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We integrate the concept of signaling theory to propose that organizations create psychological and legal contracts through their human resource management practices (HRM). Focusing on the strength of the signal generated by HRM practices, we develop a framework for contract creation. Specifically, we define and outline how weak signals generate psychological contracts and strong signals develop legally binding contracts. We provide several examples of HRM hiring practices, the weak and strong signals which they emit and the psychological and legal contracts which they create. Our key contribution is to provide a precise model for understanding the distinction between a psychological and legal contract.