By defining a declaration, you introduce a new variable to use in a rule or condition.
A variable that is not first declared, cannot be used, as it is unknown in RuLa.
Examples of declarations:
c is Contract
e is Entity
p is Person, AccountHolder
You need to declare a variable in every rule or condition you write.

The Impact of a Declaration

How you formulate a declaration, has its impact on what a rule will be about. If, on a document, you declare these variables
c is Contract
p is Person
that document will need to contain one contract and one person.
Alternatively, if you declare
p is Person
that document will be about exactly one person. In a case that involves not one but three people, the system will require this document three times: once for each person in the case.
However, if you declare
p1 is Person
p2 is Person
p3 is Person
on a document, that document can contain all three people in the case. It will only be required once.