Well, the silliest and simplest answer, but often the correct one, is that each side honored the contract because it was written and signed, and courts often had the power to enforce contracts.
You could, in fact, get sued over breaking a contract.
That said, mercenary captains and their employers had a slightly different arrangement much of the time, and a great deal of the Italian Wars are decided or at least heavily influenced, based on the fact that mercenaries can and will switch sides in a HURRY if you stop paying them.
For example, the most famous, at least in modern times likely, mercenary captain in the Italian Wars was John Hawkwood, otherwise known as Don Giovanni Acuto.
He switched sides between the Pope and and Florence during their little dust-up in the Italian Wars several times. Mostly based on who was paying, but also because he wound up marrying in to a Florentine noble family.
And famous Condottiere often got titles or land grants in an effort to keep them loyal to a particular side.
Venice was out there knighting everyone. Well not really everyone, but a lot of the English mercenary captains.
British History Online has a series of state papers having to do with English affairs in Venice from 1317-1399 that are particular revealing about how banal and legalistic all of this could be at times.
For example, in a letter from John Hawkwood to Lodovico Gonzaga, Lord of Mantua, John is apologizing for having one of his captains raid Lord Gonzaga's territory. And promises to restore any loot taken "As soon as possible"
But at the time, John was in the pay of Bernabo Visconti, who was at least somewhat at war with Gonzaga.
For further reading on this, I recommend John Hawkwood: An English Mercenary in Fourteenth-Century Italy by William Caferro
Interestingly, that book was written mostly in some famous coffee shops in Tulsa, OK
I would ALSO recommend the British History Online collection of state papers on English affairs in Venice. They are DRY, but VERY useful sources.
https://www.british-history.ac.uk/cal-state-papers/venice/vol1
There is a link to that.
Happy reading and welcome to the world of arms and chivalry in the 14th century. Don't step in the chivalry, it's hard on the boots.