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Contracts Explained:

In the derivatives industry we are dealing with all sorts of contracts, and now it is the best time to understand and distinguish one contract from another.

A contract is a legally binding agreement between two or more parties to do or not do a something specific. A contract is enforceable by law.

A common contract, such as for buying a house, needs the buyer to get into an agreement with the house seller to change the house ownership in exchange for an agreed payment.

There are also verbal contracts, such as buying a book. To buy a book the buyer has an agreement with the seller that if he pays for the book, the seller must supply it at the agreed time and place. Not supplying the book as agreed, the supplier has breached the contract.