tl;dr: covert contracts suck because the world sucks and because you can't negotiate desire.
Body: Covert contracts are pretty interesting and also pretty common. I'd wager that everybody has witnessed them in action long before he ever heard of the term. Also, they're irrevocably tied to the idea of the "Nice guyTM ".
In the book No More Mr. Nice Guy, Dr. Robert Glover describes the problems of a set of men who are not simply “nice,” but who suffer from “Nice Guy Syndrome.” These guys never assert their own needs and let people walk all over them, all in the hope that shaping themselves into what others desire will win them love and approval. And yet such behavior inevitably leads instead to unhappiness, frustration, and barely suppressed rage.
My personal theory is that introverted (and among them especially the nerdy) types are most prone to set up covert contracts. They see the world through a lens of cause and effect - their mode of thinking is "if I do X, I'll get Y". This mindset serves someone well when it comes to work, but it's a pretty shitty guideline when it comes to human interactions - especially if coupled with the wrong ideas about which behavior is more likely to produce which outcome.
Feminists like to vilify that mindset as "entitled", but "misguided" would be a much better description - "entitled" is someone who expects a certain outcome handed to him on a silver plate, which in the case of covert contracts doesn't really make much sense. Because the idea that the outcome of a situation can be entirely independent from the direct input is rather alien to the "nice guy" as described above - quite the opposite, he thinks that he has to work for it. The idea that one can simply ask for something and get it, or just take something and not get rejected doesn't compute for someone who is used to the opposite.
I once read someone saying here (paraphrasing here) "a nice guy sees women as quest givers whose task he has to fulfill so he can progress with them". So on the one hand, he doesn't think he deserves something just for being his awesome (cough) self. But on the other hand his problem is that if he has done the work he thinks produces a certain outcome, he's irritated if this doesn't happen: because what he fails to recognize is that neither is his course of action very likely to get him what he desires, but also that an entirely different approach can get what he wants with less effort.
1) The contract of inexperience
The contract of inexperience is when a guy's aversion to, hum, promiscuous women goes in a different direction than the redpill idea that they make bad long term partners (because they cheat and divorce rape you), but because he feels that she'd be a poor fit. In reddit relationships-lingo this would be called "not having the same values".
Why is that? Well, it starts with many guys simply not being included in the hookup-culture, usually by a mix of lacking opportunity as well as lacking inclination. As a consequence, they keep their distance to said culture, abstain from being a "player", someone who "uses women for sex" (which, as they probably have heard quite often, is the second-worst thing a man could do to a woman after actual rape), a "douchebag/jerk/asshole". They pass on having fun, suffer through dry spells, and put pussy (but only of the good sort!) on a huge pedestal. One might say that this is a case of sour grapes, but I wouldn't forget that an average guy can still sleep around with less attractive girls if he is ready and willing to do so. In turn, such a guy expects that his girlfriends had a similar attitude - that she didn't throw herself at guys she barely knew to spread her legs for them. He makes the mistake of thinking that what is attractive to him (inexperience) is also attractive to her. The covert contract in this case is: "I give you my love and affection unburdened by prior experiences, you give me yours."
He expects a low n-count partner because he internalized all these ideas that players are jerks and assholes no woman really wants and who only manage to get by sexually because they're scummy liars who play with women's feelings and rope them in with the prospect of a relationships, but that these guys would ultimately get their comeuppance in form of karmic justice, i.e. not finding love at all or at least not with a "quality woman" - because the latter would of course totally appreciate guys like him taking the high road. He expected to be seen as exemplary, as a "good guy", only to find out that him taking the high road didn't get him his unicorn, but just another slutty horse.
Now if such a guy realizes he has a slut on his hands, this puts his past decision into question: him being a "good guy" didn't get him a "good girl", but one that, unlike him, didn't let herself be restricting by hangups about NSA sex. One he could have had earlier and easier (and probably dirtier), that what he did or didn't do ultimately didn't matter. He either has to face that women like players (and he wasted years of his life by painfully avoiding being one) or that he got a shitty one. In both cases, he feels cheated out of his similarly inexperienced partner.
2) The contract of qualities
This is another, and actually probably the most common form of covert contract.
