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 Illinois, 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 something of value exchanged between the parties. This consideration can be in the form of money, goods, services, or mutual promises. The terms of the contract must be specific enough to be enforceable, meaning that the obligations of each party are clear. The use of the terms 'agreement' and 'contract' in Illinois is interchangeable, provided that the necessary legal elements are present, regardless of the document's label. Contracts involving governmental entities in Illinois may have additional requirements due to sovereign immunity, which can limit the government's liability and affect the contracting process, including bidding and fulfillment of contractual obligations.