Two-phase fluid flows on substrates (i.e. wetting phenomena) are important in many industrial processes, such as micro-fluidics and coating flows. These flows include additional physical effects that occur near moving (three-phase) contact lines. We present a new 2-D variational (saddle-point) formulation of a Stokesian fluid with surface tension that interacts with a rigid substrate. The model is derived by an Onsager type principle using shape differential calculus (at the sharp-interface, front-tracking level) and allows for moving contact lines and contact angle hysteresis and pinning through a variational inequality. Moreover, the formulation can be extended to include non-linear contact line motion models. We prove the well-posedness of the time semi-discrete system and fully discrete method using appropriate choices of finite element spaces. A formal energy law is derived for the semi-discrete and fully discrete formulations and preliminary error estimates are also given. Simulation results are presented for a droplet in multiple configurations to illustrate the method.