Mercenary contracts last for 30 days, and can be renewed for another 30 days. There is quite a high chance that he will ask you to become a mercenary, which you can then accept. To make a contract you must ask a vassal of the faction that you want to join if they have a task. This will allow you to fight their enemies and participate in sieges, but you will not receive any fiefs like you would if you were a vassal. To become a mercenary, you need to make a mercenary contract with one of the factions. The function is similar, but not equal to vassalage.
The player may choose to become a Mercenary for a faction.