The purpose of a contract is to define the obligations that each party to the contract must perform. A well-drafted contract will clearly describe the obligations and the consequences for failing to perform the obligations. Contracts can be verbal or written.
Many business owners are eager to execute a business contract and get to work on their new venture, but it is critical to review the contractual terms and the consequences for failure to perform.
No one who signs a contract expects the other party to breach it, but it can—and does—happen. Whether the breach is intentional or caused by unforeseen events such as financial troubles, a well-drafted contract will offset your risk if the other party to the contract fails to uphold its end of the deal.
A well-drafted contract also minimizes the chances that the you and the other party will disagree over its interpretation. And if such a disagreement does occur, a well-drafted contract will clearly define procedures for resolving it efficiently.