FREE Difference between a Contract and an Agreement [ With Samples, Tips ]

Have you ever been in an agreement with another party that didn’t end well? The only way to prevent instances like this from happening is through a contract. When two parties enter an agreement, especially when it involves business, it is important to make a documentation of the agreement through the use of a contract.

It is common for businesses to enter an agreement with other businesses, suppliers, etc. In this article, you will be able to read about the steps in creating your own contract, essential tips, and the difference between a contract and an agreement. Also, you can download from the various contract templates and samples of freelance contracts, business contracts, land sales contracts, etc.

Sample Freelance Contracts

Residential Land Contract Sample

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Employment Contract Sample

What Is a Contract?

A contract is basically a written or printed document that is used to outline the rights and responsibilities of the two parties when they go into an agreement. It is a legally binding document that is useful in resolving any disputes or misunderstandings between the two parties during the course of the transaction. One example of a contract is a freelance contract. A freelance contract is a document that is used by freelancers when dealing with their clients. Through this, both the freelancer and the client will clearly understand the scope and limitations of the work that will be done. Both parties will also know what to expect from the agreement through a contract.

Why Do We Need Contracts and Agreements?

A contract can be used for a variety of purposes. These are usually used during employment, the sales of goods and services, tenancy, and for the purchase or lease of a particular land or property. Here are the reasons why we need contracts and agreements:

• A legally enforceable contract helps protect both parties in case any disagreement may occur during the transaction.
• Although a verbal agreement is more convenient, a written contract is important since it serves as a written proof that an agreement was made and also includes the terms that have been agreed upon by the two parties.
• Contracts and agreements are needed for legal purposes to be able to determine whether the other party has breached the contract.

 

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What Is the Difference between a Contract and an Agreement?

When two parties sign a contract, they are entering an agreement. However, an agreement doesn’t necessarily mean that both parties are in a contract, especially when this is done verbally. The differences between an agreement and a contract are as follows:

• With the right elements, a contract is enforceable by law should one party breach the terms indicated in the contract. An agreement, on the other hand, is not legally enforceable unless documentation is made and signed by both parties.
• An agreement can be made through promises or commitments, while a contract should be written on paper in order for it to be legally enforceable.
• In an agreement, there are no legal consequences should the other party not perform the promise that was made. However, in a contract, a party can be held liable should he/she not follow what was agreed upon.
• Agreements are typically done between family and friends, while a contract is made when it involves business, employment, etc.

 

If you need agreement samples like lease agreements, consulting agreements, and other types of agreements, we also have samples and templates that are available for download on this site. You can also browse through this site to find more templates that may be useful to you.

How to Create an Effective Contract

When creating a contract, it is important to understand all the necessary steps to ensure that your document is legally enforceable. The steps in creating a basic contract are as follows:

• First, download from our selection of templates and samples in this article to help you in formatting your document.
• Write the title on top of your document to indicate the type of contract you are making. Some examples are sales contracts, independent contractor agreements, real estate contracts, etc.
• Write the names of both parties that are involved in the contract. Clearly write the names of the two parties, their addresses, contact numbers, and other important information of those included in the agreement.
• The terms of the contract are then written. The terms include an overview of the products and services that are exchanged by both parties. It also includes terms that indicate what will happen should the other party breach what was agreed upon.
• You can also include a termination clause in your document to specify the steps that one needs to do to get out of the contract without consequences.
• Aside from a termination clause, a non-disclosure agreement or an NDA can be included should you choose to keep information between the two parties private.
• Provide other details of the transaction. For example, you can specify the amount if you are creating a sales contract, lease contract, or rental contract.
• Ensure that both parties sign the contract in order for it to be effective.

 

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Essential Tips for Creating Contracts

Refer to these essential tips when creating a contract to ensure that you have a useful and solid contract.

• Always remember to create an outline of the contract that you will be making. This assures that you have a well-structured contract.
• Clearly explain the purpose of the contract and the agreement that the two parties are going into.
• Remember to be concise and avoid using complex words in your contract. This is important in order for readers to easily understand the information written in the document.
• When writing numbers, always ensure that you write it in words and numerals.
• Proofread your contract to ensure that all the information is accurate.
• Put any agreement that you have into writing to protect both parties.
• Always write in detail especially when creating the essential parts of the contract.
• Remember to keep all the information confidential, especially when it involves sensitive information that should only be between the two parties.
• Keep a copy of the contract that you have created.