How to Create SAP SD Contract

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how to create sap sd contractIn this SAP SD tutorial, we will talk about contracts in SAP Sales and Distribution. You will learn what SAP SD contract documents are used for and how to create them. We will provide screenshots and guidance that are relevant for this process.

What is a Contract in SAP SD

Outline agreements play an important role in nearly all business processes. Customers and vendors agree on the goods to be provided under certain conditions and within a specific period of time. Outline agreements streamline business processes for both partners in a business relationship. The two main outline agreements are:

  • scheduling agreements
  • contracts

There are two types of contractsvalue and quantity. Contracts can cover both goods and services. Generally, no restrictions apply to the different contract forms.

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A contract is an outline agreement between you and your customer that is valid for a certain time period. The contract does not contain any schedule lines, delivery quantities, or delivery dates. The same functions are available in contracts as in orders. You can also agree on special price agreements. The customer fulfills the contract with individual releases. Schedule lines are created in the release order when it is placed. The release order is then processed like any standard order. Any special agreements regarding prices are copied from the contract.

Release orders are created with reference to a contract. This generates a document flow record that allows you to update released quantities and values in the contract.

You can create release orders in the following ways:

  • Choose Create with reference on the initial screen
  • In the Sales document menu, choose Sales document → Create with reference→ To contract
  • Assign an order item to a contract retrospectively
  • Use the automatic system to search for open outline agreements when you create an order

Standard SAP SD contract normally contains:

  • Customer and material Information
  • Pricing, be it customer or material specific
  • Information about shipment processing
  • Information about billing
  • Validity periods / dates

How to Start Contract Transaction

  • Enter VA41 in Transaction Command Field for creating Contract or
Enter VA41 Transaction
Enter VA41 Transaction
  • Navigate through ‘Tree’
VA41 Transaction for Creation of Quotation in SAP Menu
VA41 Transaction for Creation of Quotation in SAP Menu

How to Create SAP SD Contract

Once you have entered the contract creation initial screen, you have to select relevant contract type. Each contract type has its own functionality and viewing based on the configuration done at backend.

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Standard Types of Contracts:

  • Quantity Contract is: QC
  • Rental Contract: QP
  • Value Contract: WK1
  • Material rel. Value Contract: WK2
  • Service and Maintenance Contract: SC
Create Contract – Initial Screen
Create Contract – Initial Screen

Please note, any field having a ‘tick mark’ means its mandatory and it has to be populated else system would not allow you to proceed further. In order to opt for a required contract type, either press F4 on the respective field and it will show all LoVs (List of Values).

List with Contract Types
List with Contract Types

Select the relevant Contract type to proceed to the next step

Create a Quantity Contract
Create a Quantity Contract

Populate Sales Area with your relevant Sales Organization, Distribution Channel and Division.

Fill in Sales Area Data
Fill in Sales Area Data

Hint: if you populate your relevant Sales Organization, Distribution Channel and Division first and then opt for the relevant contract type, only contract types relevant for the selected Sales Organization, Distribution Channel and Division will be displayed in LoVs.

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Master Data Involved when Creating Contract

The following master data is involved when creating a contract. This master data fetches relevant information and populates the relevant fields accordingly.

Customer Master Data

  • Name of the customer
  • Address
  • Location
  • Taxation details
  • Geographical location according to company’s sales geographical structure
  • Shipping details
  • Billing details as in terms of payment
  • Partners associated with the customer, i.e. ship-to party, bill-to party, payer, etc.

Material Master Data

  • Material description
  • Unit of measure (Stock Keeping Unit – SKU)
  • Transportation group
  • Loading group (fork lifter, manual handling etc.)
  • Taxation information

Customer Material Info Records

  • Used to maintain customer relevant SKU codes which are mapped with the company code

Condition Master (Pricing)

  • Base price of the product or special price for a particular customer
  • Discount(s) on the product or special discount offered to one customer
  • Freight
  • Taxes

Output Master

  • The process of communication with customer once the contract is created via printout of the quotation which is sent to customer by post, fax or email.

Partners (Parties) Involved in Contract Creation

  • Sold-To Party: the entity that inquired the goods
  • Ship-To Party: to whom goods are be delivered to
  • Bill-To Party: the entity that is responsible to receive the bill
  • Payer: the entity responsible for the payment

Entering the Customer – Sold-To and Ship-To

This is the initial screen of contract once you have selected the relevant contract type and sales area (the combination of Sales Organization, Distribution Channel and Division is technically termed as Sales Area in SAP SD).

Create Quantity Contract - Overview
Create Quantity Contract – Overview

You can see Sold-To Party and Ship-To Party fields at the top left of the screen just below the contract field. One Sold-To Party can have multiple Ship-To Parties. If there are many Ship-To parties associated with one Sold-To Party, a dialog box will pop up in the contract screen. You select the relevant Ship-To Party which the Sold-To Party has instructed you to ship the products at.

Press F4 or button on the Sold-To Party field to search for your relevant Sold-To Party. You can search by Search term maintained in the customer master or also by Name. To remain specific with your search, enter relevant Sales Organization so that only customer maintained in your Sales Organization will be displayed.

