A Starter Guide To Business Contracts In 2025

Content

• What are business contracts?
• What are the main types of business contracts?
• What are the emerging trends in business contracts?
• What are the best practices for business contracts?
• Conclusion

What are business contracts?

Business contracts are legally binding agreements between two or more parties that outline the terms and conditions under which they agree to conduct business or engage in a specific transaction. These legal tools are essential for establishing clear expectations and protecting the interests of involved parties. They provide a legal framework for all their future interactions. There isn’t one size fits all when it comes to business contracts. They come in various forms, tailored to different types of transactions and relationships within the business world. But all contractual agreements must contain the following essential elements to be legally valid:

Offer and Acceptance: One party makes an offer, and the other accepts it. This mutual assent is a fundamental element of contract formation.

Mutual consideration: Each party must provide something of value to the other. It could be anything of tangible value, such as cash, products, or services.

Legal capacity: All parties entering a contract must have the competency to do so. It means they must be of sound mind, not under duress, and of the legal age to enter into contracts.

Lawful: The purpose of the contract must be legal. Contracts for illegal activities or intentions are not enforceable.

What are the main types of business contracts?

Drafting competent and legally binding agreements is only one aspect of successful business operations and relationships; the parties also need to know which kind of contract will best meet their needs. Contracts used in a business context can vary widely based on the country, law, industry, requirement, and transaction type. But among the typical business agreements are: 

Sale and Purchase Agreements

These legal agreements define and finalize the terms and conditions of a sale between buyer and seller. Transactions involving real estate, the acquisition of businesses, and the purchase of products or services require sales and purchase agreements. The agreement specifies the asset, payment, termination, duration, damages, and remedies.

Service Contracts

As the name suggests, service contracts outline the terms and conditions between a service provider and a client or customer. The fields of education, healthcare, IT, maintenance, and consulting use them frequently. The agreement defines the scope of service, payments, duration, performance standards, termination, and remedies.

Employment Contracts

An employment contract is a legally binding agreement between an employer and an employee that outlines the terms and conditions of the employment relationship. It aids in defining each party's rights, obligations, and expectations about pay, benefits, and length of employment. The agreement includes clauses to protect the employer's confidential information, trade secrets, and proprietary knowledge.

Non-Disclosure Agreements (NDAs)

Non-disclosure agreements are a means to protect sensitive information.  It is a formal agreement between two or more parties outlining the private information they want to share for specific reasons and defining the circumstances in which that information may be shared. It can include trade secrets, business plans, financial data, intellectual property, or any other sensitive information. 

Lease Agreements

A lease agreement is a legal contract between a property owner (the landlord or lessor) and an individual or business entity (the tenant or lessee) outlining the terms and conditions for renting the owner's property. This type of contract is popular for renting real estate, such as residential apartments, commercial spaces, or industrial facilities. Lease agreements specify parties, duration, payment terms, and termination.

Business Partnerships Agreements

Partnership agreements govern the relationship between two or more individuals or entities engaged in a business venture. It outlines the roles and responsibilities of each partner, profit and loss distribution, decision-making processes, and dispute resolution mechanisms. The agreement specifies the duration of the partnership as well as exit strategies.

What are the emerging trends in business contracts?

In the past decade, there has been a dramatic change in contract management. Organizations still depending on traditional processes and email chains might find it hard to keep up with the increasing demands of the competitive business world. That is why digital contracts are the key to building commercial relationships in the age of technology. Here are the emerging trends in business contracts you need to be aware of:

Digital Signatures

In the realm of business, digital signatures are essential because they offer a quick and safe method of executing agreements without requiring paper records. Many countries have established laws recognizing the legal validity of digital and electronic signatures. For expanding portfolios with security concerns, e-signature solutions like Adobe Sign, DocuSign, and Sertifi are a respite. Bulk actions and high-level encryptions allow organizations to fast-track the signing process without compromising security. Fast vendor agreements and sales execution have a lasting impact on a business's bottom line.

AI Contract Management

AI technologies, particularly natural language processing, are popular choices for organizations to streamline and enhance the process of managing contracts throughout their lifecycle. From creation to monitoring, and analysis, AI can replace manual processes in various contract-related tasks. Organizations can utilize AI and NLP to automatically generate standard contracts or draft contract templates based on predefined criteria. It can save time and ensure consistency in contract language. Clause and data extraction can analyze large volumes of contracts quickly, extracting relevant information and identifying patterns. 

Integrations and Collaborations

Business contracts and management processes aren’t limited to the legal department these days. Every team, from finance to procurement, can make valuable contributions to the contract lifecycle and has a stake in its successful conclusion. But in most organizations, contract management remains cut off from the rest, leading to information silos. Businesses can overcome these obstacles by implementing the appropriate integrations and setting up a centralized platform for collaboration. For instance, companies heavily dependent on vendor contracts can integrate ERP systems with contract management software. It provides a common platform for procurement and legal teams to streamline the contract lifecycle. The same goes for CRM platforms like Salesforce, Dynamics, etc.

Automated Processes

Organizations can automate contract-related tasks like drafting, reviews, approval, and signing to accelerate the entire process. Automated workflows allow organizations to assign individuals or departments responsible for reviewing and approving contracts. Thus, the contract passes through essential channels without bottlenecks. They can set up automated alerts and notifications for critical contract milestones, such as renewal dates or expiration dates. Automation also enables users to generate custom reports to track key performance indicators (KPIs) related to contract management.

Mobile-friendly Systems

Adopting a mobile-friendly contract management system is essential for modern businesses, as it allows users to access and manage contracts on the go. Hosting the contract management system on a cloud platform enables users to access contracts from any location with an internet connection. Push notifications on smartphones help alert users about upcoming contract deadlines, renewals, or any other important events related to their contracts. For instance, Dock 365 makes contract management accessible through Teams for better collaboration.

What are the best practices for business contracts?

Business contracts are crucial for defining the terms and conditions of a business relationship and protecting the interests of all parties involved. Here are some of the best practices for drafting and managing business contracts:

Clear and concise language:

Businesses must use plain, easily understandable language to avoid confusion and misinterpretation. They must define terms and jargon to ensure that all parties have a common understanding. The contract needs to be specific and detailed in outlining rights, obligations, and responsibilities.

Consultation with Legal Professionals:

Business contracts must seek the advice of legal professionals when drafting or reviewing contracts to ensure they comply with relevant laws and regulations. They must tailor contracts to the specific needs and circumstances of the parties involved. Legal professionals can also help identify potential risks and liabilities.

Regular Review and Updates:

Contracts should be reviewed periodically to ensure they remain relevant and reflective of the current business environment. Organizations can update contracts when there are changes in laws, regulations, or business circumstances that may impact the agreement. Thus, they can regularly assess whether the contract still serves the interests of all parties and make amendments if necessary.

Dispute Resolution Mechanisms:

Dispute resolution mechanisms, such as mediation or arbitration, to provide efficient and cost-effective alternatives to litigation is essential for successful business relationships Organizations must clearly state the process for resolving disputes, including the applicable laws and the location for dispute resolution. Including a clause for negotiation or alternative dispute resolution enables businesses to avoid formal legal action unless necessary.

Conclusion

Creating effective business contracts is a critical aspect of fostering successful and mutually beneficial partnerships. A well-crafted contract provides a clear roadmap for the parties involved, helps prevent misunderstandings, and mitigates risks. Dock 365 contract management software offers an array of tools to help enterprises improve their contract lifecycle. From pre-approved templates to automated workflows to route contracts through approval and signing, our centralized platform can accelerate contract management without compromising quality.

Schedule a live demo today to learn how Dock 365 can improve your business contracts.