contracts / agreements
The essential differences between a contract and an agreement are minor. In essence, a contract’s outline is more formal and more rigidly presented than the terms outlined in an agreement.
A contract is a legally binding agreement reached between two parties, the terms of which the courts have the authority and obligation to enforce. An agreement is a less formal creation of an obligation between the two parties.
An agreement usually lacks one or more of the essential elements that are required to be present in order to form a valid contract that will be considered legally enforceable by a court of law.
Contracts outline the terms of the relationship that should be formed between the two parties to the contract. An agreement also outlines the terms of the relationship between the two. However, the difference is that the contract’s outline is far more rigid than that of a contract.
There are six essential elements for a contract to be valid (enforceable by a court). The first three, considered here together, relate to the agreement itself; the other three relate to the parties making the contract.
Essentials of a contract
Offer, Acceptance, and Mutual Consent
Every contract must include a specific offer and acceptance of that specific offer. Both parties must consent of their free will. Neither party can be coerced or forced to sign the contract, and both parties must agree to the same terms. Implied in these three conditions is intent of the parties to create a binding agreement. If one or both parties are not serious, there's no contract.
Consideration. There must be something of value exchanged between the parties. The thing of value may be money or services, but both parties must give something (otherwise, it is a gift, not a contract).
Both parties must be of "sound mind" to comprehend the seriousness of the situation and understand what is required.
This definition requires that neither party be a minor, both must be sober (not under the influence of drugs or alcohol when signing the contract), and neither can be mentally deficient.
If one party is not competent the contract is not valid and the non-competent party can disavow (ignore) the contract. This article on entering into a contract with a minor explains the issues involved in this kind of situation.