What is a contract?

A contract is defined as a legally binding agreement between two or more competent parties. This means that all parties involved have the legal capacity to enter into the agreement and understand the terms included. For a contract to be enforceable, there must be mutual consent, consideration (something of value exchanged), and a legitimate purpose.

The concept of competency is crucial; it ensures that the individuals or entities entering the contract are of sound mind and legal age. This legality is what distinguishes contracts from mere negotiations or informal agreements, making option B the correct choice.

In contrast, options that suggest a contract must be in writing, such as the first option, do not acknowledge that some oral contracts can also be legally binding under certain circumstances, depending on jurisdiction. The third option implies a lack of obligation, which does not align with the essence of a contract. Lastly, the requirement of notarization, as mentioned in the fourth option, is not a universal necessity for all contracts to be valid, though certain types may require it based on local laws.