A contract involves at least two parties or entities, an offer, an acceptance, terms and consideration. Contracts can be written or verbal and can use formal legal terminology or informal terminology, as long as it is clear what the terms are. If one side fails to live up to its commitment, there is a breach. An offer or an acceptance made under duress makes the contract invalid. A binding contract means mutual agreement without pressure. Terms can be negotiated until mutually acceptable. Either party can withdraw from the contract prior to final agreement.
                         
Most states have laws regarding what types of contracts must be written in order to be binding. These are called Statutes of Frauds and protect the parties from frauds. Verbal contracts in these areas will likely not be honored. Laws vary from state-to-state, but in general the following require written contracts:

• Sales of real property
• Debt obligations
• Contracts that take longer than one year to complete
• Real property leases of a year or more
• Consideration that exceeds the state’s threshold
• Contracts the outlive the parties
• Transfer of property upon the death of one of the parties.

A breach occurs when one party fails to live up to the terms of the contract. A breach may be material or immaterial. If it is material, the other party may be entitled to compensatory damages, consequential and incidental damages, attorney fees and costs, liquidated damages, specific performance, punitive damages, rescission or reformation. Such terms may be negotiated prior to finalization of the contract. If a breach occurs and no provision is in place, there may be litigation or it may be resolved by mediation or arbitration, which may be provided at little or no cost in your area.

It is strongly advised that you consult an attorney before entering into any type of contract.