Contract- Refers to a legally enforceable agreement between two or more parties. It has legal obligations and may or may not be in written form. Contracts are important if a successful bargain or agreement is being sought. Parties involved, in our case the U.S. Company and the distributor firm in Asia. The two firms should meet to enforce their telephone conversation in a contract. This will make the agreement bear more significance as we shall see below. A contract shall protect the company from undue influence. It is possible that some individuals purporting to be acting in good faith approach the distribution company with different instructions other than the initial ones. (Boundy, 2010) This could be because they want to gain selfishly. The contract will protect both cases from this.
A contract is also enforceable at law. This is because it is a document that is legally binding. It can be presented in a court of law during a prosecution case where either party has faulted its obligations. It also contains the offer and acceptance for it to be legally binding. This allows the distribution firm to accept the terms and conditions of the agreement. If it does not accept, the contract is not enforceable. The distributing firm will therefore have a chance to accept the terms. The company is also a growing company. The parties will be protected from recurring court cases because of breach of agreement. This is because both parties are on the watch-out and trying to avoid confrontations. (Emanuel, 2006)
The contract also avoids misunderstandings. In a contract, the party supposed to accept an offer is given certain conditions. They are put in the contract agreement and copies availed to both parties. This will enable to parties to refer in case of uncertainty. This process protects against eventualities resulting from misunderstanding. The contract also fixes resource costs. The costs involved are contained in the agreement including any budget estimates and agreed fees. This protects the Chinese firm from being underpaid after it has done the job. It also protects the U.S gaming Software Company from claims that are undue e.g. higher payments for work done.