The terms agreement and contract are often used interchangeably. However, while a contract is always an agreement, an agreement is not always a contract. To know the difference between them, it is crucial to define agreement and truly understand that agreement definition.

What is an agreement?

An agreement is an understanding between parties. That understanding should take into account the responsibilities and obligations of both parties. An agreement is not always legally binding however and not always enforceable. They are sometimes more informal than contracts and may even be unwritten on many occasions. That being said, an agreement can be a contract if it has all the elements of a contract which make it enforceable and legally binding. 

How does an agreement work?

An agreement works by allowing two parties to profit from an arrangement between them. That does not always have to be a financially profitable arrangement. In fact, an agreement will often just outline actions required by both sides that do not need to have a financial form of compensation in return for them. What they will outline is an arrangement that provides some value to both sides. 

Advantages of an agreement 

There are a number of advantages to an agreement. Firstly, if they are informal and verbal, they can be an incredibly quick and easy way to determine what the agreement will include. That’s great as it means the value that comes from the agreement can begin to be created and both sides should see some benefits of the agreement far sooner than without one. 

Plus, outlining what both sides want from an agreement can reduce the amount of future misunderstandings. By being clear from the outset what both sides want, it is possible to prevent any confusions or mix ups thereafter. Additionally, if it is written down in the correct format, it can hold data that a business can use in the future to help inform future decisions as well. In that way, and by potentially reducing the amount of misunderstandings, agreements can help harness many benefits - financially or otherwise - for a firm. 

Contractbook and agreements

While agreements can have their advantages and provide individuals or businesses with benefits, we would always advocate ensuring that it is enforceable wherever possible. Plus, we think that an enforceable agreement can be just as quick to produce and create than an informal agreement. In using our software, creating and managing the lifecycle of an agreement is streamlined and easy. Using templates for contracts and agreements makes drafting them quick and painless from the outset. 

And then, negotiating the terms within it is a breeze thanks to the online collaborative tools our software provides. Then, it can be signed by all relevant parties involved - helping it to become a legally enforceable contract. And, what’s more, when it has been signed, our software then stores it in an easily accessible place so it can be used in the future as soon as it is required. Plus, the machine readable way we format our contracts and agreements means that the data within it can be used - to help business decisions in the future be even more effective. 

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