Difference between agreement and contract/ Answer to Chapter 3

Difference between agreement and contract

An agreement which is enforceable by law is a contract. There are many similarities between the agreement and contract on the basis of their similar nature and their elements but these are fundamentally distinct, on the basis of enforceability. 

Following are the basic differences;

Difference between agreement and contract

Basis of difference	Agreement	Contract
Creation	The union of offer and acceptance creates agreement.	The union agreement and its enforceability create a contract.
Legal obligation	Agreement alone does not create a legal obligation to perform.	Contract alone can create a legal obligation to perform.
Binding nature	The agreement is not able to bind its parties to it.	The contract is binding on the parties to it.
Scope	The agreement is a vague term and it has a wider scope.	Contract is binding on the parties so it is the limited term.
Inclusion	The agreement does not include a contract.	Contracts include the agreement.
Remedy	May or may not have a legal remedy for the victim party.	The aggrieved party is entitled to the right to legal remedy.
Basis	Not necessarily to attract contract law.	Based on contract law.
Essential elements	The essential elements of a contract are not necessary.	Essential elements must be present.
The capacity of the parties	Not defined by law.	Clearly defined by law.

These are the major differences between agreement and contract. To form a valid contract, agreement with legal enforceability is necessary. Thus agreement is the prerequisite of the formation of a valid contract.

Major provisions of Civil Code, 2074

In Nepal, some laws of industry and commerce were enacted since the period of government of the Rana Regime. However, any particular policy prorating national interest was not considered while forming such laws. 

Rather those laws were designed with the view to strengthen the ruler’s control over the business sector. But due to the linkage of the southern boundary of Nepal with the railway of the Indian state Bihar, the development of industry and commerce begin to take motion step by step afterward in Nepal. 

In fact, mercantile laws made in the period of the Rana regime had covered only the matters essential but at a minimal degree. Modification and changes into those laws were brought and unnecessary provisions were repealed in the subsequent dates. At the same time, a tendency was established to include separate laws to meet the necessities of society in time. 

The historical development of business law in Nepal can be seen in the following three times:

1. Before 1910 BS
2. After 1910 BS
3. After 2023BS

Before 1910

Before the codification of Nepalese Law by Muluki Ain, 1910 BS, there was a practice of traditional rules guided by religious text and customary rules.  There was Manab Nyaya Shastra, a codified law developed at the time of Jayasthiti Malla, the Malla king during the 14^th century.  

At the time of Ram Shah(1666BS), when he was the king of Nepal, he had made some legal provisions relating to measurement in a business transaction, like Mana-Pathi, Dhak-Traju, etc. it had incorporated some business rules, e.g. the doctrine of caveat emptor. Therefore, there was no separate law relating to the contract in the modern sense.

After 1910

After the codification of Nepalese law by Muluki Ain, 1910 BS, the written law of unified Nepal started. At the time of Junga Bahadur Rana, the Prime Minister of Nepal, has enacted codified law called Muluki Ain, 1910 BS. 

It has incorporated some legal provisions regarding business transactions. Such as Lenden Byabaharko, Sahu Mahajanko, Registrationko Mahal etc. This effort was made by Prime Minister Junga Bahadur Rana after his European visit. 

Enactment of Naya Muluki Ain, 2020 BS has repealed the old Muluki Ain and brought some provisions in this sector. For example, provisions of Ledenko No. 37 and Naso Dharotko No. 1 came into practice. After the political change and advent of democracy in 2007 B.S., various laws were enacted and updated gradually. In this course, some principal mercantile laws were made.

After 2023

After the enactment of the Law relating to Contract 2023, a separate law of contract came into practice in Nepalese business law. 

It came into force in 1^st Poush, 2023 BS. By this effort, the business community felt better in terms of regulating their transactions under the law of contract. 

The Contract Act, 2056(2000AD) has repealed the earlier Law Relating to Contract 2023, and Civil Code 2074 has been repealed the Contract Act, 2056 with the need of the business community in modern time.

The Civil Code, 2074(Muluki Civil Code Act, 2074)

Muluki Civil Code Act, 2074, Business Law Note

The government of Nepal has recently enacted National Civil Code in 2074 B.S. and which repealed the Nepalese Contract Act, 2056 and has included all the necessary provisions of the contract act needed in modern times. 

The Civil Code, 2074 formally known as Muluki Devani Samhita, 2074 and it's English translation the National Civil Code, 2074, has incorporated the modern and developed principles of contracts enriched in English law and Indian Laws. 

Chapter 5 of the Code has provided the provision of the law of contracts and other types of liability. It is the largest Civil Code of Nepal consisting of 6 Parts (Chapter), 52 Segment (Paricched), and 721 Articles (Dhara). The Civil Code Act, 2074 simply Civil Code, 2974 has been repealed the Contract Act, 2056 and applied from 1st Bhadra 2075.

Major provisions of Civil Code, 2074

—  Section 504(1) - definition of contract.

—  Section 506- deals with contractual capacity.

—  Section 507- deals with the right and autonomy of parties to choose the matter of contract.

—  Section 508 to 512 – deals with offer and acceptance.

—  Section 513- deals with provisions of the contingent contract.

—  Section 517- deals with the void and voidable contracts.

—  Section 521 to 534- deals with the performance of the contract.

—  Section 535 to 544 – deals with breach of contract, and remedy available to the injured party. 

To see the answers to other questions from the same chapter click HERE