A contract is a legal agreement between two parties that can be enforced by a court of law. If you have a business you will need many different kinds of contracts. Even though many people just have verbal agreements with nothing written down these are difficult to prove in a court of law should some unforeseen problem require it. Commercial lawyers will tell you that a contract should be written by a lawyer and signed by each party.
Contracts can be simple and easy or more complex and difficult to understand, but all should have these 4 important points to be legally binding.