A formal contract is a legally binding agreement between two or more parties that outlines specific terms and conditions. These contracts are typically written documents that detail the obligations, rights, and responsibilities of each party involved. They often require signatures to indicate acceptance and can cover various areas, such as employment, sales, or services. Formal contracts are essential in business and personal transactions because they provide clarity and protection for all parties. If one party fails to meet their obligations, the other party can seek legal remedies. Common elements of formal contracts include offer, acceptance, consideration, and mutual consent.