Contracts

A contract defines the terms and conditions along with pricing agreed for a product with the supplier​. An active contractual price determines if the pricing of a product or service is displayed on ShoppingHub.

Use the purchasing view to view contract details in the Sourcing and Purchasing Automation module. You can also create a new contract with the contract_manager role.

In addition to purchase requisitions, systematic creation of a contract occurs during a sourcing request or negotiation. This is configured accordingly in flow designer. The various scenarios for pre-purchase contract creation are:

• Negotiation exists, created manually: Trigger contract creation, including NDA if required, against the negotiation when the state of the negotiation is Planned.
• Negotiation exists, created systematically through third-party sourcing integration: Trigger contract creation, including NDA if required, against the negotiation when the state of the negotiation is Negotiation in Progress.
• Negotiation does not exist: Trigger NDA contract creation, if required, against the sourcing request when the state of the sourcing request is Awaiting Supplier Response. A procurement specialist or contract team can manually create other contracts against the sourcing request before creating a purchase requisition. If contracts are not manually created against the sourcing request, they are systematically created against the awarded purchase requisition after approvals are complete.
• New supplier created from manual sourcing or third-party sourcing integration: For third-party sourcing integration, trigger contract creation when a new purchase line is created for a new supplier. For manual sourcing, contract creation follows the manual negotiation creation or negotiation does not exist scenarios.

When a supplier is awarded, contracts that were created for the other suppliers are canceled, except NDAs. Contract metadata population remain as is.

Figure 1. Contract form

In a contract, the following are the key fields:

Table 1. Contract form fields

Field	Description
Contract model	Type of the contract.
Supplier	Supplier that is billed for this contract.
Contract number	Unique identifier for the contract that the vendor assigns.
Name	Short description of the contract.
Parent contract	Parent contract or agreement, if any.
Start date	Date from which this contract is effective.
End date	Date on which the contract ceases to be effective.
State	Status of the contract. For example, Draft, Active, Expired, or Canceled.
Substate	Substate of the contract. For example, Awaiting Review, Under Review, Approved, or Rejected.
License quantity entitled	Number of licenses included in the contract. This field is available for Maintenance and Software License contracts.
Contract administrator	Person responsible for managing the contract and interacting with the vendor.
Approver	User who approves or rejects the contract.
Business owner	Internal user responsible for the product in the contract.
Agreement type	License classification of the contract.
Description	Detailed description of the contract.
Purchasing
Purchasing entity	The purchasing entity associated with the contract.
Payment term	The agreed to time and conditions under which a payment to a supplier is made.
Incoterm	Determines who assumes the liability and when a fixed asset must be capitalized.
Financial
Invoice payment terms	Terms that explain how to pay the contract. For example, Net Monthly Account or Net 30.
Payment schedule	Schedule that defines when to make payments. For example, Monthly or Annually.
Payment amount	Amount paid for this contract so far.
Applicable taxes	Tax applicable for this contract. Select from Exempt or Sales.
Effective tax rate	Tax rate applicable to the total cost. This field is visible only if the applicable taxes is selected as Sales.
Tax cost	Total tax on the contract. This field is visible only if the applicable taxes is selected as Sales.
Total cost	Final cost of the contract after adjustments have been applied. If a contract has one or more rate cards, this field shows the combined value of all rate cards.
Vendor account	Account of the vendor with which the contract is associated.
PO Number	Purchase order associated with this contract.
Cost center	Cost center that is financially responsible for the asset.
Has rate card	Determines if the contract has an associated rate card.
Renewal
Automatically renew	Indicates if the contract can be renewed at the end of its term.
Options	Duration of the contract renewal or extension. For example, 1 year.
Renewal start date	Date on which the contract renewal or extension takes effect.
Renewal end date	Date on which the contract renewal or extension ends.
Cost adjustment type	Type of cost adjustment applied to the contract: Fixed, Manual, or CPI (consumer price index).
Cost adjustment amount	Numerical increase or decrease in price of contract. To indicate a decrease in price, enter a negative number. Either a Cost adjustment or Cost adjustment percentage can be specified, but not both.
Cost adjustment percentage	Percentage increase or decrease in price of contract. To indicate a decrease in price, enter a negative percentage. Either a Cost adjustment or Cost adjustment percentage can be specified, but not both.
Terms and conditions
Specific legal information in the contract.

The following are the related lists of a contract:

Table 2. Contract related lists

Related list	Description
Child Contracts	Lists any child contracts that exist for this contract.
Expense Lines	Lists all expense lines for this contract.
Assets Covered	Lists all assets covered by this contract.
CIs Covered	Lists all configuration items (CI) used in this contract.
Service Offerings	Lists all service offerings from this vendor. Activate Service Portfolio Management to see this related list.
Approval History	Lists all approvals for this contract.
Contract History	Displays the changes to the start and end dates of this contract and changes to the terms and conditions.
Purchase Requisitions	Lists all the purchase requisitions associated with this contract.
Purchase Orders	Lists all the purchase orders associated with this contract.
Supplier Products Covered	Lists all the supplier products covered under this contract.
Pre-payments	Provides information of the pre-payment details such as the amount and the payment date for this contract.

Contract exception rules

Contract exception rules specify conditions in which a contract record is not created even if there is a corresponding contract type mapped to a model category. A procurement administrator​ can configure these rules from decision tables which are in the administration section of the Sourcing and Purchasing Automation module.