Useful tips for lawyers and translators on the use of agreement and contract. I decided to write this post because this is something Argentine lawyers, as well as translators, frequently ask me in the courses I teach about Contract Drafting.

difference between agreement contract

Although the terms agreement and contract are very similar, they’re not synonyms. Agreement has a broader scope. While contract and agreement may be both used to mean a formal and legally enforceable arrangement, agreement may also refer to an informal arrangement not supported by consideration, such as an agreement between friends to get together over the weekend. Many times it is obvious that the term agreement does not represent an agreement in the broader informal sense; therefore, you generally may use either word.

Sometimes, in spite of meaning the same thing, you may prefer to use one term and not the other one because of their usage. For instance, lease agreement is much more frequent than lease contract (actually lease alone will do just fine), employment contract is more frequent than employment agreement (although the latter is not incorrect, of course; it’s just a question of frequency of usage), construction contract is much more frequent than construction agreement, and so on. Generally speaking, in titles, agreement is much more frequently used than contract. Usage will also vary depending on the country – some terms are more frequently used in the United States; others in the United Kingdom, in Canada, or Australia.

These are common examples of a contract clause (Entire Agreement) in which the term agreement is used to mean 1) the contract itself or written version of the understanding between the parties, and 2) the understanding, the arrangement, the meeting of the minds:

This Agreement is the entire agreement between the parties relating to its subject matter. No purported amendment to this Agreement shall be effective unless it is in writing and signed by each party or their duly authorized representatives.

This Agreement constitutes the entire agreement between the Parties and supersedes any prior understanding or representation of any kind preceding the date of this Agreement. There are no other promises, conditions, understandings or other agreements, whether oral or written, relating to the subject matter of this Agreement. This Agreement may be modified in writing and any such modifications must be signed by both the Discloser and the Recipient.

The capitalized Agreement refers to the contract, the written document, and the non-capitalized agreement, to the understanding between the parties.

In this example, the drafter tried to avoid this double use of the same term with different meanings, and used agreement to refer to the written document and a different term, i.e. understanding to refer to the meeting of the minds. However, later in the same paragraph he uses again the term agreement (actually, agreements) again in a broader sense to refer to any understanding, whether written or oral.

This agreement, and the documents referred to in this agreement, constitutes the entire understanding of the parties relating to the subject matter of this agreement and supersedes, cancels and replaces all prior agreements between the parties which relate to the same subject matter whether written, oral, implied or which would be inferred from the correspondence, oral statements or conduct of the parties and all such agreements, including the letter of intent, will be deemed to have been terminated by mutual consent with effect from the commencement date.

Can you think of other examples in which either agreement or contract is to be preferred?

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