An agreement is something most people make regularly, whether they're accepting a freelance project, hiring a contractor, renting an office, or agreeing on payment terms with a client.
But what exactly makes an agreement valid? Does it need to be written down? And can you sign one electronically?
An agreement is a mutual understanding between two or more parties about their responsibilities, rights, or intentions. Some agreements are legally enforceable contracts, while others are informal arrangements that may not create enforceable obligations.
Understanding the difference can help you avoid misunderstandings, document important decisions, and choose an appropriate signing method.
This guide explains what an agreement means, its common types, the elements that can make it legally binding, and how to create and sign one digitally.
At a Glance: What Is an Agreement?
| Feature | Details |
|---|---|
| Definition | A mutual understanding between two or more parties |
| Main purpose | Establish shared terms, responsibilities, or expectations |
| Common forms | Written, verbal, express, and implied |
| Agreement vs. contract | A contract is an agreement that creates legally enforceable obligations |
| Legal requirements | Depend on the agreement, applicable law, and transaction |
| Common examples | Service agreements, NDAs, leases, sales agreements, and partnership agreements |
| Electronic signing | Generally available for many business agreements, subject to applicable requirements |
| Recommended practice | Document important terms clearly and retain the completed agreement |
What Is an Agreement?
An agreement is an understanding reached between two or more parties about what they intend to do, provide, exchange, or accept.
In everyday language, an agreement can be as simple as deciding to share the cost of a project or promising to deliver a service by a particular date.
In business, agreements often establish more detailed obligations.
For example, a freelance designer and a client might agree that:
- The designer will create a five-page website.
- The client will provide the necessary content.
- The work will be completed within four weeks.
- The client will pay $2,000 in two installments.
These terms describe what both parties expect from the arrangement.
Putting them into a written document makes the expectations easier to review and reference later.
Agreement vs. Contract: What's the Difference?
The terms agreement and contract are often used interchangeably, but they have different legal meanings.
An agreement describes a mutual understanding. A contract is an agreement that creates obligations enforceable under applicable law.
In general, a legally enforceable contract requires elements such as mutual assent, consideration or a recognized legal substitute, capacity, and lawful purpose.
For example, two friends may agree to meet for lunch. That is an agreement in the everyday sense, but it ordinarily does not create an enforceable contract.
A business agreement where one party promises to deliver services in exchange for payment may create enforceable contractual obligations.
The title of a document does not decide whether it is legally binding. Its terms and surrounding circumstances matter.
Why Agreements Matter
Agreements help establish expectations before work begins or money changes hands.
For freelancers, agencies, consultants, and small businesses, a clear agreement can:
- Define the work being provided.
- Establish payment amounts and deadlines.
- Clarify each party's responsibilities.
- Explain how changes will be handled.
- Set conditions for ending the arrangement.
- Provide a record of what was agreed.
Even when an agreement does not legally require a written document, recording important terms can reduce confusion.
What Are the Four Types of Agreements?
Agreements can be classified in different ways.
Four commonly discussed forms are written, verbal, express, and implied agreements.
These categories overlap. For example, a written agreement is usually also an express agreement.
1. Written Agreements
A written agreement records the parties' terms in a document or another form of writing.
Examples include:
- Freelance service agreements.
- Sales contracts.
- Lease agreements.
- Employment offer letters.
- Partnership agreements.
Written agreements are useful because the parties can review the same terms instead of relying on memory.
A written document may also make it easier to establish what was agreed if a dispute occurs.
However, the presence of a written agreement does not automatically make every provision enforceable.
2. Verbal Agreements
A verbal agreement is reached through spoken communication.
For example, a customer might agree over the phone to pay a consultant a fixed amount for a service.
Verbal agreements can create legally enforceable contracts in many circumstances.
However, some transactions must satisfy specific writing requirements.
As explained in Cornell Law School's overview of oral contracts, the enforceability of oral agreements may be limited by statutes requiring certain contracts to be in writing.
