Witnessing contracts and agreements is an old legal tradition meant to ensure that people don't accuse one another of modifying the contract or forging a signature. Today, witnesses are required for certain contracts in the form of a notary public.
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Who Can be a Witness
It is generally accepted that individuals should be neutral third parties if they wish to witness a document. Bearing any relation to one of the other parties or having some sort of financial stake in the document itself will severely hurt the witness's credibility in a court of law.
When Witnesses Are Required
Although most documents do not need to be witnessed, some documents such as wills and deeds will require at least one witness. States vary on the number of witnesses required for these sorts of documents, and the parties should always confirm their state laws with a qualified attorney.
A notary public is a licensed public servant that is appointed by a state to witness the signing of contracts. Having a contract signed and stamped by a notary is the best way to ensure that a contract will be considered valid in court.
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