Alright, so I went directly to the devs about this to make sure that everything is confirmed, as I got suspicious of my own self in that I felt like something was missing.

Player Contract signing.

Note: 1 Year = 1 Season. Contract time frame includes current season. (i.e.: When the interface shows -> 3 Years left = Current season + Next season + Next season)

These are the 3 situations that can occur:
1) Initial contract signing = 3 Years (When the player comes to your Club for the very first time.)
2) Extending a contract = 3 Years (When 1 Year or 2 Years are still left.)
3) Renewing an expired contract (first 7 days of season) = 2 Years contract.

About point 3) - The player's contract will be updated for a maximum of 2 Years only if the contract has already expired and the player is waiting for your decision (First 7 days of the season). You can, ofc. add another year after that if you tap/click the Renew button - For a maximum of 3 Years.

Example:
Click image for larger version.  Name: Contract Renewal.JPG  Views: 76  Size: 67.3 KB  ID: 74732


I've edited my first post to include a warning for the fallacy of my statement, and to redirect attention to this post!