Management of Contract Work

A contract is a legally binding agreement stipulated by two or more parties and characterised by specific obligations. Contracts usually consist of a list of conditions, which may be general (conditions that are standard to all, similar contracts), special (disciplining that particular contract) and technical (regulating how the contract is materially executed). Contractual clauses are listed both in the general and special conditions.

A sales contract provides for the mere transferral (

obligation to give

) of goods or services

that already exist

in the firm’s catalogue (

standard

goods or services); in the case of goods, it is unimportant whether these are made before or after the customer’s purchase order (

make-to-stock

or

make-to-order

, respectively).

Contract work, on the other hand, provides for the delivery of a good or a service that

does not exist in a catalogue

, and whose characteristics are

specified by the client

(

obligation to do

).

In practice, contracts are often a combination of both, so – given the legal implications – it is necessary to define the prevailing component. This assessment must be based more on the object of the contract than on economic considerations (i.e. whether the value of the work is greater than that of the materials): for this reason, it is appropriate to consider

contract works

– also known as

work orders

or

job orders

– as those that are necessary to deliver works that are

not

ordinarily massproduced, but are custom-built in response to a

specific

order (because in this case, work prevails on materials).