Verbal agreements can also create practical difficulties when the parties disagree about what was said.
For important business arrangements, written confirmation is generally a sensible precaution.
3. Express Agreements
An express agreement is one in which the parties communicate their terms directly.
The terms may be stated orally, in writing, or through a combination of both.
For example:
A consultant tells a client, "I will prepare your monthly analytics report for $500."
The client accepts those terms.
Their agreement is express because the obligations were communicated directly.
Express agreements are common in business because the terms can be clearly identified.
4. Implied Agreements
An implied-in-fact agreement arises from the parties' actions rather than an explicit exchange of words stating every term.
For example, a customer enters a barbershop, requests a haircut, receives the service, and pays the usual price.
The circumstances may establish an agreement even without a formal written contract.
Courts examine the parties' conduct and surrounding facts when determining whether an implied-in-fact agreement exists.
This differs from an obligation imposed by law to prevent unjust enrichment, sometimes called a quasi-contract, which does not necessarily involve an actual agreement between the parties.
For business relationships involving significant obligations, relying on conduct alone can introduce uncertainty.
Other Common Contract Classifications
You may also encounter bilateral and unilateral agreements.
A bilateral contract involves an exchange of promises. For example, a client promises payment while a contractor promises to complete specified work.
A unilateral contract generally involves an offer that can be accepted through performance, such as a reward offered for returning a lost item.
These classifications describe how contractual obligations arise rather than whether an agreement is written or verbal.
Written Agreement vs. Verbal Agreement
Both written and verbal agreements can have legal significance, but they present different practical considerations.
| Factor | Written agreement | Verbal agreement |
|---|---|---|
| Record of terms | Terms are documented | Terms may depend on recollection or other evidence |
| Ease of reference | Parties can review the document | Parties may need to reconstruct the conversation |
| Evidence in a dispute | Written terms can provide direct evidence | Messages, witnesses, conduct, or other evidence may be needed |
| Common business use | Contracts, service agreements, leases | Informal arrangements and preliminary discussions |
| Legal enforceability | Depends on applicable requirements | Depends on applicable requirements and any writing rules |
A written agreement is not automatically enforceable simply because it is documented.
Similarly, a verbal agreement is not automatically unenforceable because no document was signed.
The circumstances and applicable law determine the outcome.
Common Types of Business Agreements
Agreements serve different purposes depending on the relationship between the parties.
Service Agreements
A service agreement establishes the terms under which one party provides services to another.
Freelancers, consultants, and agencies commonly use them.
Important terms may include the scope of work, deliverables, deadlines, payment schedule, revision limits, and termination conditions.
For example, a marketing agency might use a service agreement to specify its monthly deliverables and fees.
Non-Disclosure Agreements (NDAs)
An NDA establishes obligations concerning confidential information.
Businesses often use NDAs when sharing sensitive commercial information with contractors, partners, or potential collaborators.
Common provisions address what information is confidential, permitted disclosures, exclusions, and the duration of confidentiality obligations.
The enforceability of particular confidentiality terms depends on their wording and applicable law.
Sales Agreements
A sales agreement documents the terms of a purchase or sale.
It may identify the goods being sold, price, delivery conditions, payment terms, and remedies if a party does not perform.
These agreements are common when businesses purchase equipment, products, or other goods.
Lease Agreements
A lease agreement establishes the terms for using property or equipment over an agreed period.
It may specify rent, duration, security deposits, maintenance responsibilities, and termination conditions.
Residential and commercial leases can be subject to different legal requirements, so relevant local rules should be checked.
Partnership Agreements
A partnership agreement establishes how business partners will operate their shared venture.
It may cover ownership contributions, decision-making authority, profit distribution, management responsibilities, and procedures for resolving disputes or leaving the partnership.
Because partnership arrangements can involve significant financial and legal consequences, professional review may be appropriate.
Memorandums of Understanding (MOUs)
A memorandum of understanding records the parties' shared intentions or proposed cooperation.
