Within the business world, a contract is an agreement that serves as a legally binding arrangement between two or more parties. They are often used to formalise a business arrangement, laying out the details clearly for the businesses involved.
Written contracts aren’t completely necessary for businesses to make an agreement, at least legally. By law, a verbal agreement is enough for it to be binding and for both parties to be held to the terms of the agreement. For any contract to be legally binding it must meet several important criteria. If it does not then it is not enforceable, and the contract loses its legal stature.
A contract that is bound by law is usually very detailed, highlighting even minute and seemingly trivial points. However most contracts don’t see a court room, and the legal nature of the rules laid out by the contract serves more as a deterrent against breaking the contract on a whim.