Contracts and the laws surrounding their use can affect your business significantly. Well-documented agreements protect the interests of your business while fortifying the rights of other parties involved in the transaction. While verbal contracts can be enforced, they are limited to individual memories. However, things can change, resulting in disputes surrounding the agreeable terms.
Businesses should rely on written contracts for smooth transactions. If drafting a business contract seems complicated, take advantage of SpotDraft. The platform helps businesses collaborate and close contracts faster. Below are some benefits of having well-written and enforceable contracts.
Record of Commitment for Contracting Parties
At the core, contracts form the basis of business relationships that prop your business for success. Two or more parties agree to partner and develop a connection that can last for many years and is mutually beneficial if fostered. A documented contract forms the visual representation of this relationship.
Written contracts hold all parties to their agreement. For instance, for SaaS contracts, one business may agree to offer software services to the other business for a given period, and the other party agrees to pay the service provider. The contract holds both parties accountable to the terms agreed upon during the beginning. Any party that breaches these terms can be prosecuted. Contracts should highlight the following;
- The goals or objectives of the agreement or what both parties want to achieve
- Scope of work of the contracting parties
- Description of goods sold (for a sales deed)
- Agreed upon payment terms and amount
- Indemnities of both parties
- Grounds for terminating the contract
- Governing laws of the contract and jurisdiction
Prevents Conflicts and Mitigates Risks
Parties involved in the contract should negotiate to ensure that everyone gets the best deal. Good contract negotiation should result in mutually beneficial outcomes, preventing possible conflicts and misunderstandings down the line. It also sets a strong foundation for a solid partnership.
Contracts should include a comprehensive audit trailing all changes, edits, and comments made during negotiations. This is why having a reliable collaboration and contract negotiation platform is important. Tracking back and forth emails is difficult and can lead to confusion. If you don’t have experience negotiating contracts, consider involving your legal team.
Contracts Extend Business Brand and Values
While most people might be doing this for formality, contracts are an extension of business values. Sending out contracts to other parties clearly indicates that your business treats external relationships with high regard. Everything, starting from contract negotiation, gives the other party/s a hint of your business values.
Helps Businesses Generate Revenue
Well-written contracts indirectly help businesses to generate revenue. A contract is a binding agreement, which ensures that one party delivers products or services for payment or other forms of compensation. For businesses, the ability to process contracts efficiently, within the right terms and timeframe boosts their ability to generate revenue.
Generating revenue for your business isn’t about closing contracts, but the procedures around them. Anything that affects the validity of signed contracts prevents the business from making more revenue. Conversely, quick contract processing allows businesses to sign more deals and thus more income.
The importance of contracts for businesses goes beyond the legal aspects. However, businesses should streamline contract negotiation and management obligations with their partners to enjoy these benefits.