Why Your Business Needs Contracts

Contracts are legally binding agreements between two or more parties and are crucial for any business deal to be successful. Not only do they set out in concrete terms the details of any agreement, but they also mitigate uncertainty in the process. From the sale of goods and services to consortium agreements, contracts are the platform through which any deal is made.

Tak Matsuda from Crestlegal.com explains why B2B contracts matter

Transparency is the name of the game

A well-written contract will detail the terms of an agreement transparently. This is with the aim of reducing miscommunication between the two (or more) parties involved. As such, any potential issues which could, in the worst-case scenario, lead to legal disputes, are effectively avoided. 

More specifically, the parties forming the agreement may not necessarily have similar terms when describing something. If the case were to arise that one party had intended something in a certain manner, to which the other party understood differently, that would only lead to further headache. 

A contract effectively creates a bridge between businesses, through which an effective compromise can be found, that which best serves those involved.

Legal cover

Unfortunately, there are often times where things don’t go quite the way we want them to. The last thing you want is for a party you are conducting business with to take legal action against you. 

To help prevent a claim, a contract will provide a legal bulwark that can protect you in the case that such claims are made. Safe and legal practices must continue to be observed, however, as contracts do not remove all risk.

Communication is key

Just like all relationships, communication is key. Why shouldn’t this be the same between businesses? Misunderstandings can be the root cause of many headaches for business owners, and the more precise a contract is, the fewer problems that are likely to be encountered down the line. 

Any promises made between parties should be written down as well. These promises could regard discounts offered in the future, among other things. The last thing you want is to enter a deal with expectations that are not met.

Once again, contracts do not eliminate risk. They do, however, provide you with some legal assurance and a platform from which you can communicate effectively.

Physical proof of a deal

By forming a contract, you create a legally binding agreement between two or more parties. If you did not have a contract, and one party decides to back out of a deal on their whim, you would not have anything to fall back on. With a contract, you have that safety net, stating any repercussions that would arise in such a scenario.

Say, for example, that a contract details the sale of goods, with one party supplying these goods and another purchasing them. When is the date of payment? With a contract, this is specified, and no misunderstanding can be made about this.  Payment cannot be missed without the repercussions stated in the contract.


A contract is key when forming a deal between two or more parties. Avoiding miscommunication, providing financial and legal protection, as well as setting in stone your expectations are what makes a contract as important as it is. So don’t go without one!