Contracts are magically binding. The first contract is known by different names in different lands (The First Contract, the Great Contract, or even just the Contract). By whatever name it is refered to it changed the shape of the world forever.
Many of the worlds most powerful creatures got together to forge the first contract. Using magics that even then were scarcely understood they mad is so any agreement signed for by both parties became magically binding.
Note: Some important things to remember about this, is that there is no lawyer that can talk magic out of acting the way it should. So Magic decides the exact nature of things left unsaid and interprets the contract and Magic is the final arbitrator. There is no guy on a mountain top that is Magic and making all the descisions, but if two people sign a contract saying that the border is between the old oak tree and the stream, rerouting the stream, and uprooting the stream won’t do you any good, the intended/implied boundry is where the boundry will be and the tricky landowner will be a little distraught when they try building their home on their new land, but the nails just won’t go into the wood because Magic can’t be fooled.
Contracts cannot be broken unless stipulations for breaking them are including. If you sign a contract saying you will fight for the duke however and whenever he wants, he can literally send to alone against the enemy army. Because of this, contract writing has become an artform.
Note: Going back to Magic being the arbitrator, in general there is a limit to the compulsion that the magic is capable of directly corresponding the stakes in the contract. Basically the more important contract the more powerful the magic involved and the more that can be asked of the person. But if two people sign contracts saying they’l hel peach other no matter what and they’re going to be BFFs and then one of these said BFFs is arrested and wants her friend to break into a heavily guarded prison even though she is just a seamstress, well the magic involved in the contract is jut to weak to force that.
New Information: Now it is known (at least by a few) that contracts can be destroyed. Since they are the combination of magic, they are a third kind of magic, a rigid unmalleable thing quit unlike anything else in the world. Because of this it takes a very specialized form of destroying magic to get rid of them. However since this third kind of magic is really the two forms merged into one, when the contract is destroyed that magic is gone forever.