Contract and agreement: What are they and what is their difference?

In the labor and business field, different terms are used to formalize an agreement between two or more parties, such as the contract and the agreement. Although they both seem similar, there are some important differences to consider before making a decision.

What is a contract?

A contract is a written agreement between two or more parties that establishes the conditions and terms that govern a commercial, employment or financial relationship. A contract details the responsibilities and obligations of each party, as well as the consequences in the event of non-compliance. A contract can be verbal or written, although it is always recommended to formalize it in writing to avoid misunderstandings.

What is an agreement?

An agreement is a collective agreement between employees and employers or between unions and companies. Its main objective is to establish working conditions in a specific sector. An agreement establishes aspects such as working hours, remuneration, vacations, job stability, among others. These agreements are negotiated by the parties and their compliance is mandatory for both.

What is their difference?

Although the contract and the agreement are used to formalize agreements between parties, their difference lies in their scope and application. The contract is an agreement between two or more parties to establish specific terms, while the agreement is a series of agreements negotiated by unions and employers to establish working conditions in a given sector.

Botton line

• A contract is a written agreement between two or more parties that establishes the conditions and terms that govern a commercial, employment or financial relationship.
• An agreement is a collective agreement between employees and employers or between unions and companies. Its main objective is to establish working conditions in a specific sector.
• The contract and the agreement have different scopes and applications, the first being more specific and the second more general.

In conclusion, both the contract and the agreement are useful mechanisms for formalizing agreements, although their scope and application are different. Therefore, we must choose the appropriate mechanism according to our needs and objectives to avoid possible problems in the future.