A contract is an agreement between two or more parties to undertake a task. A contract may be oral, communicated, written or just plain understood. Contracts may be between any two people. An acceptance of a son to do a chore for the mother in return for a treat is a contract; while a partnership between two companies is also a contract. There is a contract if and only if all associated parties receive some benefit. For example, a commitment to donate money to a charity cannot constitute a contract.

Though most oral contracts are not legally binding, they are undertaken on ethical principles. In the US, every contract that involves a sum of more than $500 must be written down for it to be legally valid. The US courts recognize any meeting of competent people with a like purpose and intent to undertake some common task as a contract.

There are two types of contracts: express and implied.

Express contracts are those that very lucidly convey the purpose of the agreement. Each word is carefully penned down and carries weight in a court of law. There are further three types of express contracts – parol contracts, under seal contracts and of record contracts. Parol contracts are simple legally binding contracts that are undertaken between two competent parties. Under seal contracts are those that are in the form of deeds and bonds. They are usually the result of a lot of deliberations between all the parties involved. The third type of express contract - of-record contracts - are those which are recorded by law. Judgments passed by courts, bail agreements, etc. belong to this category.

Implied contracts are those that are not written down, but perfectly understood. Students enrolling in a school understand that they will be tutored in all the lessons of their syllabuses, though there is no written contract declaring so. A majority of buying and selling is carried out on implied contracts. Even these contracts are recognizable by law. Contracts are implied on the basis of reason and tradition.

Considering the spate of business that is being carried out on the Internet, another type of contract has been created. This is the EULA or the End User's License Agreement. Such contracts are signed online by users with the vendors of software applications by clicking on an acceptance tab during installation. Breach of the EULA is also against the law.

A contract is meant to be honored by all parties until the time the transaction is over. There may be lots of discussions before the contract is made, but once it is signed it becomes binding on all concerned parties.