Player contracts represent guaranteed money for players--they are iron-clad.
The moment a player lands on a team's pending roster, that team begins paying the contract on a daily basis.
More about team rosters.
There are three primary contract types:
Additionally, contracts can be inherited through trades or the end-of-year draft.
Draftee contracts each:
More about the amateur draft.
Free-agent contracts are each defined by the acquiring team before acceptance by the player. As such it is assumed the terms of the contract are satisfactory to the team.
More about free-agency.
Once a player is on a team, that team has exclusive rights to extending the player. The terms of the extensions are largely dictated by the player, but if a team extends a player, it is assumed the team accepts the terms.
More about player extensions.
When a team acquires a player via trade, they are acquiring the remainder of the contract, as well as the cost of any extension that has not yet kicked in. By trading for a player, it is assumed the team accepts the terms of that player's contract and extensions (if any).
More about trades.
The end-of-year draft allows a team to acquire an unprotected player from another team's roster for $1.5M. In doing so, the acquiring team is accepting the remaining contract and any extension.
More about the end-of-year draft.
It may sometimes be necessary to release players to make room on your roster. Whenever a player is released, the team will be immediately charged for the remaining cost of that player's contract and extensions (if any).
Example:
It is possible to extend players, keeping them under team control, usually for a slight increase in salary.
More about player extensions.