A contract is a formal agreement between two parties, usually for the exchange of goods and services. When a contract is made, an obligation is established to each party to perform on their part of the contract. The failure to perform on a contract invokes pacta sunt servanda ("all agreements shall be kept"), which states that failing to perform on a contract can be considered a breach.

Pacta sunt servanda is important because it is the basis upon which all international treaties work -- they work in good faith because there is no other way they can work without disrespecting the sovereingty of the society.

In order for a contract to be valid, there must be a meeting of the minds on each and every term in the contract. This meeting must be mutual and arrived at by each party of their own volition without any kind of force, coercion, or duress.

A contract must have proper consideration, which is to say, it must state the value each party brings to the contract, whether that value is monetary, act, or expectation. Contracts may not be altered without fairly updating the consideration for all parties, and must have their consent.

The capacity to enter into a contract must be taken into account as people must be properly developed and in full control of their faculties before they can make formal agreements.

A third party might attempt to interfere with an established contract between two other parties. This kind of trespass is a form of terrorism. A citizen attempting to sue their government for constitutional violations is an example of this -- because they are not a party to the compact.