The Contract Signing Problem

The lack of atomicity is the primary cause of the contract signing problem.When two parties are connected to each other via a possibly unreliable network, ensuring atomicity becomes a serious problem.In a contract signing problem, there are two or more parties who are trying to agree on a contract. Each party will digitally sign the contract to signal their agreement.A variant of the contract signing problem is the return receipt problem or certified mail problem.
see the below example:
Alice and Bob jointly write down the contract, or have their lawyers do it for them. Now both Alice and Bob have a copy of the contract. The contract is not signed yet. Next, Alice signs her copy of the contract and sends it to Bob.
When he receives the signed contract, Bob signs his contract and sends it to Alice.
Now both Alice and Bob have a contract which has both their signatures on it. If Alice wants a return receipt from Bob, then the process is very similar: Alice indicates in her message that she wants a return receipt, so Bob obligingly fills one out and sends it back,
This protocol does not work. Here is a story which shows why:

One day Alice and Bob wanted to sign a contract. "Hey," Alice e-mailed Bob, "I will bet you US$15 that the Nikkei rises 3% tomorrow!" Bob idled a moment, then sent back the message "OK, but if not, then I get your CD collection." After thinking a moment, they decided to make up a real contract ... just in case one of them got "cold feet."

Alice and Bob drew up a contract. Alice signed her copy and sent it to Bob. Then she waited. She waited some more. Still no response from Bob.

Suppose that the next day, the Nikkei rose 2.5%. Eagerly anticipating her money, Alice e-mails Bob, including a copy of their contract. Much to her dismay, Bob's response is "Oh, so that's where that contract went...I thought you didn't want to do that anymore. I mean, I didn't hear anything from you!"

Alternatively, maybe the Nikkei rose 3.5%. The next day, Alice receives an email: "Coming for CD collection. See you at 2:00 - Bob." Alice sits back in her chair and wonders just what happened.

What Went Wrong?
When Bob stopped responding, Alice assumed that he had not received her copy of the contract. In fact, Bob was waiting to see whether he liked the way the contract would turn out. Only after he was sure of the outcome did he decide whether or not to honor the contract. He could do this because Alice was bound to the contract before Bob.

Notice that Alice has no way to determine if Bob's failure to respond is malicious. Furthermore, she has no means of convincing others of his malicious actions. This is the contract signing problem.
read more:http://www.acm.org/crossroads/xrds7-1/contract.html#MERKLE