The term contract is a document that is a legally binding agreement that is enforceable in a court of law. A contract is a document that outlines the exchange of promises that occur between two parties. Should either of those parties breech the terms listed in the contract, they may be punishable in a court of law. A contract is a form of an agreement. Both parties agreeing to the terms within the contract reach it. It may be an oral agreement in some cases, however the most common type of contract is a written document. A contract falls under contract law, in terms of how it is to be disputed, handled and broken. These laws differ from state to state, based on a number of factors.