If you decide to find the customer with name, enter customer’s first name with * before and after the name. This is called a wild-card search.

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Example: *demo*.

Search for Customer
Search for Customer

Hint: You can use asterisk to be more specific in your search and press Enter to get output of your search.

Search Results
Search Results

Double click on the required Customer line in the contract to select that customer.

Sold-To Party Populated into the Contract
Sold-To Party Populated into the Contract

Press Enter once you have selected the Sold-To Party, so that the SAP system can accept the customer and proceed with the contract creation.

Select Ship-To Party
Select Ship-To Party

Since this customer has two Ship-To Parties, a dialog box is popped up to select the relevant one which your customer, Sold-To, has instructed. Double click on the required one and same will be selected.

Sold-To and Ship-To Partied were Successfully Populated
Sold-To and Ship-To Partied were Successfully Populated

If there’s only one Ship-To Party, once you press Enter, Ship-To Party will automatically get populated. Since the contract is a legal document, system will prompt to populate validity dates:

Validity of Contract
Validity of Contract

Populate contract validity dates, i.e. Valid From and Valid To dates:

Select Validity Dates using Calendar
Select Validity Dates using Calendar

SAP SD Contract Screen Navigation

This part is called Header of the Contract:

Header of SAP SD Contract
Header of SAP SD Contract

This part is called Overview of the Contract:

Overview of SAP SD Contract
Overview of SAP SD Contract

This is called the line item part of the contract where materials which are inquired by the customer are to be maintained:

Line Items of SAP SD Contract
Line Items of SAP SD Contract

Add Items to SAP SD Contract

Use F4 to search for the material the same way we did for customer and repeat the same process for entering multiple line items (if required).

Search for Materials to Populate Items of the Contract
Search for Materials to Populate Items of the Contract
Material was Found
Material was Found

Double click on the desired material to select.

Material Number was Added to the Contract
Material Number was Added to the Contract

If you press Enter without entering the Quantity, the system will prompt:

SAP Asks to Enter Quantity of Material (at the bottom of the screen)
SAP Asks to Enter Quantity of Material (at the bottom of the screen)

Enter Quantity.

Information about Material Entered into the Contract
Information about Material Entered into the Contract

Incompletion Log for Contract

Go to Edit > Incompletion Log or Ctrl+F8 to see if the contract Created is Complete.

Check Incompletion Log of Contract
Check Incompletion Log of Contract

If there is anything or fields which needs to be populated, the system will prompt and new window will be displayed.

Incompletion Log Results
Incompletion Log Results

Press or F2 to complete the missing data.

The System Shows the Screen with Missing Data
The System Shows the Screen with Missing Data

Enter the PO Number. PO stands for Purchase Order and it is a number of customer’s purchase order.

Enter PO Number in Contract
Enter PO Number in Contract

Press or F5 to populate the next data, if any. Once all the required data is populated, the system shall take you to the main screen of the contract.

SAP SD Contract is Complete
SAP SD Contract is Complete

If the document is complete, the system will prompt the relevant message accordingly. .

Navigating Contract Screens – Header

Press button to view header details in the contract.

Header of Contract
Header of Contract

Here you can see relevant sales data:

  • User who created this Contract
  • Sales Organization, Distribution Channel and Division information
  • Sales Office
  • Sales Group
  • Date on which the document is created
  • Document Currency
  • Customer Group
  • Price list
  • Sales District
Sales Data in SAP SD Contract Header
Sales Data in SAP SD Contract Header

Press tab to see the partners which the customer is having:

Business Partners in the Header of the Contract
Business Partners in the Header of the Contract

Press to know the current status of the contract.

Status Screen of SAP Contract Header
Status Screen of SAP Contract Header

Press to go back to the main contract screen.

Navigating Contract Screens – Item

If you want to see the pricing of the individual material, select that line item and press this conditions button .

Pricing Conditions Button
Pricing Conditions Button

Here, you can see the pricing of the selected product.

Prices for Contract Item
Prices for Contract Item

Press to view material’s details.

Sales B Tab of Contract Item
Sales B Tab of Contract Item

Press to go back to the main contract screen.

Save the Contract

Once you have created the contract and satisfied with the information populated, press or CTRL+S to save the contract.

SAP SD Contract was Successfully Saved
SAP SD Contract was Successfully Saved

Did you like this tutorial? Have any questions or comments? We would love to hear your feedback in the comments section below. It’d be a big help for us, and hopefully it’s something we can address for you in improvement of our free SAP SD tutorials.

Navigation Links

Go to next lesson: How to Create SAP SD Sales Order

Go to previous lesson: How to Create SAP SD Quotation

Go to overview of the course: Free SAP SD Training

2 thoughts on “How to Create SAP SD Contract”

  1. I like the clear screen captures with instructions.

    However found a contradiction with the below statements on the tutorial:

    “A contract is an outline agreement ……The contract does not contain any schedule lines, delivery quantities, or delivery dates.”

    “Standard SAP SD contract normally contains – Delivery dates and delivery quantities”

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