What Is A Contract? (2025 Updated)

Contents

We hear the word ‘contract’ quite often in the world of business legals. But what does it actually mean? And more importantly – what does a contract even do for your business?

This article goes through some updated contract basics for 2025, helping you understand how contracts impact your business and how you can use them to safeguard your commercial relationships.

What Is A Contract?

Contracts are legally binding agreements that set out the specific terms between two or more parties. In today’s fast-paced business environment, a well-drafted contract is essential as it provides clarity, certainty and, if required, legal recourse. It remains a cornerstone of successful business relationships.

A contract can be written, oral, or even a mix of both – provided there is an offer and an acceptance. However, in 2025 the safest approach is to have a meticulously drafted written contract. This way, the details of your deal with customers, suppliers, service providers, partners or affiliates are clearly documented, minimising commercial and legal risks. For additional guidance on ensuring your contracts are robust, you might find our article on contract review useful.

When Do I Need A Contract?

Any time your business enters into a commercial arrangement, whether this involves the provision of services, the sale of goods, or a complex joint venture, it’s wise to have a contract in place. In an increasingly digital and interconnected market, contracts help secure your business interests against potential disputes.

Legally binding written contracts provide the best assurance that commercial deals are locked in. With various forms of business agreements available, there is a myriad of contracts tailored to different situations. For a broader understanding of the types of agreements available and how they might apply to your business, see our overview of contracts.

Common Types Of Contracts:

Consulting Agreements
Contractor Agreements
Software Development Agreements
Distribution Agreements
Employment Contracts
Hire and Rental Agreements
Intellectual Property Licence Agreements
Joint Venture Agreements
Non-Disclosure Agreements
Partnership Agreements
Referral Agreements
Reseller Agreements
Revenue-Share Agreements
Sale Agreements
Service Agreements
Shareholders Agreements
Sponsorship Agreements
Standard Terms & Conditions
Supply Agreements

How Do I Use It?

Contracts are often prepared as formal agreements that require signature from both your business and the other party – particularly when it involves an ongoing or high-value relationship. For instance, if you’re negotiating a long-term supplier deal or a comprehensive service agreement, having an explicitly finalised contract is vital.

Alternatively, Standard Terms & Conditions can be seamlessly attached to invoices, forms or proposals. When these terms are used on an online platform, the customer will typically tick a checkbox to accept them, forming what is known as a “clickwrap” contract. For more insight into drafting effective terms, our guide on good business terms and conditions might be of interest.

What Does A Contract Actually Do?

Once a contract is entered into by two or more parties, it becomes a legally binding agreement. This means that if one party fails to meet the obligations agreed upon, you have the right to seek legal recourse. In essence, a contract functions as both a shield and a roadmap for your business operations.

Of course, in day-to-day business practice, immediate legal action is rarely the first course of action. For example, it is generally more practical to resolve an issue such as a late payment through discussion before resorting to legal processes. In these cases, a contract acts as a documented reminder of the agreement and details the steps that should be taken if discrepancies arise.

Moreover, a well-prepared contract will include clauses that outline a clear process in case of disputes – such as mechanisms for meditating late payments, non-delivery of services, or any attempts to terminate the agreement prematurely. In today’s legal climate, staying on top of updated regulations is essential; our compliance guide for consumer guarantees is a great resource for staying informed.

Key Benefits Of Using Contracts In 2025

In 2025, the business landscape is more dynamic than ever. Efficient contract management not only mitigates risk but also enhances trust with your stakeholders. By utilising digital tools and secure online platforms, you can streamline the creation and execution of contracts. This digital shift ensures faster transactions and better record-keeping, which is particularly beneficial for small businesses looking to scale. To explore how you can digitise your legal processes, check out our insights on digital marketing legal tips and related services.

Need Help With A Contract For Your Business?

Drafting a comprehensive contract can seem daunting, especially when you’re faced with uncertainty about what specifics to include or how to phrase them. Equally, going through a lengthy legal document full of specialised terminology can be confusing if you’re not familiar with it. Investing in professional legal advice is a one-off cost that can prevent future disputes, misunderstandings and needless headaches.

At Sprintlaw, our experienced team of lawyers is ready to assist with Contract Drafting, Contract Review and a host of other legal services your business might require. Whether you need a bespoke agreement or need to update Standard Terms & Conditions – we’re here to help. For further information on how we can safeguard your business, explore our contracts service page or get in touch directly on 0800 002 184.

Minna Boyle

Minna is the Head of People & Culture at Sprintlaw. After completing a law degree and working in a top-tier firm, Minna moved to NewLaw and now manages the people operations across Sprintlaw.