Assigning Contract Terms to a Contract

Objectives

After completing this lesson, you will be able to:

  • Assign contract terms to a contract

Contract Terms

Select the play button to learn about the mandatory parameters for establishing a contract, including the contract start date, end date, and termination or extension rules.

The contract term includes following parameters:

  • Contract start date - Date of contract start agreed on in the contract. This date does not have to be the same as the date of the first periodic posting or the start of cash flow calculation. This parameter is for contract obligatory.
  • First contract end - Contract end date for a fixed-term contract, or for a contract with options and/or automatic renewals. For unlimited contracts, this field can be left empty.
  • Contract end date - The date is the calculated contract end date. The system calculates this date based on the renewal rules and the first contract end date. The renewal rules included are automatic renewals, as well as options, if their acceptance was declared.
  • Cash flow from date - Date starting on which the agreed conditions are considered during generation of the cash flow.
  • First posting from date - This date specifies the point in time starting from which cash flow records can be created as planned records for postings. The date of first posting (which should be greater than or equal to the Cash Flow From date) specifies the date in the system starting from which the system should post based on the cash flow.
  • Notification rule - In this rule, you make settings for giving notice and for processing notice periods in a contract.
  • Renewal rule - In this step, you can specify the rules for renewal of contracts. There are two types of contracts:
    1. Without fixed term (you cannot create renewals, since there is no defined contract end)
    2. With fixed term (you can renewal rules used)

You can define renewal and notice rules for contracts with a fixed term.

For contracts without fixed terms, only notices are applicable, as there is no contract end in such contracts.

The first contract end date can be entered manually (in the case of contracts with fixed terms).

The term end date is the calculated contract end date. It is always calculated by the system based on the available information about contract notices and renewals.

If there is an activated notice for a contract, the term end date is the same as the notice per date.

In the case of contracts with fixed terms, the term end date is calculated based on the renewal rules (automatic renewals and renewal options) for the contract.

For an ongoing (open-ended) contract without fixed terms and without an activated notice, the term end date is empty.

The term end date is also empty in the case of automatic renewals with a repetition of the last rule or with unlimited after renewals contracts.

You have the following options for creating notice procedures on contracts:

  • No period of notice
  • Standard notice procedure (Configuration)
  • Individual notice procedure (defined in the contract)

You can assign a standard notice procedure (created in Customizing) or define an individual notice procedure for the respective contract. You can create notice procedures with different notice rules for the contractee and the contractor or both.

Standard and individual notice procedures consist of notice rules, which are either period regulations or deadline regulations.

You can use a period regulation for periodic notice rules (month end, quarter end, half-year end, year-end).

The deadline regulation defines extraordinary notice possibilities (for certain specific notice dates, for example, a period of notice of three months on May 31 and September 30)

Select the play button to learn how to create and process notices for contracts on the Terms tab.

Renewal

To define renewal rules, you must assign them manually in the Terms tab of a contract. In contrast to notice rules, the renewal term is not automatically created when you create a contract.

You can use both automatic renewals and renewal options. In the case of automatic renewals, the contract duration is extended after the contract end is reached. If you do not want to extend the contract duration automatically, either the contractee (for example, the tenant) or contractor (for example, the landlord) must reject the renewal.

You can combine both variants of renewal rules (automatic renewals and options) for a contract (for example, two options and afterward an automatic renewal).

An example of such a combination can be, "There is the option of renewing the contract twice by X months. If this option is not used, the contract is automatically renewed by 12 months." The renewal options always take precedence over the renewal in this case. Besides the standard renewal rules that are predefined in Customizing, you can also assign individual renewal rules to contracts. It is also possible to combine different renewal rules within the terms of one contract. For example, you can use a standard renewal rule as a "copy template" to create an individual renewal rule within a contract.

Select the play button to learn about the different variants of renewal rules, including options and automatic renewals.

In this exercise, you will maintain contract terms in a contract.

Assign and Maintain Contract Terms in a Contract

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