Agreement
Also called: Every promise and every set of promises
Under Section 2(e) of the Contract Act, every promise and every set of promises forming the consideration for each other. An agreement enforceable by law is a contract.
Explained
Section 2(e) of the Indian Contract Act, 1872 defines an agreement as every promise and every set of promises forming the consideration for each other. It is reached through the chain in Section 2: a proposal under Section 2(a), when accepted, becomes a promise under Section 2(b), and promises supported by consideration make up an agreement. Section 2(h) then provides that an agreement enforceable by law is a contract, which is why it is said that all contracts are agreements but not all agreements are contracts.
Section 10 states what turns an agreement into a contract: free consent of parties competent to contract, a lawful consideration and a lawful object, and the agreement must not be one expressly declared void. An agreement that is not enforceable by law is void under Section 2(g). An agreement enforceable at the option of one party only is a voidable contract under Section 2(i), as where consent was caused by coercion, fraud or misrepresentation. The Act expressly declares certain agreements void, including agreements in restraint of marriage, trade or legal proceedings (Sections 26 to 28) and agreements by way of wager (Section 30).
Void is not the same as illegal. In Gherulal Parakh v. Mahadeodas Maiya (1959) the Supreme Court held that a wagering agreement, though void under Section 30, is not forbidden by law, so a collateral agreement such as a partnership to carry on wagers is not unlawful under Section 23. In Tarsem Singh v. Sukhminder Singh (1998) an agreement to sell land under a mutual mistake as to area was void under Section 20, and the earnest money had to be returned under Section 65.
The word has special meanings elsewhere. Section 2(b) of the Competition Act, 2002 includes any arrangement, understanding or action in concert, whether or not formal or intended to be enforceable. Under Section 61 of the BNS a criminal conspiracy is itself an agreement between two or more persons to do an illegal act or a lawful act by illegal means. Examiners test the definitional chain, the void, voidable and illegal distinctions, and these statute specific meanings.
What the law says
(e) Every promise and every set of promises, forming the consideration for each other, is an agreement;
(f) Promises which form the consideration or part of the consideration for each other are called reciprocal promises;
(g) An agreement not enforceable by law is said to be void;
Sections 2(e), 2(g), 2(h): agreement, void agreement, contract
All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.
Nothing herein contained shall affect any law in force in [India] and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.
What agreements are contracts
Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.
Exception in favour of certain prizes for horse-racing.—This section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be awarded to the winner or winners of any horse-race.
Section 294A of the Indian Penal Code not affected.—Nothing in this section shall be deemed to legalize any transaction connected with horse-racing, to which the provisions of section 294A of the Indian Penal Code (45 of 1860) apply.
Agreements by way of wager are void
(b) “agreement” includes any arrangement or understanding or action in concert,—
(i) whether or not, such arrangement, understanding or action is formal or in writing; or
(ii) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings;
Section 2(b): wide meaning of agreement in competition law
(b) an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy:
Provided that no agreement except an agreement to commit an offence shall amount to a criminal conspiracy unless some act besides the agreement is done by one or more parties to such agreement in pursuance thereof.
Explanation.—It is immaterial whether the illegal act is the ultimate object of such agreement, or is merely incidental to that object.
Criminal conspiracy as an agreement
Earlier law: IPC 120A. Definition of criminal conspiracy.; 120B. Punishment of criminal conspiracy.
Example
For example, a promise by A to take B to dinner is an agreement, but since the parties did not intend legal relations, it is not enforceable and so is not a contract.
For the exam
- Section 2(e): agreement is every promise and set of promises forming consideration for each other.
- Section 2(h): an agreement enforceable by law is a contract.
- Section 10 lists the essentials: free consent, competency, lawful consideration and object, not expressly void.
- A wagering agreement is void but not illegal (Gherulal Parakh, 1959).
- Competition Act, Section 2(b): agreement includes informal arrangements and action in concert.
1,903 questions in the Law Maker question bank use this term. Practise Contract Law questions
Judgments
- Gherulal Parakh v. Mahadeodas Maiya (1959)A partnership formed to carry on wagering transactions is not unlawful under Section 23 of the Contract Act, because a wager, though void under Section 30, is not forbidden by law, opposed to public policy or immoral.
- Tarsem Singh v. Sukhminder Singh (1998)An agreement to sell land made under a mutual mistake about the area (kanals or bighas) was void under Section 20 of the Contract Act; its forfeiture clause failed and the earnest money had to be refunded under Section 65.
Related terms
- ContractUnder Section 2(h) of the Contract Act, an agreement enforceable by law. Section 10 lists what makes an agreement a contract.
- ProposalUnder Section 2(a) of the Contract Act, a person makes a proposal when he signifies to another his willingness to do or abstain from doing anything, to obtain that other's assent.
- PromiseA proposal that has been accepted. Under Section 2(b) of the Indian Contract Act, 1872, a proposal, when accepted, becomes a promise.
- ConsiderationAn act, abstinence or promise done or made at the desire of the promisor by the promisee or any other person, which is the price for the promise (Section 2(d) of the Contract Act).
- VoidHaving no legal effect. Under Section 2(g) of the Contract Act an agreement not enforceable by law is void, and under Section 2(j) a contract becomes void when it ceases to be enforceable.
- Voidable contractAn agreement enforceable by law at the option of one or more of the parties but not at the option of the other or others. Section 2(i) of the Indian Contract Act, 1872.
Further reading
Checked 6 November 2026. Statutory text is quoted from the Bare Acts library, taken from India Code. See the full glossary.