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 prevent misunderstandings and disputes by clearly stating the terms, including payment details, deadlines, and specific obligations. If one party fails to meet their obligations, the other party may seek legal remedies.