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  • Writer's pictureBatuhan Uçmak

Essentials of A Legal Transaction: Distinction between An Agreement and A Contract

Nowadays, we come across legal transactions in all phases of daily life. Transactions affect our lives in different areas such as health, economy, education, or anything you want to name. If the legal transaction would be defined, it could be handled as a type of lawful legal act ‘by which legal subjects can change the legal positions of themselves or other persons intentionally’. The concept is substantial in civil law jurisdictions based on or influenced by the German law of obligations, like Austria, Switzerland, Turkey, and Japan. The notion of legal transaction generally involves agreements and contracts. But not all kinds of contracts or agreements result in legal consequence invariably.

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Concerning the agreements and contracts, it is hard to trace that the differences. Firstly, an agreement is any understanding or arrangement reached between two or more parties. On the other side, a contract is a specific type of agreement that, by its terms and elements, is legally binding and enforceable in a court of law. Both of them need mutual acceptance by all parties involved. The agreement doesn’t need to be written, contract doesn’t need it too, but except for some specific kinds of contracts, such as those involving land, or which cannot be completed within one year. Agreements don’t involve consideration any less the contract should include the consideration. Because in any legal dispute there will need for the subject and the consideration to specify the verity. Within this scope, it can be said that a contract is a kind of agreement, despite that the broad scope of agreement verbalizes an informal arrangement that is not enforceable by law contrary to the contracts.

Probably, the legal effect is one of the most important elements for comparison. An agreement that lacks any of the required elements of a contract has no legal effect [1]. An agreement can be about an immoraltransaction; the Turkish code of obligations could not accept them in a legal concept, this transaction will have no legal effect in Turkish Law. Generally, informal arrangements often take shape as “gentlemen’s agreements” and terms rely upon the honor of the parties involved rather than exterior means of enforcement. A contract is a legally binding document, and its terms may be enforceable while the court is making a decision. It is a specific type of agreement that meets certain requirements designed to create legally binding obligations between parties that are enforceable by a court. Nevertheless, to reach an agreement, the parties need only come to a common understanding named “meeting of the minds.”.

The requirements to draw up a contract are more accurate and comparatively stricter. A contract must contain the following essential elements: Offer and Acceptance, mutual consent, consideration, competence, and legal purpose [2].

The primary benefit of an agreement is that it could be inherently informal. By way of making an arrangement, parties agree on a longstanding relationship and share a considerable degree of trust. Also, within the non-contract agreements, it could be saved time and provided for more flexibility regarding the fulfillment of the agreed-upon obligations.

The main advantage of contracts is that they include the specific terms that parties have agreed upon, thus in any case of a breach if a party or the parties fail to fulfill their obligations, contracts serve as a guide for a court to determine the proper remedy for the party or parties.

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Consequently, contracts and agreements resemble in many aspects, but certainly they are not the same thing. Both of these tools, to enter into any legal relationship, have advantages and disadvantages. Moreover, they are towardly in different legal or non-legal situations. It is crucial to know which of these tools is best suited for the subject will help parties.


[1] Murray J., “The Basics of Business Contracts and Agreements”, the Balance Small Business, 2020

[2] Kate T., Gauri S., Nikhilesh Jasuja, Diana Hoffman. ‘‘Agreement vs. Contract’’,

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