A contract is a written agreement signed by both parties, which dictates what will be provided in the session and for how much money. Contracts are looked at in court if something happens, and contracts are legally binding.
What should be in the contract?
1) The photographer's contact information, and the client's contact information. This might include a mailing address, legal names, phone numbers, email addresses, etc.
2) The amount of money the photographer is expecting the client to pay, and by when. Some photographers require the funds to be paid in full before even taking the first picture. Some photographers require only a portion to be paid. Whatever the agreement is, make sure it is in the contract. This avoids the photographer having to chase down his money, and it avoids the client being surprised if the photographer refuses to take photos if the funds have not been paid as agreed. Does the photographer charge clients late fees? How much sales tax is added on?
3) What is included in the session? Is the money paid for just the photography booking and not the prints? If images are included in the total cost, how many? What kind of extra fees will be applied if necessary? Some photographers charge extra for various types of retouching or certain location bookings. HOW LONG IS THE SESSION? Make sure the time is outlined so the client gets what they are expecting and the photographer doesn't end up with more work than they expected. What happens if the session runs over-time?
4) By when will the photos be delivered, and by what medium? Are they going to be on a CD? Is the client expected to order prints from the photographer exclusively? Is the photographer sending the images over email? How long should the client give the photographer to put the finishing touches on the photographs? Does the photographer deliver the photos only after artistic license has been applied?
5) Model release! The photographer should have a statement that specifies what the images can be used for after the shoot is over (typically this includes portfolio use, advertising, etc.) Likewise, the client should be clear about usage on social media (Facebook) etc. Can the images be duplicated? Can the photographer use them commercially? Can the client use them commercially?
6) By how much can the photographer be held responsible for the images' damage etc.? If the photographer loses the memory card, what happens? If the memory card ends up corrupt, what happens? If the photographer neglects to backup content, what happens? Likewise, if the client loses the disc, who is responsible? If the client damages printed images, do they have to pay for another copy?
7) If the photographer is sick, in a car accident, etc. what is the protocol and procedure for handling this? Is the photographer responsible for refunding all fees paid? Is the photographer responsible for hiring a replacement?
These are some good guidelines to develop a rough draft of your own contract, but I strongly suggest taking that draft to a lawyer for review.