A contract is a legally binding agreement between two or more parties. It outlines the rights and responsibilities of each party involved, ensuring that everyone understands what is expected. Contracts can be written or verbal, but written contracts are generally preferred because they provide clear evidence of the terms agreed upon. Contracts are commonly used in various situations, such as business transactions, employment agreements, and real estate deals. They help protect the interests of all parties and provide a framework for resolving disputes if they arise. Understanding the terms of a contract is essential before signing it.