A written contract is a legal document, which provides the individuals in business, with statements about what is expected by the involved parties and how to deal with negative situations. It is very important to know what is the importance of contracts to business, before entering into one.


Business contracts generally include a process of negotiation, in which all the terms that must be abided by each party are stipulated. Some contracts can also include measures for any modifications or additions to the agreement. Majority of businesses use contracts, in order to maintain specific level of service.


A business contract clearly specifies the terms and conditions of a particular business transaction, including sales, delivery of products and services. This helps in avoiding the occurrence of misunderstandings between the concerned parties, in the absence of an agreement. Statements made in oral contracts, may be forgotten, but with a written contract, you can always look up, when a certain situation is encountered.

Fixed Cost

A contract states an agreement between two parties for selling a product or service, at a fixed price. These agreements ensure that a business obtains the specified economic resources, in the defined period of time, at specified price. A fixed cost contract may prove to be detrimental for the company, if the economic resources decrease in future.


Service contracts specify the duties and responsibilities of the companies involved. These types of contracts are used, when a company collaborates with other business or organization, to carry out services like call-center operations, technical support, maintenance, etc.

Expert Insight

Before signing any contract, you should take legal advice from an experienced attorney. Large businesses may take advantage of smaller businesses, by considering the executive’s willingness to undertake business operations. Contracts can also consist of some legal terms, which may not be understandable to business owners. Attorneys will be able to provide clear information regarding the contract.

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