A zero dollar contract is a contract with no exchange of money, or payment might be just one dollar – a nominal payment. Government entities, for example, commonly use a zero dollar contract for the use of government-owned facilities. A firm may sign this type of contract to maintain a government facility, and in return, it is granted the right to rent out this facility to third parties for limited use.
A company that is submitting equipment for evaluation may sign a zero dollar contract with a university. A zero dollar contract allots responsibility and liability, even though no payment was made – or there was just the nominal $1 payment.
Put simply, a zero dollar contract is a type of agreement where no money is directly exchanged between the two main parties involved.
It’s often used by businesses or government agencies that bring in a vendor to handle payments for them. The vendor doesn’t get paid by the business or agency, but instead is allowed to charge a small fee to the people who use the service.
So, the vendor still earns money—but not from the company they’re working with directly.
A contract in which either no money changes hands or a nominal payment of $1 is made.
Zero dollar contract – example
A zero dollar contract may be arranged between a commercial enterprise and a customer. For example, SmartDog Services, a provider of Oracle consulting services and solutions, has a pay-as-you-go arrangement with customers, which it describes as a zero dollar arrangement.
The advantage of this arrangement is that when help is needed, the two parties do not have to go through the lengthy process of filling in paperwork.