The exchange of promises is based upon each party getting something “new.” For example, if a person purchases a car, the car is new to the person. That does not mean the car is new, nor does it mean the money paid for the car is new. Instead, there is a transference of something not owned immediately prior to creating the contract. This is determined by looking at the particulars.
This exchange of promises binds the parties to a specific course of action. A number of times this can be for only a short amount of time. In the example of purchasing a car, the transaction could feasibly occur in the course of an afternoon. Alternatively, contracts can be for years. Regardless, the purpose of a contract is to ensure the parties actually complete what is contemplated by the agreement.
Technically, the correct term for an exchange of promises binding the parties into compliance through the law is called an agreement. A contract is the writing putting the agreement into words and signed by the parties. There is some freedom in using these titles interchangeably as the effect of an oral agreement and a written contract is mostly the same.
This is the first part of a series, which will continue next week.