Social contract theory has a certain practical purpose in ethics. It allows the theorist to give a kind of explanatory foundation for their ideas. Over time, I have found that this is indeed a most useful purpose for giving a foundation to my own ideas about society and politics.
I should say, upfront, I have borrowed from both John Locke and John Rawls; but, my idea about how to use social contract theory is differs from both of them.
What is Social Contract Theory?
My version of social contract goes like this: The government's role is two fold: 1. To protect rights and freedoms. 2. To maximize utility. Note, the difference between my position and utilitarians: I have maximizing utility as the second in importance compared to protecting rights and freedoms. (I do agree sometimes 1 and 2 can be the same.)
Social Contract Theory as a way of showing the benefits of government
For the sake of argument, I often social contract theory to mean the minimal benefits of government. For example, I might say: If we didn't have government, we would have problems, x, y and z, and therefore the benefits of entering the social contract is a, b and c.
But, it's important for me to explain that I do not see the social contract as only a relationships between people and their government or people and their sovereign. Rather, I see it more like a foundation for ethics between people, including, when they form governments.
So in an ethical conundrum, a person might use this outline as a basis for figuring out how to treat someone else. (It need not be a relationship between government/sovereigns and individuals. It can also help sort out relationships between individuals.)
Why are rights primary? Why not be a utilitarian?
Making rights primary is just a stop gap measure to insure the basic “rights of man” and fundamental dignity is guaranteed. It is also understood that there is going to be situations where this will decrease utility for everyone as a whole.
The concept “not proven” in criminal court as an example
The concept “not guilty” or “not proven” is an example of this ethical principle in action, in western courts. If you have a jury that thinks the person being tried committed the murder; but, they don't believe the prosecution demonstrated their case, its very important they declare the case “not guilty” or “not proven”. While its true, they knowingly let a murder go free, the idea of continuity of protecting rights, being the higher value, was maintained.
The OJ Simpson murder trial was an example of this. Several of the jurors who gave interviews, after the case was closed, said on the one hand they believed he really did kill his wife. On the other hand, they did not believe the prosecution did not demonstrate it. There was only one truly ethical, and legal choice in that situation, and I think they made it correctly: NOT GUILTY.