In this case, the guy expects that what he considers his qualities get him brownie points with women or a specific subset of women, because he genuinely thinks that these qualities govern attraction (you can guess where he got that idea from). These "qualities" cover a wide range of opinions, behaviors and what not. Maybe he's a notorious white knight. Maybe he's a feminist. Maybe he has committed himself to a cause women (or a specific subset of women) are into, like SJW stuff or animal rights. Maybe he's a good Christian. Maybe he loves kids. Maybe he's very non-confrontational (i.e. nice). Maybe he just has an awful lot of stuff in common with her. Remind you: this doesn't mean that he does the stuff exclusively or just mostly because of pussy, he actually may have adopted these qualities entirely without ulterior motive, but it can still mean that on some level he expects that having them translates into attractiveness to the opposite sex (or, as I said, a subset thereof) - or at least that their absence translates into a lack of attractiveness. The covert contract here is: If I cultivate the qualities women profess to desire, I become desirable for a relationship; if I don't cultivate the qualities women profess to desire, I become uneligible for a relationship.
The former is best known in the form of the strawman nice guy, though his main quality (or rather: set of qualities) can be anything. What matters is that he thinks that because he has certain qualities which he assumes should set him apart from "the other guys", should qualify him as boyfriend material. Of course, the notorious absence of success leads to frustration and resentment, especially if all the messages he gets indicate the opposite, or actually outright tell him the opposite. He is "such a great guy" and "shouldn't change", why the fuck are girls notoriously uninterested in him?
The other side is more low-key, and usually tied to the former, but not necessarily tied to it. Here the guy may not think that his qualities which he assumes are a condition to be eligible as boyfriend material are enough in themselves - but he can't wrap his head around the fact that one can go entirely without them in still be romantically successful. To illustrate this, I want to quote Scott Alexander with his pretty extensive post about nice guy-shaming regarding that particular point:
When I was younger – and I mean from teenagerhood all the way until about three years ago – I was a nice guy. In fact, I’m still a nice guy at heart, I just happen to mysteriously have picked up girlfriends. And I said the same thing as every other nice guy, which is “I am a nice guy, how come girls don’t like me?” [...] to spell it out very carefully, Henry clearly has no trouble with women. He has been married five times and had multiple extra-marital affairs and pre-marital partners, many of whom were well aware of his past domestic violence convictions and knew exactly what they were getting into. Meanwhile, here I was, twenty-five years old, never been on a date in my life, every time I ask someone out I get laughed at, I’m constantly teased and mocked for being a virgin and a nerd whom no one could ever love, starting to develop a serious neurosis about it. And here I was, tried my best never to be mean to anyone, gave to charity, pursuing a productive career, worked hard to help all of my friends. I didn’t think I deserved to have the prettiest girl in school prostrate herself at my feet. But I did think I deserved to not be doing worse than Henry.
This is the most basic and also the most tragic form of this covert contract - a guy who truly is a good guy and nevertheless gets it rubbed into his face hard that what he considers his finest qualities in reality mean shit on the SMP. But ultimately it's the same sentiment as the guy above. And it's also a sentiment that's held by loads of other guys, for example the SJW who finds out that his fellow feminists rather swoon over macho jocks than over him. Think of Barney Stinson's formative experience that led him to suit up, only without the comedy, and you get the gist.
3) The contract of the friendzone
Did I say the second was the most common? Well, I have to backpedal, it may also be this one. But it may also be because it's the best-known and as a rule contains the contract of qualities as well. The contract of the friendzone is probably the most debated covert contract, at least among the younger crowd: guy does all kinds of shit for girl but gets rejected despite his efforts.
Here I have to interject something: there are several definitions of "friendzoning" flying around on the internet. Disregarding the disingenuous blowhards who say the friendzone doesn't exist, there's also the overly sensitive faction that already counts it as "friendzoned" if a girl rejects a guy who has a crush on her but would prefer to stay on good terms with him. Well, technically he is in the "friend-zone", but in the context of this particular contract it requires a bit more from the guy than pining over a girl who barely communicates with him.
