Five Important Benefits of Contracts

1. Outlines concrete details

Contracts serve as a written record of the rights, responsibilities, and commitments of each party in a business relationship. All benefits, services, and payments should be clearly written in the contract to ensure a clear contract outcome. Concrete details also guard against misunderstandings as both parties have a clear expectation of the transaction.


2. Enforceability

Each party wants the other to abide by their promises, however, a word of mouth may not be enough. For all businesses – big and small – a contract will protect you in the event of wrongdoing. A contract will not only provide you the right to sue if the terms you agreed to are broken, but it will also specify the court you can sue in and the procedures you must follow.


3. Prevent Disputes

A written contract ensures that each party fulfills their respective commitments. Hopefully, you’ll never have to take legal action based on the contract, however, simply knowing it’s in writing can put pressure on all involved parties to meet their obligations on time.


4. Increase Revenue

Contracts can also be viewed as an opportunity to generate higher revenue. By negotiating contract terms that work in their favor such as raising the price of a specific software subscription or upselling a particular service, a business can increase their revenue. Contract negotiation is the perfect opportunity to get a favorable deal and get the terms of the deal documented.


5. Enable Collaboration

Businesses often collaborate with each other to work on a project. It is usual for parties during business collaboration to come into contact with sensitive information regarding one another or, at the very least, know details of the transactions related to their relationship. Where parties are reluctant for this information to be shared, contracts serve as a perfect opportunity to ensure that the client or business they are dealing with keeps it confidential using non-disclosure provisions and confidentiality clauses within the written contract.



Every business is unique in terms of its operations and therefore should have contracts that are both protective and suitable for its line of work.

Start-up businesses, in particular, should pay close attention to the types of contracts they require as those contracts determine how their business is run and how efficiently this is done between the different parties involved.

There are a variety of contracts which may be important for a business at any given time on any operation. A poorly written contract may be found void or cause misunderstandings – leaving you or your business completely exposed.

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