Introductory Business Law CLEP Prep Practice Exam

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What is a contract?

  1. A legally binding promise

  2. An agreement between two or more parties

  3. A contract of sale

  4. A written document

The correct answer is: A legally binding promise

A contract is a legally binding agreement between two or more parties. This means it is a promise or agreement that is backed by law and has consequences if not fulfilled. While options B and C mention an agreement and a contract, respectively, neither specify that it is legally binding. Option D mentions a written document, which is often a component of a contract, but a contract can also be formed verbally or through actions. Therefore, option A is the most accurate and comprehensive definition of a contract.

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