In the previous course Maria introduced Chris to the different contract types. He learned that the contract type is an important attribute of the contract.
Rental contracts, service contracts, or leasing contracts are different types of contracts and similar in content, although they differ from each other in important ways. In a classic contract for renting an apartment, for example, you’ll find a monthly tax-free rent field, as well as operating costs as advance payments. This type of contract is usually open-ended and includes a termination clause for both parties.
In a leasing contract, on the other hand, you will find a leasing rate including VAT and a limited term field. The leasing contract often includes renewal options. Thus, the contracts are similar depending on the type, and completely different in other respects.
Due to these distinctions and to simplify the management of contracts, different contract types are used to group the individual contract situations that occur. These contract types are stored in the Customizing area.
In the Customizing area it can be defined how many assignments will be done, and which fields are mandatory for contract creation. You can even define pre-sets of recurring values in contracts to simplify the contract creation process.
The essential question for a contract is from which direction the contract will be closed:
- Are you the tenant or the landlord of the contract object?
- Do you use the object?
- Or, do you grant using rights to someone?
To make it clearer, imagine that Chris’ company is renting another office. This indicates that the company needs to pay rent to a landlord. The contract partner in this case would be the landlord who would be represented in accounting as the vendor/creditor.
This means that contract management distinguishes between credit and debit contracts, depending on the role of your company's company code. In a credit-side contract, your company is the user and the contract partner is the vendor. On the other hand, if your company has the role of landlord, your contract partner will pay the rent and is the tenant. In this case, the tenant is the debtor for accounting purposes.
Examples:
- Your company wants to sublet unused office space. In this scenario, we are talking about a lease-out (sublease) situation. Your company is the provider (landlord). Your contract partner, who is leasing/renting the unused office area is the tenant and in the account is known as the debtor. The lease-out contract is a debtor contract.
- Your company is leasing some notebooks and PCs. In this scenario, your company is the user, and the leasing provider is the vendor. The lease-in contract is a creditor contract.
- Your company commissions a facility company to clean the offices. In this scenario your company receives services. The company is the user, and the contract partner is the creditor, this service contract is known as a creditor contract.
When a new contract is created the first step is to select the contract type. Based on the contract type selected, the role of your company in the contract, provider, or user, as well as different functions in the contract dialog will be defined.
The contract type determines:
- If your company is a provider or a user.
- Which data can be maintained or needs to be maintained.
- Assignment of a contract number.
- If and how some fields will be pre-set.
- The processes that can be performed in the system with this contract.
The definition of contract types includes the following:
- the contract category (external, internal, or G/L account)
- the offerer or user indicator, which determines:
- if the company code is the "offerer" of the object or service, then the main contractual partner is a partner with a customer account (aka a debit contract).
- if the company code is the "user" of the object or service, then the main contractual partner is a partner with a vendor account (aka a credit contract).
- in the case of internal contracts, a cost center, internal order, or project (WBS element) takes over the role of the external contract partner.
- the contract reference (e.g., objects) are leased-in or lease-out.
- the screen sequence (which defines the layout of the application dialog).
- the condition group (a grouping of condition types).
- up to two partner roles for the main contract partners.
- a default notice procedure for each contract type (which can be overwritten in the application dialog).
- a number interval for contract numbers.
Besides the main contract partner roles, you can define further partner roles for each contract type in the configuration.