A legally binding agreement between two or more competent parties fixing the precise terms and details for a voluntary exchange of goods or services over which the contracting parties possess property rights. An agreement is a legally enforceable contract if and only if:

  1. The agreement must be "mutual" (all parties have the same understanding of the meaning of their agreement -- there is a "meeting of the minds");

  2. The agreement must be "voluntary" (none of the parties is agreeing under the influence of violent threats or fraudulent misrepresentation of the facts);

  3. There must be actual "consideration" paid (that is, each party must be achieving a benefit by giving up something he controls to get something another party controls in exchange: a simple one-sided promise to give someone else a gratuitous benefit is not a contract);

  4. All parties to the agreement must be "competent" (children and the severely mentally impaired or insane are assumed by the courts to be incapable of forming a coherent intent or determining their own best interests, so the courts will not enforce the agreements they make);

  5. The substance of the agreement must not be "contrary to public policy" (for example, the U.S. courts will not enforce a contract that requires one or more of the parties to commit a crime, nor will they enforce a contract by which even a legally competent adult voluntarily sells himself into life-long slavery in exchange for, say, a ten million dollar payment to his children).

[See also: property rights, private property rights]