They formalize relationships, reduce misinterpretation, and assist businesses in mitigating risk.Contracts are essential in business for several reasons.Contracts establish payment terms that ensure timely and accurate payments, dispute resolution, and revenue capture, as agreed upon by both parties at the time of signing.Contracts protect both parties if expectations are not met by specifying the circumstances under which the contract can be terminated and how this will be handled.Contracts provide legal protection, establish trust, and save time and money by eliminating the need for lengthy arbitration or court proceedings, demonstrating the parties' commitment and trust.Contracts must include parties, an offer, consideration, acceptance, awareness, capacity, and legality to be enforced in court.