The contract of the friendzone means that the guy is invested in the prospect of a relationship and tries his best to make it happen. The fundamental friendzoning dynamic is that the guy is making an offer - he's courting her without outright stating it. He does all sorts of stuff guys only do for girlfriends (listening to her shit, taking her out to diner, spending all of his spare time with her, buying her presents, making her mixtapes, validating her etc. pp. yadda yadda yadda), it's basically his sales pitch and - let's be honest here - in most cases it's so blindingly obvious what he's up to that only the most naive girls are oblivious to it. He basically hands her the covert contract for a relationship and hopes that she'll sign it; the covert contract here is "I show you what a great boyfriend I'll make, and you'll either take me up on my offer or make clear beyond any doubt that you're not interested. The second part is of course an undesired outcome, but what's even worse is if the girl in question gladly takes all free samples he gives her while pretending that she either on the fence regarding a relationship or even that she didn't notice the contract at all. And when she ultimately does reject him, or picks another guy (jerk, asshole, douchebag, etc.) who didn't jump through hoops to demonstrate his honest intentions, this "inevitably leads instead to unhappiness, frustration, and barely suppressed rage" (ah, the sweet taste of the sunk cost fallacy and the frustration it leads to when one realizes one has been strung along).
4) The contract of compromising
This one could also be called "the contract that happens after failed shit tests". This particular contract is the one you'll most likely stumble over when you google the term: most sites that deal with covert contracts comment on people (mostly guys) who tried to reignite the passion (...you know what i mean) in their marriage by doing all the things they thought would work: choreplay, supplication, communication, backrubs, roses etc. - basically, they were trying to craft a compromise with their partners, the covert contract here is: "I do stuff for you to do you a favor, therefore I may expect you to return the favor by doing "stuff" (:winkwink:) for me". Of course it works as well as one might expect; the guy is basically behaving like in the friendzone, with the exception that he's now trapped inside the relationship and under the worst circumstances can't just cut his losses and ditch the broad.
Disingenuous blowhards (again) will tell you that the problem why this didn't work was because he had an ulterior motive, but common sense says that's bullshit - he could be as "ulterior motive-less" as he wanted and the partner would accept his tokens of affection and still not put out; the only difference would be that he'd be less frustrated about it.
The contract of compromising is ultimately the most dangerous on that list: the relationship situation that leads to the creation of these contracts is as a rule a pretty dire one, and the dynamic this contract produces makes sure that your relationship situation also stays dire. You'll try to regain the favor of your partner by supplicating ever harder, but the reaction isn't that she mellows and her love is rekindled, but that the frustration level rises - possibly because she continues losing respect, possibly because she feels guilty that all your efforts don't lead to her feeling more affectionate towards you (if you want to know more, I suggest you check Archwinger's entries, he has basically written volumes worth of information on this particular subject).
Okay, there's no way around it, covert contracts suck - this is something even the bluepilled mainstream will agree on. However, they do it for the wrong reasons: they do it because they consider covert contracts dishonest, they ascribe their failing to them being born out of ulterior motives, they judge them because they think what you're trying to gain when operating under them is questionable, that they're manipulation etc. But simultaneously, by handing out wrong advice and faulty suggestions, they help birthing new covert contracts every day. And I mean, can I blame the guys? If you're constantly told that you should do assloads of choreplay and constantly kiss her ass, but that pestering your wife for sex makes you worse than Hitler, covert contracts seem to be the most obvious solutions.
The red pill on the other hand rejects covert contracts simply because they don't work.
If covert contracts worked but where just considered morally dubious, you'd see countless of posts on this side praising them and explaining at length how you could set them up without the other party noticing. But you won't see that here, because they fail as a rule, and they fail as a rule because they violate two fundamental RP principles: that you can't negotiate desire and that the belief in a just world is bullshit. Covert contracts are born out of the misguided belief that you can get what you want by behaving "the right way". That by being a non-player you'll also get a non-slut. That by forming yourself in the mold of the "ideal boyfriend material" you'll also get a girlfriend. That by courting a girl you can win her over. That by meeting your partner halfway, she's also reciprocate the favor.
And what all these contracts have in common as well is that they totally overrate the impactof what I call second tier-qualities. Second tier qualities are all these qualities a "perfect boyfriend" supposedly should have, or the traits that show "personal compatibility" - basically all the fluff women will write in their dating site-profiles. However, these second tier qualities (like being a good listener, listening to and reading the same stuff she likes, being good with kids, sharing her political opinions, being always understanding and not controlling blah. blah. blah.) don't get you anywhere without the first tier qualities (everything the red pill says you should cultivate).
So what you want is pushing your value by developing actual quality traits, not those virtual ones that only work under the condition that you have the first tier-quality set. And never ever enter covert contracts again - when you're a high value guy, you won't need to display the behavor that comes with covert contracts anyway.
lessons learned: avoiding the covert contract-trap. Not because you're an asshole for having covert contracts, but because they'll strangle you.