Contract

Also known as: Agreement, Pact

In one sentence

A legally binding agreement between two or more parties to do or not do something.

Plain English

A contract is a promise or set of promises that the law will enforce. It requires at least two parties, an offer, acceptance, and something of value exchanged (called consideration). Contracts can be written or spoken, though important ones are usually in writing. When someone breaks a contract, the other party can sue for damages or ask a court to force performance.

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Example

You sign a lease agreeing to pay rent each month in exchange for the right to live in an apartment. This is a contract. If you stop paying rent, your landlord can sue you or evict you.

Used in a sentence

“The contract between the builder and homeowner specified that construction would be completed by December 31st.”

Related terms

Offer to Treat

A preliminary invitation to negotiate, not a binding offer to enter into a contract.

Acceptance

Agreeing to the exact terms of an offer, creating a binding contract.

Meeting of the Minds

Both parties share the same understanding of a contract's essential terms.

Bilateral Contract

A contract where both parties make binding promises to each other.

Material Breach

A significant failure to perform a contract obligation that defeats its core purpose.

Entire Agreement

A clause stating that the written contract contains the complete and final agreement between the parties.

Offer

A proposal to enter into a binding agreement on specific terms.

Consideration

Something of value exchanged by each party to make a contract binding.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.