An agreement is any understanding or arrangement between the parties or coming together of the parties for mutual and common purpose with the view of altering their rights. When that agreement contains terms and elements legally binding/enforceable by law in an exchange for consideration, that agreement becomes contract. Every contract is an agreement, but every agreement is not a contract.  All agreements which are duly executed between competent parties for a consideration and lawful object can be referred to as a contract.

Contracts are mutual agreement which are binding on both the parties. Agreement is formed when there is an offer by one party and acceptance of the same by the other party. The important aspect of the contact is consensus ad idem (meeting of minds) meaning that the parties to an agreement should agree upon the same thing, in the same sense and at the same time. Apart from these, the parties must be competent to enter into contact. Any contract enter into by any incompetent individual (like a minor) is not valid and also not enforceable in the courts. Moreover, the contact must be made with free consent of the parties. It should have a lawful object, some legal obligations and some lawful consideration. Both the parties must get something in return. In certain circumstances it should also be in accordance with the legal formalities such as registration, writing.

The difference between the Contract and Agreement is as described below: <table style="width: 100%;" border="1"> <tbody> <tr> <td width="40"></td> <td width="104"><strong> <b>Points of Difference </b> </strong></td> <td width="221"><strong> <b>Agreement </b> </strong></td> <td width="209"><strong> <b>Contract</b> </strong></td> </tr> <tr> <td width="40">1.</td> <td width="104">Definition</td> <td width="221">An informal understanding between two parties which is not legally enforceable</td> <td width="209">A formal understanding between two parties which, by its elements and terms is enforceable by law.</td> </tr> <tr> <td width="40">2.</td> <td width="104">Consideration</td> <td width="221">Not required</td> <td width="209">Required</td> </tr> <tr> <td width="40">3.</td> <td width="104">Legal effect</td> <td width="221">An agreement that does not fulfil the required elements of the contract has no legal effect.</td> <td width="209">A contract is legally binding and the terms and elements of the contract are enforceable in court of law.</td> </tr> <tr> <td width="40">4.</td> <td width="104">Requirements</td> <td width="221">Common understanding as to their relative rights and responsibilities, which is meetings of mind.</td> <td width="209">Free consent, competent to enter into an agreement, lawful object and lawful consideration and other as mentioned in answer 2.</td> </tr> <tr> <td width="40">5.</td> <td width="104">Need to be in writing?</td> <td width="221">Not necessary</td> <td width="209">It is required for some specific kind of contracts, such as those involving land which cannot be completed within one year.</td> </tr> <tr> <td width="40">6.</td> <td width="104">When is it valid?</td> <td width="221">When mutually accepted by both the parties or all parties involved</td> <td width="209">Mutual agreement between the parties (after an offer has been made by one party and has been accepted by the other) and consideration (something of value must be exchanged)</td> </tr> </tbody> </table>

Contract/Agreement drafting is a practice of forming a written document which can serve as an evidence wherein the written document states clauses with respect to the obligations of the parties with necessary safeguards and effective remedies (which also can include out of court settlements), the purpose of the contract/agreement (which depends upon the types of contracts). The drafting would also include the manner in which a contract/agreement is to be performed, the laws governing the contract/agreement (if the contract/agreement is an international one), the appropriate court which will be competent to entertain your dispute, the duration of the contract, intellectual property protection, territorial restriction, confidential information (if applicable), termination of a contact/agreement. Thus, contract/agreement drafting is a process of including mutually agreed upon clauses into a binding document.

A well drafted Contract clears ambiguities and specifies the rights and obligations which needs to be performed. Once the clauses have been noted down in a single document, the other party can review the document and identify concerns arising from the document. The purpose of such review is to address those concerns and make both the parties at an equal footing so that the parties can work competently. The document spells out specific terms that that the contracting parties have agreed upon and in the event of breach serves as a guiding document for the courts to decide proper remedy for the injured party. Those agreements which does not meet the legal criteria is termed as an informal agreement which can save time and allow more flexibility in the fulfilment of an obligation.

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