Q1. Distinguished between the term agreement and contract under the Contracts Act 1950 (Revised 1974)

A contract is legally binding agreement reached between two parties, the terms of which the courts have the authority and obligation to enforce. An agreement is less formal creation of an obligation between two parties.

An agreement usually lacks one or more of the essential elements that are required to be present in order to form a valid contract that will be considered legally enforceable by curt of law. Contract outline, the terms of the relationship that should be formed between two parties to the contract. An agreement also outlines the terms of relationship between the two.

However, the difference is that the contract outline is far more rigid than that of a contract. The essential difference between an agreement and a contract is that usually an agreement will only modify a contract that is already in place but does not place an obligation on either one of the parties to provide consideration to the other party, which a contract requires. A contract can be involve in the exchange of promises between the parties to the contract, while an agreement may simply involve one party accepting the offer from another party.

The approach taken by the Contracts Act 1950 (Revised 1974) to distinguish between agreement and a contract was noted by the Supreme Court in the case, Beca (Malaysia) Sdn Bhd v Tan Choong Kuang & Anor [1986] 2 MLJ 390. It was held that there is a distinction between an agreement and a contract. The word ‘contract’ has at times been loosely used in the past.

We are used to the English common law which does not make the distinction between the two terms as our section 2 of the Contracts Act 1950 (Revised 1974). An agreement is defined in S.2(e) as “every promise and every set promises, forming the consideration for each