Which of the following accurately describes the term "contract"?

A contract is defined as a legally binding agreement between two or more parties. This definition encompasses a broad range of agreements, which can include written documents as well as oral agreements, provided they meet certain legal criteria. For an agreement to be considered a contract, it must include essential elements such as offer, acceptance, consideration (something of value exchanged), and the intention to create legal obligations.

This understanding is particularly relevant in real estate transactions, where clarity and adherence to the terms of the contract are crucial for the protection of all parties involved. While formal written agreements are the most common and recommended because they provide clear evidence of the terms and help prevent disputes, the essence of a contract lies in the parties' mutual consent to abide by the terms, making verbal agreements potentially enforceable as well under certain conditions.

In contrast, informal handshake agreements and verbal promises may lack the necessary elements to establish a legally binding contract, which can lead to complications in enforceability. Thus, defining a contract solely in terms of formal written agreements or informal arrangements does not capture the full scope of what constitutes a contract under legal standards.