Some MOUs are intended to be nonbinding, while others contain provisions that may create enforceable obligations.
The legal effect depends on the language, context, and applicable law, not merely the document's title.
What Makes an Agreement Legally Binding?
Not every agreement creates a legally enforceable contract.
In U.S. contract law, several elements are commonly considered when determining whether contractual obligations exist.
Offer and Acceptance
One party must generally make an offer that can be accepted by another.
For example, a freelancer may offer to design a website for $2,500, with delivery within 30 days.
If the client accepts the terms, that can establish mutual assent.
If the client responds by proposing a different price or scope, the response may be a counteroffer rather than acceptance.
The legal outcome depends on the communication and applicable contract rules.
Consideration
Consideration generally involves something of legal value exchanged between the parties.
It may include money, goods, services, or promises.
For example, a consultant agrees to prepare a report in exchange for a client's promise to pay $800.
Each party undertakes an obligation in exchange for the other's promise.
Some enforceable obligations arise through recognized substitutes or legal exceptions to consideration requirements.
Simply inserting a nominal payment or boilerplate consideration statement does not necessarily resolve a substantive contract-formation issue.
Mutual Assent
Mutual assent means the parties objectively communicate agreement to the relevant terms.
Courts generally consider outward expressions of intent, including words and conduct, rather than relying only on what someone privately believed.
Fraud, duress, material mistakes, or other circumstances may affect whether an agreement is enforceable.
However, their legal consequences vary. Some problems can make an agreement voidable rather than automatically void.
Legal Capacity
The parties must have the legal capacity required to enter the agreement.
Rules concerning minors, mental capacity, and other circumstances vary by jurisdiction.
Capacity questions can affect whether an agreement is enforceable or may be avoided.
Lawful Purpose
The agreement must have a legally permissible purpose.
An arrangement requiring illegal activity may be unenforceable.
Other rules, including public policy and statutory restrictions, may also affect particular terms.
Writing and Signature Requirements
Certain agreements must satisfy additional formalities.
For example, statutes of frauds may require written evidence of certain property transactions or contracts that cannot be performed within a specified period.
A signature may be necessary for some transactions, but an unsigned agreement is not automatically unenforceable in every situation.
Parties' conduct, communications, and applicable law may establish contractual obligations even when a formal document was never signed.
How to Create an Agreement: Step-by-Step
Creating a clear written agreement starts with identifying what the parties are actually committing to.
The following process works as a general starting point for many routine business arrangements.
1. Identify the Parties
Include the names of the individuals or businesses entering the agreement.
For business entities, use the appropriate registered business name where relevant.
If someone signs on behalf of a company, confirm that they have the necessary authority.
2. Describe the Purpose
Explain what the agreement is intended to accomplish.
For example:
"The Service Provider will design and develop a five-page business website for the Client."
A specific description is more useful than a vague statement such as "provide website services."
3. Define Each Party's Responsibilities
Identify what each party must do.
For a freelance project, this might include:
- The freelancer's deliverables.
- The client's required materials.
- Review and approval responsibilities.
- Revision limits.
- Project deadlines.
The more specific the terms, the easier they are to follow.
4. Set Payment Terms
Where payment is involved, specify the amount, payment method if relevant, and due dates.
For example:
"The Client will pay $1,500 in two installments: $750 upon signing and $750 upon completion of the approved deliverables."
Also explain any applicable late-payment terms or conditions for additional work.
5. Include Duration and Termination Conditions
State when the agreement begins and when it ends, if applicable.
Explain how either party may terminate the agreement and what happens to outstanding work, payments, or obligations.
A termination clause can be especially useful for ongoing services.
6. Review Important Legal and Business Terms
Depending on the agreement, consider whether it needs provisions addressing:
- Confidentiality.
- Intellectual property ownership.
- Changes to the project scope.
- Liability and remedies.
- Dispute resolution.
- Governing law.
- Renewal or termination.
