Simply stated, a contract is a legal document between a family child care provider and a parent that spells out your legal obligations to each other. Namely, the days and hours you will deliver child care and the amount the parent is to pay you for your services.
Policies are your rules and procedures telling parents how you will care for their children. Your policies can cover a broad range of topics - curriculum, discipline, transportation, activities, and so on.
You can't take a parent to court for violating your policies, but you can for violating your contract. Therefore, I recommend that you create two separate documents: your contract and your policies. This will give you more flexibility in enforcing them.
Image credit: childcarelink.com
For more information, see my book Family Child Care Contracts & Policies.