Can any one tell me how the two wires that come into the clutch lever with the contactor inside work. and what its function is???

 

I believe they are to complete the circuit for the saftey switch on the clutch lever so that you cannot start the bike in gear without the clutch lever pulled in. When you have the clutch lever pulled in, the circuit is complete. when not pulled in, the switch is deactivated

 

so would those wires and contact swich if faulty cause the bike to shut off when hitting a bump and also sometimes when i put it in gear as soon as i go to let out the clutch it instantly dies????

 

that can also be from kick stand safety switch.

 

If this is what is happening, there is no way it can be the clutch lever switch. check the kickstand saftey switch or a loose battery connection