Contract

In law, a contract is a binding legal agreement that is enforceable in a court of law. <1> That is to say, a contract is an exchange of promises for the breach of which the law will provide a remedy.

Agreement is said to be reached when an offer capable of immediate acceptance is met with a "mirror image" acceptance (ie, an unqualified acceptance). The parties must have the necessary capacity to contract and the contract must not be either trifling, indeterminate, impossible or illegal. Contract law is based on the principle expressed in the Latin phrase pacta sunt servanda (usually translated "pacts must be kept", but more literally "agreements are to be kept").<2> Breach of contract is recognized by the law and remedies can be provided.

As long as the good or service provided is legal, any oral agreement between two parties can constitute a binding legal contract. The practical limitation to this, however, is that only parties to a written agreement have material evidence (the written contract itself) to prove the actual terms uttered at the time the agreement was struck. In daily life, most contracts can be and are made orally, such as purchasing a book or a sandwich. Sometimes written contracts are required by either the parties, or by statutory law within various jurisdiction for certain types of agreement. For example when buying a house<3> or land.
http://en.wikipedia.org/wiki/Contract

Had a discussion on the kids' playground with a small business owner and manager. We have never met. He suddenly starting talking about healthcare and how it was killing him in cost.

My wife and I had a discussion about the contract side of healthcare just that morning (Sunday).

My new friend agreed completely- health insurance companies are the only ones that can simply rip up a contract with even the hint of damages or remedy namely giving your money back for services NOT rendered. In fact in doing so they can effectively cut the other party out of the availability of even entering into another such contract within that industry.

It's nice when you own the people the make the rules, the rules that apply to you.