A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or render some service.
We make a contract whenever we buy something, work for pay, or use public transport. In fact, many contracts are unwritten. But for major transactions, it can help you to think of ways on how to make a good contract.
Make contracts with people you trust.
Even the best contract in the world won't protect you from someone who will default on his obligations. So ask around and get references before making a contract. If a person can be trusted in little things, he or she will tend to be trustworthy in more important matters.
Take steps to protect yourself.
If you are unable to know more about the person that you are dealing with, you can take steps to protect yourself and your money. If you are going to buy an item, you might want to buy it from a merchant store with a return or exchange policy. For services, you can require an upfront fee or down payment for a service contract, so that you are paid beforehand before you start work.
Get the contract in writing.
Many contracts are required to be in writing. For example, a written special power of attorney is required for an agent to sell a parcel of land. So if you are dealing with real property, it is good practice to get everything in writing. The same principle holds for employment contracts and service agreements. If the parties want a change in the contract, get the modification in writing, and agree on the modified contract.