Sure InfamousBrad,

A regular contract in EVE is generally used for legitimate purposes in the game, and can be issued by individuals or player corporations. They're used for auctions, item exchanges, courier contracts, and even loans. Some of the rarer items (ships, modules, etc.) in EVE cannot be sold on the open market and are only sold via the game's contract system.

They're generally 'safe' to accept in that you are getting what you're offered. But this still means a player needs to look closely at the amount the contract issuer is asking for a given item/items. Decimal place tricks were, probably still are, common, adding an extra zero in there and ripping someone off that way. A recent patch added text to the contract that will write out the amount in words, so you're more likely to notice the contract issuer is requesting 8 billion ISK for something you want to pay 800 million ISK for. Still, people click 'Accept' without reading. Also, it's possible for people to rename a basic item as a higher-end item, but by clicking "show info" you can easily see if a person is trying to scam you.

Now *freeform contracts* were a bit different, in that it was a more flexible way to put together a contract. It was possible for the issuer to structure the agreement so that they (as an issuer) receive your money, but you (the buyer) receive nothing. Originally, there was no warning box about this. People would click 'Accept' and then get enraged to find they were tricked, having paid their ISK for something they never received.

CCP eventually added a text box that would pop up to warn players about this, before accepting. Still, people must have been sending a wave of "exploit" or "griefing" petitions to EVE's customer service as the removal of an entire channel for scams is pretty significant. However, some players are concerned that an action from the devs like this is another step towards removing risk from the game.

This link on the EVE wiki has more info about how contracts work in EVE Online, and mentions a few of the tricks players can employ with the feature:

http://wiki.eveonline.com/wiki/Contracts_guide

Hope that helps.

James