The Contracts dashboard is not part of the approval workflow for suppliers. The only area of the Supplier Profile that is subjected to the approval workflow is the Supplier Data dashboard.
This means that if you want to create the conditions to block workflow until a contract is in place, these conditions needs to be included in the Supplier Data dashboard.
How Canopy prevents suppliers being published without a valid contract
By default, the Contracts tab in Supplier Data includes a requirement for internal users to confirm that a contract record has been created in the Contracts dashboard.
Failure to respond in the affirmative to this question will block the supplier from being approved. This forces users to actively confirm the presence of a contract before being able to proceed.
If this question is not visible in your instance of Canopy, and you think it should be, please consult your Administrator.