The Terms "Contract" and "Order"

[former_member813607]

Hi All,

Can anyone tell me in brief about a contract and order.

Thanks in Advance, Sudeep..

[Former Member · Accepted solution]

HI

Order is a normal sales order.. Customers request for a product. order is raised for customer to deliver a product.

Contract is a agreement between customer and company on behalf of Materials or Value...

[former_member813607]

thanks

[Former Member]

Hi there,

Contarct is an aggrement between you & your customer that he will buy a specific num of goods in a given time period usuaolly 1 year. There are 2 kinds of contracts.

Quantity contarcts: An agreement that customer will buy 10000 quantityof item X in a given year irrespective of value of the goods.

Value Contracts: Aggrement that the customer will buy $10000 worth of goods from you between Jan 2008 - Dec 2008 irrespective of the items he buys.

In the item catg setting for the contract items in VOV7 we set the completing rule that item is complete when target quantity is fully referenced.

Then basing on the contract, you create orders with refernece to the contact. In VA01 you choose create with reference & give the contract num.

For eg you entered a contract with the customer of 10000 items this Jan 2008. In May he places order for 1000 items. Then the open contract quantity will be 9000.

By any chance you wish to create a sales order without refernece to the existing contratc, you can control that the syetem throws an error / warning message. This is done in VOV8 for OR.

Pls note that yoiu should also maintain the copy control from contract to order in VTAA.

Pls refer http://help.sap.com/erp2005_ehp_03/helpdata/EN/70/a7853478616434e10000009b38f83b/frameset.htm

for further info

Regards,

Sivanand

[Former Member]

Hi Sudeep,

These 2 terms r quite frequently used in our day 2 day life as well, in SAP also these have d same meaning:

C 'Contract' is nothing but an agreement between the Service Provider (or good supplier) n d Consumer that the provider will be providing / supplying the agrreed service / goods within a specified time period.

Now if the customer also gives u the total qty (not d date-wise break up) 2 b supplied within that period then it's called Qty Contract. The contract will have the price information as well.

On the other hand if instead of qty the customer puts cap on the total value of goos / service within that time peiod then it's called Value Contract.

Here though I have mentioned service / goods together but practically n in SAP as well v define Service Contracts for Services. Hope this clears ur doubt abt Contracts.

Of course whenever the customer will ask the supplier will create Release Order i.e RO w.r.t d contract and then rest of the normal sales process of del, PGI, Billing etc follows.

Order on the other hand is a simple order without ny reference to pre-defined conditions of some contract (i.e there r no agreements b/twn d 2 parties), it can b created w.r.t Quotation but ROs r created w.r.t Contracts only. Again rest of the sales process remains the same here as mentioned above.

Hope I have been able to answer ur question.

regards

PARAM

[Former Member]

Pl go through below link:

http://help.sap.com/saphelp_47x200/helpdata/en/06/57683801b5c412e10000009b38f842/frameset.htm

Master Contract:

The master contract is a document under which you can group contracts as lower level contracts. It contains the general terms which apply for all the lower level contracts over a specified period.

Use

You group contracts as lower level contracts under a master contract to ensure that

The terms in the master contract are granted in all the lower level contracts

The data in all lower level contracts remains consistent

You can group the following documents under a master contract:

Quantity contracts

Value contracts

Service contracts

The link between the master and lower level contracts is controlled by the referencing procedure which is assigned to the master contract type in Customizing. The referencing procedure determines which data is copied from the master contract into the lower level contracts

Structure

A master contract contains header data only. In the master contract, you can record:

Business data

Partner data

Contract data

Billing plan data

On the overview screen of the master contract, there is a list of all the lower level contracts which refer to it. You can branch from this list into the individual contracts.

--

Master Contract: The master contract is a document under which you can group contracts as lower level contracts. It contains the general terms which apply for all the lower level contracts over a specified period.

Check these links on Master Contract

http://help.sap.com/saphelp_47x200/helpdata/en/dd/55fd0d545a11d1a7020000e829fd11/frameset.htm

http://help.sap.com/saphelp_47x200/helpdata/en/dd/55fd34545a11d1a7020000e829fd11/content.htm

http://help.sap.com/saphelp_47x200/helpdata/en/dd/55fd27545a11d1a7020000e829fd11/content.htm

[former_member550050]

Hi

Contract is an outline agreement between the customer and the company in which the customer agrees to buy a certain qty of products or for a certain value for a period of time under certain terms and conditions and may be with a special pricing

For e.g a customer can have contract for buying material x from a company of 10000 units for 1 year

Now the customter fulfills the contract by release orders of 1000 in qtr 1,5000 in qtr2, 2000 in qtr3,and another 2000 in qtr 4

Order is normal order and it finishes with customer paying for the goods delivered

Contract is fulfilled thro release orders which is nothing but normal orders

Raja

[former_member813607]

So the when will the customer pay for a contract ?. can it be done after the contract is succefully comleted ?.

also in SAP creation of a new contract can be considered as an order ?.

Many Thanks, Sudeep..

[Former Member]

Sudeep,

As far as billing / payment is concerned, 1 can go for Milestone (i.e one this much is done / supplied then this much will b paid as u pay in case of a flat which is under construction) or Periodic Billing (this much after a predefined time period say at the end of every month).

As far as 2nd question is concerned Creation of contract is not same as creation of orders. Both r totally diff. As u would have understood one is an agreement n other is just a next step after that agreement i.e d step at which actually things start being supplied.

if ny other queries then feel free 2 write.

regards

PARAM