Introduction to Contract Management: Contract Types
Contract management in today’s market plays a very important role for all companies around the world. In a nutshell, it is about managing a company’s contracts between themselves and employees, suppliers, customers and partners. It is imperative that all parties understand the expectations, cost, risk, and success of each business move at all levels.
In general, the use of contract management has four main advantages:
• Reduced administrative costs
• Better accountability
• Improved forecast
• Happier customers
Before you rush to buy your contract management software, you need to make sure you fully understand everything. Here we’ll go over the various types of contracts that crop up time and time again along with the different applications you may need.
Different types of contracts
A contract can be defined as a legally binding agreement, oral or written, that is accepted by two parties on the premise that they can abide by the terms and conditions of their initial agreement. Previously, this was enforced by signing a written contract, but as with everything, the world of contract management has expanded.
There are several 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 undertakes to sell services and/or products to the buyer (client). As a result, the customer is required to pay for these products or services.
• Purchase contracts: it is the opposite of a sales contract, in which the company is the buyer and agrees with a supplier to sell its services and/or products under the agreed terms and conditions. As a result, the buyer acknowledges these services or products and pays the liability.
• IP: An intellectual property contract is a contract between institutions that explains the responsibilities and rights of each in relation to the intellectual property that arises through the collaboration.
• Real Estate – Simply put, this is the contract between the parties for the purchase and sale of real estate. These are usually agreed upon by two parties, specifying the law of the contract, and are enforced in writing.
• Employment – This is the employee/employer contract and one that assigns responsibilities to two parties through employment law.
• Government: Similar to commercial contracting in its principles, public contracting is a diverse and intricate process. Since it includes the use of public funds, accountability and transparency are vital.
These are the main contracts that you will probably have to deal with. However, other contracts include:
• Trade agreement: Also known as a trade pact, this is usually where preferential and free trade rates are agreed to reduce quotas, trade restrictions and tariffs between the signatories. This can be a complex type of contract and it varies widely.
• Partnership Agreement – Partnership articles often involve multiple components and sections and is a voluntary contract, which means that the partners understand that there will be a division of profit or loss between the partners who give their labor, capital and skills to a business.
• Insurance Settlement – Clients want the cheapest premiums and highest payments, while the client wants it to work the other way around. Insurance contracts are often managed by underwriters who determine the details.
• Reimbursement: A contract may arise where the contractor is not sure that they can meet the terms of the agreement. In this case, a reimbursement contract can be drawn up that promises a monetary return in the event of a breach of contract.
• Legal: Another form of contract management is a legal dispute. When there has been a disagreement about a contract, it will go to court and the judge will decide the outcome.
• Management – This is given to the manager who undertakes to oversee a certain project under specific conditions. Monetary compensation is promised upon completion, and this type of contract is often negotiated by both parties.
