In any complex, high value relationship, and particularly one which is long term and business critical, there will be a a good number of risks.

The parties control some of these: releasing confidential information; poaching employees; incompetent project management.

Others are external: cost increases; natural disasters; subcontractor insolvency.

The contract can’t influence the scale of most of these risks because words on the page don’t stop events happening. But what the contract can do is apportion responsibility. It can either confirm the affected party has to cope with the problem, or it can allow the consequences to be shared or even passed to the other side.

Now most professionals understand perfectly well that contracts are used to apportion risk, but it’s important to recognise they’re actually a very imperfect way of doing so. That’s because loss will always initially lie where it falls. If the contract says someone else should bear the loss, then either the parties have to cooperate to achieve this or the aggrieved party has to enforce it. Enforcement means management time, delay and legal costs (and, even if successful, will rarely achieve full compensation for the expense).

None of this should detract from the importance of an enforceable agreement though. Disputes can and will arise. And when the parties meet to address the issues, the side that can back up its arguments by pointing to clear contractual positions is likely to win the day - precisely because it has the fall-back of contractual enforcement.

So even when a contract isn’t litigated it’s vital in defining the landscape on which the parties engage, and who is standing on the high ground with the sun at their backs.