Contracts have many purposes and thus many different reasons for why they are important. Here are a few reasons why contracts are important:
1. They serve as a record of commitments for both parties.
At their very core, contracts are relationships. First, two parties agree to work together, and forge a connection that if fostered well and beneficial on both sides, can last years. A contract is the visual representation of that relationship.
Contracts also hold each party to their original agreement.
2. Contracts prevent conflicts and reduce risk.
Contracts often go through a negotiation process that ensures both sides are getting the best deal possible. Obviously, good negotiation should lead to a mutually successful outcome that prevents conflict down the line and sets the foundation for a strong partnership moving forward.
When managed correctly, contracts should have a comprehensive audit trail of every change, comment, and edit made.
3. They help maintain organizational compliance.
Unless employees have a legal background, it’s likely they’re often not thinking about compliance. Luckily, having a process set in place for contracts, helps employees remember they need to create a contract that has to be approved by Legal.
4. Contracts serve as a tool for communicating.
From their very creation, contracts are by nature collaborative. Teams can work together to determine their needs through the creation of a contract, building healthy communication and opening up collaboration across departments.
Then, once the contract is sent out to a third party, collaboration continues at the start of a business relationship. Next, negotiation can be used as a tool to foster a high quality of collaboration.
After a contract is signed, both sides can feel confident in the final outcome because of solid communication.
5. Contracts improve service quality.
Looking at contract processes and evaluating the greatest needs for improvement will help organizations work more efficiently as a whole. In turn, working faster and smarter means using the right tools.
Having all people, processes, and documents in one place is critical for aligning with the current pace of business.
6. Contracts extend a company’s brand and values.
Although this may not be the first thing that comes to mind when most people think about contracts, they are an extension of company brand. Additionally, sending out a contract is a symbol that an organization cares about having a detailed record of a relationship that they are making a commitment to.
Everything from wording to negotiations gives each party an idea of how the other functions. What’s more, a solid company brand shows through care in contract creation and the interactions that follow.
Good information