Agreement or Contract?
by
Jason Thomas Olivier on Mar. 21, 2016
Business Contract Business Corporate
Summary: The basics of why we use agreement and contract interchangeably.
People often confuse the terms agreement and contract, and rarely will you find a lawyer who can explain the differences in laymen’s terms. Here is an introduction that may help you understand the difference, and what they actually mean.
You: We had a contract! Bob: No, we had an agreement.
Agreement or contract: is there a difference? The terms are often used interchangeably. But there is a big difference. An agreement is a meeting of the minds, where a contract is the written memorialization of an agreement. Agreement is a far broader term than contract, and often agreements lack the necessary elements to qualify as a contract. Agreements, nevertheless, can be oral contracts if both people agree on the key terms. Most the time they do not, because they haven’t worked it out that far. A contract is an agreement but an agreement is not a necessarily a contract. For instance, two people can have an agreement that they don’t like a certain neighbor, but it is not a contract.
You agree to cut Bob’s lawn every week, and Bob agrees to pay you $100.00 a month.
What makes something an agreement, or a contract? Are they common? YES. Agreements, and resulting contracts, are made every day. If you agree to do something in return for another’s promise to do something for you, that is "quid pro quo" (latin, literally “that for what”) a necessary component of an agreement. An agreement should be bi-lateral, or synallagmatic as we say in Louisiana civil law. In fancy terms, the agreement must “impose reciprocal obligations and characterized by mutual rights and duties” upon the parties. In plain English, there should be a two way exchange- a something for something. A unilateral promise to do something isn’t necessarily a contract because there is no consideration, it is merely an offer to do something for someone else.
You agree to cut Bob’s lawn every week, and Bob doesn’t specifically agree to pay you.
There are requirements for a contract to effectively memorialize an agreement, also known as the Four C’s. “Consideration” is the reason why one party agrees to do for another, and an agreement does not stand without it. The second C is “capacity”. A party to the agreement must have the capacity to make an agreement (i.e., cannot be a minor, must be authorized by a corporation to bind the corporation, etc.). For instance, my 12 year old can’t give away my care and neither can my next door neighbor. “Consent” is also required. The agreement must clearly show the parties understand what they are agreeing to do for each other, and consent to do it. Lastly, it must involve a “certain” issue or subject, it cannot be some a mere concept.
If I become king of some country some day, Bob agrees to pay me $100.00.
Though an agreement can be an oral contract, it is always best to put that contract in writing. Often writing out an agreement into a contract encourages discussion, bringing other unforeseen issue to light, and avoids confusion at a later time. An oral contract is binding, but both parties must agree under oath to what the terms were. Often, the differing opinions about what the terms were is reason one ends up in court.
Once written, a contract is the memorialization of the agreement and a court will look only to what you wrote down to decide what was intended. The "four corners" rule is a common law concept that you only look within the four corners of the document to decide what was meant, and consider the document as a whole. No parole evidence (other outside evidence like testimony, other writings, etc.) is allowed except in rare circumstances. So when you write your contract, be sure it is precise.
Legalese is necessary, unfortunately, because certain words or phrasing have a generally accepted specific meaning in court. Precision in your language is important. If the wording of a statement made in a contract doesn’t sound quite right, restate it until it means precisely what you intend. If you want to make sure the other party does what they are supposed to, don’t use wiggle words. State "Bob shall pay me $100.00" rather than "Bob will pay me $100.00." Shall is an example of a word with a specific legal meaning, where "will" is open to debate.
"It depends on what your definition of ‘is’ is." - President Bill Clinton, in his deposition on the Lewinsky matter
Ultimately, the best thing to do is write out your understanding of the agreement with the other parties, and consult a qualified attorney to assist you with memorializing your agreements into a legally binding contract. REMEMBER- no contract is perfect, though, and there is no way to write a contract to stop bad people from acting badly. In plain English, no matter how good your contract, you can still be sued by anyone for anything.
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