Not every agreement needs every clause.
For complex or high-value transactions, professional review can help identify missing protections and jurisdiction-specific requirements.
7. Prepare the Document for Signing
Once the terms are agreed, prepare the final document.
Confirm that names, dates, amounts, and obligations are accurate.
If electronic signing is appropriate, use a signing method accepted by the parties and permitted under applicable law.
8. Sign and Retain the Agreement
Arrange for the required parties to sign.
Keep the final document and any relevant signing records in a secure, accessible location.
For agreements involving multiple signers, an electronic signature platform can help manage signing order, reminders, and completion tracking.
How to Sign an Agreement Digitally
Electronic signing can simplify the process of completing agreements when the relevant transaction permits it.
Instead of printing, signing, scanning, and exchanging paper copies, parties can often complete the signing process online.
What Is an Electronic Signature?
An electronic signature can include an electronic symbol or process associated with a record and adopted with the intention of signing.
Depending on the circumstances, this may include typing a name, drawing a signature, or completing a signing action through an electronic signature service.
The appearance of the signature alone does not determine its legal effect.
The signing intent, document requirements, attribution, and applicable law are important considerations.
Are Electronic Signatures Legally Binding?
In the United States, the federal ESIGN Act generally provides that qualifying signatures and records cannot be denied legal effect solely because they are electronic.
However, electronic signing laws do not eliminate the other legal requirements applicable to agreements.
The ESIGN Act also includes exceptions covering certain categories of documents and transactions.
Specific consent, disclosure, retention, witnessing, or notarization requirements may apply.
Always confirm that the method is suitable for the particular agreement.
How to Sign an Agreement Online With LoreSign
LoreSign provides a way to prepare documents and request electronic signatures.
A typical workflow includes:
- Prepare your agreement. Finalize the terms and create the document you want signed.
- Upload the PDF. Add the document to LoreSign.
- Place signing fields. Add signature, name, date, or initial fields where needed.
- Assign recipients. Identify who should complete each field.
- Configure the signing order. If several people need to sign sequentially, arrange the order.
- Send the signing request. Recipients can review and complete the document without creating a signer account.
- Track completion. Monitor the signing status and use reminders when appropriate.
- Save the completed agreement. Retain the final document and available signing records.
LoreSign also supports reusable templates, which can help when businesses regularly send similar agreements.
Its audit trails and Certificates of Completion can provide supporting information about signing activity.
These records can help document how and when a transaction occurred, but they do not automatically guarantee that an agreement is enforceable.
What Should You Look for in an Agreement-Signing Tool?
When choosing a signing platform, consider how well it supports your actual document workflow.
Ease of Use
The process should be straightforward for both the sender and recipients.
Complicated instructions or unnecessary account requirements can create friction.
Multiple Signers
If an agreement involves several parties, look for recipient assignment and signing-order controls.
These can reduce confusion about who needs to sign next.
Signing Records
Audit trails, timestamps, and completion records can provide useful information if someone later questions the signing process.
The precise records available depend on the platform.
Document Templates
Reusable templates are helpful for recurring agreements, such as freelance contracts, service proposals, and NDAs.
They can reduce repetitive document preparation.
Pricing and Usage Limits
Review how the service charges for document sending, users, templates, or advanced features.
A lower advertised price doesn't necessarily mean a platform is the best fit for every signing volume.
Check current plan details before choosing a tool.
Common Mistakes When Making an Agreement
Even a carefully formatted document can lead to problems if important terms are missing or unclear.
Using Vague Language
Terms such as "payment will be made soon" or "work will be completed promptly" can create uncertainty.
Where possible, specify dates, amounts, and measurable obligations.
For example, "Payment is due within 14 calendar days of invoice receipt" is clearer than "Payment is due promptly."
Leaving the Scope Undefined
A service agreement that simply says "marketing support" may not clearly establish what the client will receive.
Identify deliverables, exclusions, revisions, and any process for approving additional work.
