Service Agreement Vs Contract - How They Compare & Differ?

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LegalKart Editor 06 min read 662 Views
Last Updated: Oct 31, 2023
Service Agreement Vs Contract -  How They Compare & Differ?

The Fundamental Difference

Its true that all the contracts are agreements, but the converse is not true. That is, not all the agreements are contracts. The points that distinguish a contract and a service agreement are small and not major. A contract, unlike an agreement, follows a more formal outline. Any understanding between numerous parties regarding what they commit to do for each other might be considered an agreement. These informal arrangements, known as "gentlemen's agreements," rely on all parties upholding the agreement rather than being enforced by a third party or the threat of legal repercussions.

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More Differences Between Contract & Agreement

On the other hand, a contract is legally binding. In fact, the courts can enforce the contracts and the provisions of the contract if they aren't followed. An agreement is less formal and rigid. Any party to a contract can take it to court if there is a disagreement between the parties. Most contracts, on the other hand, do not end up in court. In reality, unless there is a specific purpose for the contract to be written, most contracts can be made verbally. Also, a contract which is written will protect whosoever is involved in case something goes wrong.

If one party believes the other has broken the contract or failed to keep their end of the bargain, they can file a lawsuit and take the other party to court. During the course of the case, the court will determine whether there was a breach of contract or whether additional factors rendered the breach void. It's vital to remember that only legally binding contracts can be challenged in court.

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The Points On Which They Differ:

Offer and Acceptance: The contract must include an offer from one party and the other party's acceptance of that precise offer. Any contract revisions must be agreed to by all parties, and no one can be forced to accept the conditions. The terms imply that all parties want for the contract to be legally binding. A contract cannot be made if one of the parties is not serious.

Mutual Consent: Both parties must agree to the offer and acceptance without pressure or force. Everyone must agree to the agreements in their entirety.

Consideration: For a transaction to be legal, something of value must be transferred between the parties. Money is the most common kind of consideration, but commodities or services can also be used. Both parties must exchange something of value, such as money for a service. The agreement is a gift rather than a contract if only one party gives consideration.

Competence: Neither party can be a minor or someone who is unable to comprehend what they are signing. The contract's terms must be understood by all parties. The contract is declared void if any party is found incapable.

Legal Purpose: A legally enforceable contract cannot contain any illegal actions, and both parties must be able to get it plausibly. If the agreement is based on an implausible premise, either party has the right to change the terms as they see proper.

The Issue Of Legality – How Do Agreements & Contracts Differ

A contract that fits these criteria is considered enforceable by law, which means that one party can sue the other in court if the provisions of the contract are not followed.

Some Examples Which Depict The Differences Between Agreement & Contract

Example 1:

The difference between an agreement and a contract can be seen in the following examples. Suppose two people agree to meet for lunch and one of them doesn’t turn up, the other person can not do anything to claim the damages for the wasted time because it was an agreement to do something and not really a contract.  

Example 2:

There is another example, there is a parent. He/she agrees to

pay his/her child’s debt. In this case, it is a written agreement that is acknowledged by the child and the parent. This makes it an enforceable contract.

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One More Difference

Not all contracts need to be written. In many instances, an oral agreement creates a valid contract as long as it meets the criteria listed above.



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