Essay on Business Contracts Importance

Introduction

Business contracts are formal written document representing agreements and treaties made between businesses as they engage in their day to day transactions and operations. They are usually legal bidding, and a party that breaches the provisions or obligations stated in the agreement are held responsible by the court of law. The contracts also express the expectations, how conflicts will be solved in the execution process and possible consequences that could accrue a party that goes against the provisions stated. The contracts also represent or stipulate the undertakings of businesses and individuals and also how their interactions would be carried out. Contracts are essential and act as a tool to assist organizations manage and safeguard their resources.

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Contracts are essential in fixing the cost of resources acquired by an organization. The agreement guides companies as they interact with other parties that avail the necessary economic resources at an agreed and a fixed cost. Additionally, it ensures that organizations can access such resources within a fixed period (Bellou & Kaymak, 2012). This enables enterprise hedge against an unprecedented increase in the cost of buying such resources. For instance, institutions such as Apple employ most of their employees under contract basis, which enables them to maintain fixed expenditures across the economic turbulence. Therefore, contractual agreements are essential in ensuring that organizations manage their resources responsively.

Notably, contracts are essential in outlining and limiting the obligations of the participants. Organizations that offer services such as maintenance, call-center operations, and technical support need a contract to establish what is expected of them and the exact remuneration they ought to receive after availing their services. Such agreements express the frequency of such services and the role of each of the parties in ensuring that such targets are accomplished. For instance, the supplier agreement made between Apple Inc (Scholar, Johnson, & Singer, 2012). Stipulates the roles, obligations, and the extent at which they are liable for the company's products. Hence, such contracts assist the firm to ensure that its customers have access to the final products and in the right condition and ensure that the suppliers are compensated satisfactorily. This ensures smooth operational process and management of the available resources.

Additionally, the contracts ensure that non-compete agreements are enforced. Non-compete agreements allow an organization to prohibit a participant from offering the same products or services to other players in the marketplace. Such enables the creation of a strategic relationship between enterprises and allow them to avail unique goods or services in the economy. It also ties specific employees who offer specialized and unique services with an organization, and also limit former employees from availing such services to other organizations after they part ways or retire (Governatori, Milosevic, & Sadiq, 2006). This enables an organization to maintain its competitive advantage over its competitors, and also cement its supremacy and expert knowledge on either processes or critical production techniques. Hence, in the long run, contracts act as a tool that is utilized to protect the resources at the disposal or particular organizations.

Conclusion

In conclusion, contracts are essential and act as a tool to assist organizations manage and safeguard their resources. For instance, organizations sustain a fixed cost for acquiring economic resources, which ensures sustainable production process. Ideally, it also outlines the obligations and the extent to which the contracting parties are responsible for the firm's products and services. Contracts also ensure that companies can enact compete-contracts, which limit and protect organizational secrets and processes allowing firms to protect their copyrights.

References

Bellou, A., & Kaymak, B. (2012). Wages, implicit contracts, and the business cycle: Evidence from a European panel. Labour Economics, 19(6), 898-907. https://doi.org/10.1016/j.labeco.2012.08.003

Governatori, G., Milosevic, Z., & Sadiq, S. (2006). Compliance checking between business processes and business contracts. In Proceedings - IEEE International Enterprise Distributed Object Computing Workshop, EDOC (pp. 221-230). https://doi.org/10.1109/EDOC.2006.22

Scholar, M. D., Johnson, K., & Singer, J. (2012). The Innovative Success that is Apple , Inc. Marshall Digital Scholar, 1(1), 1-43.