5 Key Reasons a Contract Is Important in Business

In 2019, over 60 million people were working as freelancers or in the gig economy and this number keeps growing. Whether you’re a freelancer, an entrepreneur, or a seasonal worker, you need to sign contracts with everyone you’re working with.

A contract will protect you from overbearing clients, give you peace of mind, and can serve as official proof of a business relationship.

Here are 5 important reasons why you should use a contract when working with clients and how to create one that fits your needs.

1. Protecting Your Business

One of the most important reasons for signing contracts when working with clients is to protect your business. Of course, the same goes for the other party, i.e. the client will want to protect their business. This is why contracts are best created as a mutual collaboration to make sure both sides are happy with the provisions.

Not sure how a contract should look like and how to write it? Click here to find hundreds of contract templates and agreements already made for you.

2. Preventing Scope Creep

Scope creep happens all the time in business, whether you’re a freelancer or a business owner. When a client asks for more work than you agreed on initially and doesn’t want to pay extra money, this is called scope creep.

A scenario like this will help you understand the importance of a contract and save you a lot of time and financial losses, and protect you from bad clients.

3. Guaranteed Confidentiality

If you’re working on a project that needs to remain anonymous, a contract gives you guaranteed confidentiality. The same goes for clients who ask you to sign an NDA (non-disclosure agreement). This means everything that happens between the two parties, as well as the documents, information, and work being shared, remains a secret.

4. Security and Peace of Mind

The best thing about contracts is they give you a sense of security and peace of mind. Because they’re legal documents, you can rest assured you’ll be protected in court if the other party breaches the terms of the contract.

If the client sends you a contract, make sure to read it a few times to make sure you understand everything. If not, ask for clarification and consult a legal representative or a lawyer before signing a contract of any kind.

5. Serving as an Official Record of Agreement

When entering a relationship with a client, a contract serves as an official record of agreement between the parties. It’s proof of the business relationship and contains all the important information related to it, including deadlines, payments, scope, and involved parties. Most importantly, it keeps both parties accountable for their part of the deal.

Now You Know Why You Should Use a Contract to Protect Your Business

Whether you’re a new freelancer or have never signed a contract with clients before, these reasons will change your mind. Using a contract is the best way to protect yourself from trouble and scope creep so you can spend your time doing the work you love.

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