Forgetting Termination Conditions
An agreement should explain how the relationship ends when termination is relevant.
This may include notice periods, outstanding payments, delivery of completed work, and continuing obligations.
Assuming a Signature Fixes Every Problem
A signed document may still contain invalid, unenforceable, or ambiguous provisions.
Electronic signing does not replace careful drafting or legal review when needed.
Using the Wrong Document Version
Sending an outdated agreement can create confusion about which terms were accepted.
Review the document before requesting signatures and preserve the final completed version.
Ignoring Applicable Law
Parties in different states or countries may face different legal requirements.
A governing-law clause may help clarify which law applies, but its effectiveness and relationship to jurisdiction or venue rules depend on the circumstances.
When Should You Get Professional Legal Advice?
You can often prepare a routine business agreement using a suitable template or drafting tool.
However, certain situations justify additional review.
Consider professional advice when an agreement involves substantial financial exposure, ownership interests, significant intellectual property rights, long-term commitments, unusual liability provisions, regulated transactions, or unfamiliar legal requirements.
A template can help organize standard terms, but it cannot assess every legal or commercial risk.
Similarly, an electronic signing platform helps parties complete the signing process. It does not independently determine whether the agreement's contents are legally appropriate.
The Bottom Line
An agreement helps establish shared expectations between two or more parties, but its legal effect depends on the terms and applicable law.
- Not every agreement is a contract. A legally enforceable contract generally requires additional elements.
- Agreements can take different forms. Written, verbal, express, and implied arrangements may all have legal significance.
- Clear terms matter. Define responsibilities, deliverables, payment, deadlines, and other important conditions.
- Written records reduce uncertainty. Documenting an arrangement makes its terms easier to review and reference.
- Electronic signatures can be valid. The appropriate method depends on the transaction and applicable requirements.
- Keep completed documents and signing records. They can provide useful evidence if questions arise.
When you're ready to send an agreement for signature, LoreSign can help you prepare the document, assign recipients, collect signatures, and track completion.
Frequently Asked Questions
1. What is the meaning of an agreement?
An agreement is a mutual understanding between two or more parties about their intentions, responsibilities, or obligations. Agreements may be written, verbal, or established through conduct. Some create legally enforceable contracts, while others are informal arrangements without contractual effect.
2. What are the four types of agreements?
Four commonly discussed forms are written, verbal, express, and implied agreements. These categories can overlap because written and verbal describe how terms are communicated or recorded, while express and implied describe how assent is manifested. Agreements can also be classified as bilateral or unilateral.
3. What is the difference between an agreement and a contract?
An agreement is a broader understanding between parties. A contract is an agreement that creates legally enforceable obligations. Contract formation generally involves mutual assent, consideration or a recognized substitute, capacity, and lawful purpose, although requirements vary by jurisdiction.
4. Is a verbal agreement legally binding?
A verbal agreement can be legally binding when it satisfies applicable contract requirements. However, certain transactions must meet statutory writing requirements. Verbal agreements can also be harder to prove when the parties disagree about the original terms.
5. Can I create my own agreement without a lawyer?
You can often prepare a routine agreement using a suitable template or drafting tool. However, a template does not guarantee enforceability or address every legal risk. Consider professional review for complex, high-value, regulated, or unfamiliar transactions.
6. How do I sign an agreement digitally?
Prepare the final document, confirm that electronic signing is appropriate, and use an accepted signing method. With an e-signature platform such as LoreSign, you can upload a PDF, place signature fields, assign recipients, send the signing request, and retain the completed document and supporting signing records.
About LoreSign
LoreSign is an electronic signature platform designed to help freelancers, consultants, agencies, and businesses prepare documents and collect signatures online.
With PDF uploads, signature fields, recipient management, reusable templates, reminders, audit trails, and signing-status tracking, LoreSign helps simplify everyday agreement workflows.
Our guides cover document preparation, electronic signatures, contract-signing processes, and practical ways to manage business agreements.
