Yes, contract difficulty scales with difficulty mode. You’ll get more/stronger opponents on Challenging and Deadly.
Well in any case you might want to scale this down a little bit. I dont want to be arrogant and claim that its not possible to kill 4 orc warriors (with 8 younglings) with a 12 bros party with average level 4, but i will dare to say that vast majority of people wont be able to do it. If this was a one case situation – sure i *may* pull it off, losing a bunch of bros, but thats not really a sustainable approach when you stand to gain 1380 gold for that contract.
Now dont get me wrong, im not saying make it easier on challenging, im saying use a different line up. Up until like level 3 put younglings and increase their numbers, at like level 4 start adding berskers, until like level 7 or 8 keep increasing their numbers, and then at level 8+ add orc warriors.
If the whole point of contracts is for you to gain something (money which you use to get stuff you need to survive) then these contracts shouldnt be near impossible to complete, and they should be economically viable (you should lose more getting them done than you get from completing them).
Note: also for the record im totally fine with random world locations being guarded by w/e, there you simply have a choice of just moving along. Contracts on the other hand i really need (otherwise gameplay turns into 30 minutes of waking around until i get lucky enough to get a contract i can actually complete).