods, or property, makes the established legal duties binding.

The consideration need not be sufficient to fulfil the promise, but it must have some legal weight.

Even if someone obtains what they promised to, they cannot assess if it was comparable to the commitment they made in exchange because there are no agreements signed between the parties by the court throughout the litigation.

The consideration must be correct. Promises made in jest are not binding. For a contract, there must be reciprocity in the consideration given by the parties.

5. Capacity

One crucial component of a contract is the ability to enter into one. Section 11 of the Indian Contract Act, 1872, defines a party's capacity to make a contract. A contract may only be signed by parties who are both able to enter into one. To make a legal contract, both parties must meet the prerequisite for capacity.

The following scenarios are used to determine the party's capacity:

  • Age: Only parties at least 18 years old may engage in the contract. On the other hand, if one of the parties is a minor, another person—like a parent or guardian—may sign the agreement on their behalf.
  • Mind: Both parties must be in good mental health. People who are insane or intoxicated cannot give their consent. As a result, they cannot sign contracts. However, the court will recognize the permission to enter into the contract if the party is voluntarily drunk.
  • Consent: The consent obtained must be free from coercion.

6. Legality

One of the crucial components for the creation of the contract is legality. Therefore, each party must demonstrate a legal commitment for the outcome of their agreement to be entirely legal.

A contract's validity cannot be established to regulate the sale of illicit goods or services. For instance, a drug dealer cannot go to court if their customers don't pay them the money on time.

What Is The Importance Of a Signature In a Contract?

Contracts must always have a signature. It is crucial to sign a contract to engage in one for several reasons

First, contract talks between parties may be drawn out, so a person must invest a lot of time, energy, and money in contract discussions before the contract is finalised and signed.

The contract safeguards both parties' interests and becomes a record with probative value. Consequently, the parties are now bound by the terms of the contract.

If the parties fail to uphold their responsibilities, a written contract is strong evidence against them. Therefore, it is advisable to execute a contract before entering into any deal involving money or property, such as a claim that someone owes you money.

Can a Contract Be Considered Valid Without Signatures?

The Indian Contract Act 1872 stipulates that signatures are not necessarily necessary for contracts. Consent or approval to the agreement may be explicit or assumed, as in the case of email communication, etc.

The court examines the intent behind the "signature" in the agreement to create a contract, even though approval of the agreement may be implicit or declared. For example, the contract could be binding if the court could discover these four elements - mutual purpose, consideration, legal obligation, and capacity.

Importance Of Stamp Duty On Agreement

The government must pay the legal tax when real estate is transferred. In relation to stamp duty, which differs from state to state, specific legislation has been developed. According to the Indian Contract Act of 1872, a contract is enforceable in India, even oral. Therefore, stamp paper should be used to record all agreements rather than non-stamped paper.

There are no particular provisions regarding e-agreements or stamp duty on e-agreements under the Indian Stamp Act. Nevertheless, several states, including Rajasthan, Delhi, Uttar Pradesh, Karnataka, and Gujarat, have recognized stamp duty levies on electronic agreements.

How The Digitalization Of Contract Management And Signatures Improves Efficiency?

Simplifying Contract Negotiations

Each contract is amended and modified several times before being finalised. Digital contract law management system decreases the amount of human labour necessary to draft the original contract, negotiate it, and assess the completed contract to ensure correctness.

The following are some advantages of the digital contract law management negotiating system:

  • Throughout the negotiation and auditing processes, it keeps track of all changed versions of the contract.
  • By alerting the parties, it enables the evaluation and approval of the contract's modifications.
  • It facilitates the coordination of internal and outside resources.
  • It offers total transparency into the contract negotiating process.

Added Value For Improved Efficiency

Organisations have benefited from the digitalization of contract management by making more informed strategic decisions and providing the necessary funds to execute potential productivity-boosting measures. As a result, the lifetime of contracts has changed due to the digitalization of contract administration, but without sacrificing accuracy, compliance, or impeding the implementation of your company plan. Additionally, the organisation gains more excellent value from the contract's performance since the negotiating, approval, and performance phases are shorter.

Deliver Maximum Productivity

A digital contract law management system's automated user interface and broad configurability enable the optimization of niche requirements. Additionally, a speedy contract management system increases efficiency by allowing for the safe and secure transfer of user information and client data. A contemporary and digital contract management system also offers total oversight throughout the contract.


Contract management is a process that should be taken seriously in any business. There are many benefits of having a digital contract law management system, including increased efficiency, productivity, transparency, and value. When it comes to making strategic decisions for your company, nothing beats the accuracy and security of a well-run contract management system.

To learn more about how digital contract management can help scale your business operations to unprecedented levels, schedule a demo with ZoopSign and get started today!


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