Ace the 2025 Arts Board Exam – Elevate Your Creativity with Confidence!

The term that refers to a binding agreement established between two or more parties is "contract." A contract is a formal and legally enforceable arrangement that outlines the rights and obligations of the parties involved. It must include specific elements such as offer, acceptance, consideration (something of value exchanged), and mutual consent.

While an agreement and a memorandum can both denote some form of understanding between parties, they do not necessarily carry the same legal weight as a contract. An agreement may simply refer to a mutual arrangement without the enforceability aspect, and a memorandum might document terms but does not alone create binding obligations. An understanding refers to a shared interpretation or consensus and, like an agreement, lacks the formalities that would render it enforceable in a legal sense. Hence, "contract" is the specific term that encapsulates the idea of a binding legal commitment between parties.