Introduction to contract management: contract types

Contract management in today’s market plays a huge role for every business across the globe. Simply put, it is a company’s management of contracts between itself and employees, suppliers, customers and partners. It is imperative that each party understands the expectations, costs, risks and success of any business move at all levels.

In general, the use of contract management offers four main advantages:

• Reduced administration costs

• Better accountability

• Improved forecast

• Happier customers

Before you buy your contract management software, you should make sure you fully understand everything. Here we go through the different types of contracts that keep popping up alongside the different applications you might need.

Different types of contracts

A contract can be defined as a legally binding oral or written agreement accepted by two parties on the premise that they can perform the terms of their original agreement. This used to be enforced by signing a written contract, but as with anything, the world of contract management has expanded.

There are different types of contracts that can be signed between the parties and these include:

• Sales Contracts – This is probably the most common form of contract; where the company agrees to sell services and/or products to the buyer (customer). As a result, the customer is obliged to pay for these products or services.

• Contracts of Sale – This is the opposite of a contract of sale where the company is the buyer and agrees with a supplier to sell its services and/or products on agreed terms. By doing so, the buyer acknowledges these services or products and pays the liability.

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• IP – An intellectual property contract is a contract between institutions that explains the responsibilities and rights of each with respect to intellectual property created through collaboration.

• Real Estate – This is simply the contract between the parties for the purchase and sale of real estate. These are usually agreed upon by two parties stating the contract law and enforced in writing.

• Employment – ​​This is the employee/employer contract and one that delegates responsibilities to two parties through labor law.

• Government – ​​Similar in principle to commercial contracting, government procurement is a diverse and complicated process. As this involves the use of public funds, accountability and transparency are key.

These are the main contracts you are likely to have to deal with. However, other contracts include:

• Trade Agreements – Also known as a trade pact, this usually agrees on free trade and preferential rates to reduce quotas, trade restrictions and tariffs between signatories. This can be a complex type of contract and reaches far.

• Partnership Agreement – A partnership’s charter often has multiple components and sections and is a voluntary contract, meaning the partners understand that any losses or gains will be shared among the partners who provide their labor, capital and skills to a business place.

• Insurance Contract – Customers want the lowest premiums and highest payouts, while the customer wants things to be different. Insurance contracts are often managed by underwriters who set the details.

• Reimbursement of costs – There may be a contract where the contractor is unsure whether he or she can meet the terms of the contract. In this case, a reimbursement contract can be concluded, which promises monetary consideration in the event of an unfulfilled contract.

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• Legal – Another form of contract management is litigation. If there has been a disagreement about a contract, it goes to court and the judge decides the outcome.

• Management – This is given to the manager who agrees to oversee a specific project under certain conditions. Financial compensation is promised upon completion, and this type of contract is often managed by both parties.