Contract Theory is a branch of economics and legal studies that examines how individuals and organizations create and enforce agreements. It focuses on the incentives and behaviors of parties involved in contracts, analyzing how they can achieve mutually beneficial outcomes while minimizing risks and uncertainties. The theory also explores the design of contracts, including terms and conditions, to ensure compliance and reduce the likelihood of disputes. Key concepts include moral hazard, adverse selection, and incomplete contracts, which help explain the complexities of contractual relationships in various contexts, such as business, law, and economics.