OK, let’s go back to basics.
I noticed this passage (footnotes omitted) in the textbook Stephen L. Sepinuck & John F. Hilson, Transactional Skills: How to Structure and Document a Deal 15 (3d ed. 2022):
Notice that the discussion above refers to the written document as an “agreement,” not as a “contract.” While you might encounter documents labeled as a “contract” of one type or another (e.g., a “Sales Contract”), such a label is potentially misleading. Under the Uniform Commercial Code, which governs many commercial transactions, an “agreement” is the bargain of the parties in fact, whereas a “contract” is the legal obligation that arises from an agreement. The Restatement (Second) of Contracts defines the two terms similarly. Thus, whether an agreement exists is a factual issue; whether an agreement creates a contract is a legal issue. Put another way, parties sign agreements; they do not sign contracts.
Unlike Sepinuck and Hilson, I use contract to refer to the written document.
You’ll see from the small collection of extracts below that both agreement and contract can be understood as referring to the written document or understood as referring to something beyond the written document. So unless we invent some word for only the written document, we’re stuck with these shifting meanings.
But contract is the better word to use for the written document. In my experience, among lawyers and others it’s the word that first comes to mind for the written document. Heck, that meaning is inherent in the phrase contract drafting.
And unlike Sepinuck and Hilson, I don’t see how what you call the written document could be “potentially misleading.” The shifting meanings of agreement and contract are beyond those who aren’t lawyers, so they wouldn’t be misled by the word used for the written document. And any lawyer would have to be catastrophically incompetent to attribute any particular significance to the word used for the written document. So making a point of using only the number-two choice, agreement, as the generic term for the written document might be a little precious.
Given that I use contract to refer to the written document, why don’t I recommend using contract in the title for written documents? MSCD says, “Most contracts use the word agreement in the title rather than contract, perhaps because agreement sounds more genteel than contract, with its two /k/ sounds.” Whatever the explanation, use of agreement is entrenched, and it’s not confusing, so nothing would be accomplished by agitating for contract instead. (But agitate for getting rid of agreement and plan of merger? Yeah, I’ll do that.)
I’m glad to have had occasion to revisit this, but in the past 25+ years I’ve never had reason to question what I call the written document, so I don’t think I’ll now find myself lying awake at night thinking about it.
What “Agreement” Means
Here’s what others have had to say about agreement:
Here’s UCC § 1-201(b)(3):
“Agreement”, as distinguished from “contract”, means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in Section 1-303.
This is from 1 Williston on Contracts § 1:3 (4th ed.):
Agreement has in some respects a wider meaning than contract, bargain or promise. It covers executed sales, gifts, and other transfers of property. It also covers promises to which the law attaches no legal or equitable obligations. Thus, for example, an instrument which expressly states that it is a gentleman’s agreement, or otherwise not a binding commitment, will generally not be treated as creating contractual duties, although it is nevertheless an agreement.
This is from 2 Stephen’s Commentaries on the Laws of England 5 (L. Crispin Warmington ed., 21st ed. 1950) (quoted in Black’s Law Dictionary):
The term “agreement,” although frequently used as synonymous with the word “contract,” is really an expression of greater breadth of meaning and less technicality. Every contract is an agreement; but not every agreement is a contract. In its colloquial sense, the term “agreement” would include any arrangement between two or more persons intended to affect their relations (whether legal or otherwise) to each other. An accepted invitation to dinner, for example, would be an agreement in this sense; but it would not be a contract, because it would neither be intended to create, nor would it in fact create, any legal obligation between the parties to it.
What “Contract” Means
Here’s what others have had to say about contract:
This is from Restatement (Second) of Contracts § 1 (1981):
A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.
a. Other meanings. The word “contract” is often used with meanings different from that given here. It is sometimes used as a synonym for “agreement” or “bargain.” It may refer to legally ineffective agreements, or to wholly executed transactions such as conveyances; it may refer indifferently to the acts of the parties, to a document which evidences those acts, or to the resulting legal relations. In a statute the word may be given still other meanings by context or explicit definition. As is indicated in the Introductory Note to the Restatement of this Subject, definition in terms of “promise” excludes wholly executed transactions in which no promises are made; such a definition also excludes analogous obligations imposed by law rather than by virtue of a promise.
This is from 1 Williston on Contracts § 1:1 (4th ed.):
As used in this treatise, the term “contract” is primarily based on two fundamental notions: first, that the obligation of a contracting party is based on the party’s promise, and second, that whether a promise or set of promises falls within the definition of contract is dependent upon whether the law will enforce the promise or set of promises. It is neither the circumstances which make a promise or set of promises binding, nor the legal relations between the parties which arise from the existence of a binding promise or promises which constitute the contract, but only such a promise or such promises as create binding legal relations.
This too is from 1 Williston on Contracts § 1:1 (4th ed.):
A contract or agreement is not equivalent to the piece of paper it is written on; that is, the paper evidences the agreement, but the agreement exists separately from the piece of paper.
Here’s how Black’s Law Dictionary defines contract:
- An agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law.
- The writing that sets forth such an agreement.
- A promise or set of promises by a party to a transaction, enforceable or otherwise recognizable at law; the writing expressing that promise or set of promises.
John D. Calamari & Joseph M. Perillo, The Law of Contracts § 1.1, at 3 (4th ed. 1998) (quoted in Black’s Law Dictionary).
The term “contract” is also used by lay persons and lawyers alike to refer to a document in which the terms of a contract are written. Use of the word in this sense is by no means improper so long as it is clearly understood that rules of law utilizing the concept “contract” rarely refer to the writing itself. Usually, the reference is to the agreement; the writing being merely a memorial of the agreement.
This is from William R. Anson, Principles of the Law of Contract 13 n.2 (Arthur L. Corbin ed., 3d Am. ed. 1919) (quoted in Black’s Law Dictionary):
The term contract has been used indifferently to refer to three different things: (1) the series of operative acts by the parties resulting in new legal relations; (2) the physical document executed by the parties as the lasting evidence of their having performed the necessary operative acts and also as an operative fact in itself; (3) the legal relations resulting from the operative acts, consisting of a right or rights in personam and their corresponding duties, accompanied by certain powers, privileges, and immunities. The sum of these legal relations is often called “obligation.” The present editor prefers to define contract in sense (3) …
