Need of Contract and It's Importance for Associations, Businesses, Corporates and Small Scale Industries

“A contract is a voluntary arrangement between two or more parties that is enforceable at law as a binding legal agreement. Contract is a branch of the law of obligations in jurisdictions of the civil law tradition”. Contracts govern all transactions whether they are between firms or between firms and private individuals. Indeed, in most of the developed world, any transaction or commercial exchange is usually not undertaken without a contract. This trend is also catching up in the developing world where contracts are increasingly becoming the norm

The most important aspect of any contract is to ensure that you fully understand all terms in the contract before you sign it. Many business owners have gotten themselves into sticky situations because of not reading a contract properly. If there is any terminology or phrases which you do not understand you should do your own research or alternatively turn to a business advisor for assistance.

Companies around the world use contracts to negotiate and lock in business. Yet, many businesses continue to focus on sales process automation without paying enough attention to the importance of their contract processes. As a result, contracts often get bogged down in the “last mile” of the agreement, when all parties would like nothing more than to get through to the “done” side — signatures inked, and contract finalized. 

To understand why contract processes are so important in your business, here is the latest information on what modern contracts are, how they impact your business, and the process to follow to create an industry-standard contract. 

What is a business contract? 

A business contract is a  legally binding agreement between your company and another party. Contracts can be used business-to-business or business to a client to arrange services and fees for any given project. 

For legal validity, a contract needs the following details: 

• All parties involved in the agreement 
• Considerations of the benefits for each party 
• Terms and conditions of contract fulfillment
• All signatories must be mentally competent for contract validation 
• All work done or products received must be legal for a valid transaction

Why are contracts important?

Contracts are imperative for building trusting business relationships and streamlining important transactions. Outside of that, there are a few other reasons why contracts are important for your business.

Outlines concrete details 

A business contract should clearly outline what each party has agreed to do. All benefits, services, and payments should be in the contract to ensure an unmistakable contract outcome. Concrete details also guard against misunderstandings as both parties have a clear expectation of the transaction. 

Protection for both parties 

A written contract that explicitly states each side’s expectations creates legal protection for both parties. You and your company have a clear path of what to do to uphold your end of the contract, as well as what forms a breach of contract. 

Contract confidentiality 

One clause that can be added to a written contract involves confidentiality. If the business contract involves sensitive information, you can ensure secrecy by adding a confidentiality agreement into your written contract. 

Maintain official records 

Once the contract is written and agreed upon by both parties, both sides should maintain a copy of the agreement to have an official record of the transaction. Both your company and the other business or client can work strictly against the contract and complete all services and payments by the close of the agreement date. 

What is the contract procurement process?

The contract procurement process begins when your company identifies a need to be fulfilled or is approached by a client for a specific project. The entire process is complete once the contract is awarded and signed, but there are many steps to get from beginning to end. 

Goals of the contract procurement process

There are particular goals you should set in your contract procurement process and these steps can be the same every time you search for, or receive a new contract. Since contracts are legally binding, follow these goals for a successful process:

• Identify products and services
• Create and issue purchase orders
• Ensure timely delivery 
• Approve payments 
• Establish and meet milestones 
• Resolve issues with product delivery 
• Communicate issues among the team 
• Review proper fulfillment of the contract 

Creating a standard contract procurement process for your business makes it easier to draw up a new contract whenever one is needed. 

Creating your contract 

After you’ve decided to move forward in a business relationship with another business or a client, it’s time to start drafting your contract. Paydirt allows you to easily draft, negotiate, approve, store, and analyse every contract your business needs.

Move toward efficiency 

Most of the businesses still use manual processes to manage contract work. This often creates situations where paperwork gets lost, negotiations stall, and in worst-case scenarios, the entire process falls apart. 

With paper contracts, there’s also the problem of data accuracy, since human errors can happen when retyping form information back into a computer. Manual, paper-based contract processes are expensive, less efficient, and outdated in today’s industry. 

Thank You

Sandigdha Mishra, Advocate

advsandigdha@paydirtprofessionals.com

advocate.sandigdhamishra@gmail.com

http://paydirtprofessionals.com/ "BE AWARE"