In the legal context, a contract is an exchange of promises, i.e. an agreement between two or more parties that is enforceable in a court of law. There must be a valid offer from one party, and a valid acceptance before the contract is established. The offer must be communicated by one party to another and may be in writing, verbal, or by conduct. Business contracts are usually communicated and accepted in writing because it is much easier to prove that it has been created. When we purchase an item in a shop we enter into a contract with the vendor or seller. The receipt would be proof of the existence of the contract.

The terms of a contract can be expressed or implied:

• Express terms are stated by the parties during negotiation, or written into a contractual document so it is clear what is required of each party.
• Implied terms are not explicitly stated in the contract, but are implied by custom, statute, or by the courts.

For example, in the sale of goods, an implied term is that the seller has the right to sell the goods and that in business sales the goods are of satisfactory quality and are fit for purpose.