What defines a contract?

A contract is defined as a legally binding agreement between two or more parties. This means that the parties involved have created a mutual understanding that is enforceable by law, which is a key characteristic distinguishing a contract from other types of agreements or understandings. For a contract to be valid, it typically must include certain elements such as offer, acceptance, consideration, mutual assent, and legality of purpose.

In contrast, a suggestion does not involve the same level of commitment and does not create legal rights or obligations. An informal handshake agreement, while it can indicate an intention to enter into a contract, lacks the enforceability that comes with a legally documented contract. A memorandum of understanding, though it outlines an agreement, often lacks the intention to create legal obligations and is typically not binding in the same way as a formal contract. Therefore, defining a contract as a legally binding agreement accurately reflects its nature and significance in legal contexts.