You cannot create PR directly from Contract as a reference document.
You can use it as a Source of Supply.
During manual creation of PR (ME51N), you have to enter all the details like material, qty, plant, purchase grp, etc... manually and under Source of Supply Tab at item details level, specify the Contract document no.
And you can also create PRs using contract through MRP, for this maintain Source List (ME01), here specify Contract document no for the source line and also maintain MRP indicator as "1" or "2" and after MRP Run (MD02), check PRs, they will have contract no in Source of Supply Tab.
Steps to Manually Assign Contract from Purchase Requisition :
1. Logistics----Materials Management----Purchasing ---Purchase Requisition --Follow-on functions --- Assign and Process
2. ME57
3. Select the Assigned Purchase Requisitions checkbox if you also want to see requisitions already assigned, and choose Execute.
4. On the Assign and Process Purchase Requisitions screen, select the requisition lines for your material.
5. Choose Assign Manually if the info record already exists.
6. On the pop-up Assign Source of Supply Manually dialog
box, make the following entries:
Agreement 46XXXXX Agmt item 10
7. Choose Assign Source of Supply.
For assign the source of supply, you can also choose
Assign Automatically (only if not already assigned by MRP due to existing
source list). If more than one source exists, select the contract in the
Source Overview for Purchase Requisition 100XXXXX window and confirm with
Enter. When assigning a source, make sure to select the contract.
8. Choose Save.
9. Select the line item, and then choose Assignments Overview (SHIFT+F5).
10. On the Assign and Process Requisitions: Overview of Assignments screen, select the line below Vendor (you can only select one at a time), then choose Process Assignment.
11. On the Process Assignment: Create PO window, check and make sure the Order Type (NB), Purchasing Group and Purch. Organization fields then choose Continue (Enter) to confirm.
12. On the Create Purchase Order screen, select the requisition in the Document Overview section and choose Adopt in the left part of the Document Overview screen.
13. Choose Save.
