Presentation of an appropriate criterion for understanding the nature of contract will result in useful application of this credit-based instrument in administration of the legal relations in a society. This is because lack of an appropriate criterion will cause discord and disagreement on determining articles of the contract and will eventually result in increasing cost of administering social relations, lack of certainty and lack of predictability. On this basis, the principal question of this research paper is about the nature of contract. To find an appropriate answer to the principal question of “What is the nature of a contract?” we have applied a descriptive-analytical methodology to find a criterion for understanding the nature of natural creatures per se in understanding the nature of contract as a clear example of a credit-based and hypothetical thing. Findings of this paper indicate that the nature of contract is synonymous with its quiddity and this quiddity is itself synonymous with the need for the existence of ultimate nature for a contract, i.e. the same goal for realization of which in social relations the contract has been created. Without such a goal, the existence of contract will be all in vain. Among experts at law, Dr. Mohammad Jafar Langroudi and among jurists, Imam Khomeini must be considered as outstanding theoreticians in the field who have both argued the need for ultimate essence of a contract as its nature. This theory stands counter to the theory of direct effects and is considered as a prerequisite for its nature as argued in Imamiya jurisprudence, whilst it has been accepted in Iran’s law in Clause 1 of Article 233 of Civil Code.