I think Pinkbaby has a fair point though. This meeting has caught you off balance and you are angry. First you need to become less angry, and then ask for another formal meeting with the Headtacher and head of year. The simple point is this: if your son's behaviour has become so bad that you are being asked to agree to a contract, which may remain on his file, why have you not been contacted before this point? Ask to have copies of the schools policy for behaviour management and see how this policy compares with the process you have just experienced.
Schools avoid getting rid of pupils as far as possible, as each lost pupil represents lost revenue, so your school won't be getting rid of pupils for no good reason.
But it comes back to the fact that you should have been told if your son was misbehaving a long time ago.
You will need to be honest with yourself too - have you been going to parents evenings? Has the school tried to contact you? Have there been any indications that your son was with a bad crowd, that you maybe haven't picked up on?
Parents are often reluctant to believe the worst of their kids and to resolve the situation you are faced with youmay need to accept unpalatable truths.
If there is no behavioural problem and if the school are unable to justify their demand that you sign this contract, I suggest that you write to ther chair of governors and the local education director and complain about their actions.