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- An agreement and a contract are related, but not identical
- Mutual assent connects an agreement to enforceability
- Consideration, capacity, and legality address separate questions
- Some contracts can be formed without a formal signed document
- Offer and acceptance can take different forms in a sale of goods
- “Agreement” and “contract” can have specialized statutory meanings
- Electronic form does not automatically defeat a contract
- Sources
Key Facts
- State-law overview: A contract is an agreement that creates obligations enforceable by law; not every agreement is an enforceable contract.
- State-law overview: Common formation questions include mutual assent, consideration, capacity, and legality, but state law and the transaction type control the precise requirements.
- State-law overview: An agreement may be shown by words or conduct, and a signature is not the only possible evidence of assent.
- Federal and state: Federal law generally prevents covered interstate or foreign-commerce contracts from being denied effect solely because an electronic record or signature was used, while other formation requirements remain relevant.
The distinction between an agreement and a contract separates an ordinary understanding from a legally enforceable bargain. In everyday speech, “agreement” and “contract” are sometimes used interchangeably. In legal analysis, the useful distinction is that a contract is an agreement the law recognizes as creating enforceable obligations.
An agreement and a contract are related, but not identical
An agreement is a broader idea: two or more parties have reached an understanding about something. A contract is an agreement with the legal features needed for enforcement under the governing law.
Cornell’s Legal Information Institute describes the basic formation elements as mutual assent, consideration, capacity, and legality. It also explains that most contract law derives from state common law, supplemented by statutes, and that state courts can interpret individual elements differently.
This is why a national overview cannot supply one universal checklist for every transaction. The governing state’s law and the type of transaction must be identified before applying general formation principles.
Mutual assent connects an agreement to enforceability
Mutual assent concerns whether the parties objectively manifested agreement to the proposed exchange. It is commonly analyzed through an offer and an acceptance.
Acceptance can be express or implied by conduct. Cornell’s acceptance overview states that acceptance is judged objectively and should be communicated in a manner authorized, requested, or reasonably expected by the offeror.
The focus on objective manifestations means that private, unexpressed intent usually does not tell the whole story. The words used, the surrounding circumstances, and conduct consistent with a deal can all matter under the applicable law.
Consideration, capacity, and legality address separate questions
Consideration generally asks whether the promise was part of a bargained-for exchange rather than a purely gratuitous promise. Capacity concerns whether a party has legal ability to enter the transaction. Legality concerns whether the proposed bargain has a lawful purpose.
These are distinct issues. Clear assent does not necessarily cure the absence of another required formation element, and the consequences of a missing element depend on governing law.
A useful review therefore separates several questions: Did the parties manifest assent? Was there a legally recognized exchange? Did they have capacity? Was the subject lawful? Did a writing, signature, or other formality apply?
Some contracts can be formed without a formal signed document
Cornell’s contract overview notes that even informal agreements may bind when the formation elements are present.
The Uniform Commercial Code illustrates the role of conduct in sales of goods. UCC section 2-204 states that a contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties recognizing that a contract exists.
The same section provides that a sales contract can exist even if the exact moment of formation is uncertain. Open terms do not automatically defeat formation if the parties intended to contract and there is a reasonably certain basis for a remedy.
These UCC rules concern sales of goods and must be read as adopted in the relevant state. They are not a universal rule for services, real estate, employment, or every other agreement.
Offer and acceptance can take different forms in a sale of goods
UCC section 2-206 provides that, unless the language or circumstances unambiguously indicate otherwise, an offer to make a contract invites acceptance in any manner and by any medium reasonable under the circumstances.
For an order to buy goods for prompt shipment, the section treats a prompt promise to ship or prompt shipment as possible acceptance. A shipment of nonconforming goods is not acceptance when the seller seasonably notifies the buyer that the shipment is offered only as an accommodation.
When beginning requested performance is a reasonable mode of acceptance, an offeror who is not notified within a reasonable time may treat the offer as having lapsed. The text of the offer and the commercial context therefore matter.
“Agreement” and “contract” can have specialized statutory meanings
Legal definitions change with context. UCC section 2-106 says that, within Article 2 and unless context requires otherwise, “contract” and “agreement” are limited to present or future sales of goods.
That specialized definition does not mean those words always refer to goods. It shows why a definition must be read within the statute, document, or body of law where it appears.
For a broader introduction to formation, writing, and breach, the contract law basics guide provides the closest pillar for this agreement-versus-contract distinction. More specific pages address documents such as a nondisclosure agreement or a purchase agreement.
Electronic form does not automatically defeat a contract
The federal Electronic Signatures in Global and National Commerce Act applies to transactions in or affecting interstate or foreign commerce. Under 15 U.S.C. section 7001, a signature, contract, or record generally may not be denied legal effect solely because it is electronic, and a contract generally may not be denied effect solely because an electronic signature or record was used in formation.
The statute does not erase other legal requirements or require a private person to accept electronic records or signatures. Its consumer-disclosure provisions also contain conditions for using electronic records when another law requires information to be provided in writing.
