Here's a screeshot, basically it tells the game to put certain teams into a competition before a certain stage of that (or another competition) starts. It allows for a lot more control of what teams are in what competitions:
Those secondary divisions are the 'tags' for the regions, just as in your dynamic relegation system it ignores all other regions. This is one of the regions with only 8 levels, the game is told here to add all teams from that region and that level (+ the lowest level, where there isn't a comp for this region) to the competition before the league stage starts. This is setup for all regional competitions, so all teams are 'forced' in the right regional division. I used a group competition to divide the teams in parallel leagues for the same level and region, as in real life there are sometimes 2 or more competitions for that region on that level ([3rd provincial Region X] A, [3rd provincial Region X] B, etc.)
As for the contracts: that is strange. Is there some higher level data that could change this (maybe on the country level?)