At sprint what is a 2 yr service agreement

At Sprint, a two-year service agreement only means that you will continue service with them (paying your bill) for two years. If you agree to do this, they will sell you your phone at a discounted price. Failure to maintain service for the full two years could result in an "early termination fee", which is usually the extra cost of the phone.

If your phone has been damaged, you need to determine if it's still within the warranty period (usually 1 year) and have it repaired.

-Wolf sends
 
even if it is under warranty, dropping it into water voids this warranty and any repair costs you will have to pay.

the only way you can get a freebie out of this situation is if you had a "repair/replacement" agreement with them (i know verizon has one, guessing sprint does too). with such a plan most anything is covered.

as wolfshadow said, 2 year agreement means you're locked into paying their plan fee every month for 24 months. if you back out even at the 23rd month you could have a several hundred dollar termination fee. the plus side is a heavily discounted phone every 2 years.
 
A general 2 year service contract does not cover damage, especially water damage. You can try to let the phone dry out for several day, maybe it will function properly afterwards. I have a friend who dropped her iPhone into water after several days of drying the phone worked fine except that the LCD screen was a little messed up due to the water. She was lucky I suppose.

You may have no alternative but to buy a phone at full price. Go to Sprint tell 'em a sob story about your phone getting stolen and they may give you a break. You can always opt for a "repair/replacement" contract, but that will add a few dollars to your monthly bill.