Yes, contract difficulty scales with difficulty mode. You’ll get more/stronger opponents on Challenging and Deadly.
Not a good idea IMO. Contracts are the game’s way of providing extra income and more importantly guiding players to content (i.e. give them things to do). Messing with the difficulty of the contracts encourages players *NOT* to take contracts but instead to wander aimlessly hoping for something more reasonable to come by…
Edit: I actually meant scaling the difficulty of contracts in higher difficulties… er, how do I say this? Huh, it’s tough to word this out exactly but it really depends what you meant by “contract difficulty scales with difficulty mode”.