A contract is generally a written or spoken agreement between persons or entities that includes obligations for each party (mutual obligations or mutuality) and enough specific information to be enforceable by either party (specificity).

The elements of forming an enforceable contract are generally (1) an offer made; (2) acceptance of the offer; and (3) consideration given by each party for the other party’s performance of the agreement—such as money in exchange for products or services, or mutual promises exchanged—which is often referred to as the bargained-for exchange.

The word "agreement" is often used interchangeably with the word "contract," and a document labeled as an agreement (with the necessary legal elements included) is as enforceable as a document labeled as a contract.

Contracts between governmental entities and contracts between private citizens or entities and governmental entities often have unique considerations such as the contracting or bidding process for government contracts and the governmental entity's legal liability for failing to meet its obligations under the terms of a contract (see the subtopic on sovereign immunity).

In Alabama, a contract is recognized as a legally binding agreement when it contains the essential elements of (1) an offer, (2) acceptance of that offer, and (3) consideration, which is the exchange of something of value between the parties. This 'bargained-for exchange' is crucial for the contract to be enforceable. Specificity in the terms of the contract is also important to ensure that the obligations of each party are clear and can be legally upheld. The terms 'agreement' and 'contract' are often used interchangeably, and the enforceability of the document does not depend on its label, but rather on the presence of the necessary legal elements. When it comes to contracts involving governmental entities, there are additional considerations to take into account, such as the specific procedures for government contracting and the concept of sovereign immunity, which may limit the government's liability for breach of contract. It is important to note that while general principles of contract law apply, Alabama may have specific statutes and case law that further define and regulate contracts within the state.