Can a prepaid phone be used with a contract?

It depends on the country and provider. Here in Switzerland, if the provider of the prepaid phone is Orange, and you have another Orange contract, you can use the sim card of that other Orange contract with your Orange prepaid phone. But you can't use a contract of another provider with the Orange Prepaid phone. Also, as far as I know, with some providers such as swisscom you can't even use the swisscom prepaid phone with a normal swisscom sim card.

Sometimes you can buy yourself out of the prepaid contract and get the phone unlocked, and then you can use any other provider, but that will probably be as expensive as buying a new phone without contract.