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Types of Contracts in Australia

This guide covers the common types of contracts Australian businesses use, when each applies, and how they protect your commercial interests.

Written by: Mark Lazarus, Commercial Lawyer, Director of Lazarus Legal
Last updated: 19 December 2025

Legal Disclaimer: The information on this page is general in nature and is not intended to constitute legal advice. It does not take into account your personal circumstances. Laws and legal processes can change, and their application varies between cases. You should seek independent legal advice before acting on any information on this page.

Understanding Different Types Of Contracts In Business

Contracts are the foundation of every commercial relationship. They define what you’re buying, selling, providing, or receiving. They set expectations, allocate risk, and give you legal options when things go wrong.

Most businesses deal with multiple types of contracts throughout their lifecycle. A startup might begin with shareholder agreements and contractor arrangements. As it grows, employment contracts, supply agreements, and terms and conditions become critical. The contract type you need depends on the relationship you’re creating and the risks you’re managing.

Australian contract law provides the framework for all these relationships:

  • Common law principles apply across all contract types
  • Industry-specific legislation adds requirements on top of common law
  • Fair Work governs employment relationships
  • Australian Consumer Law affects terms and conditions

Getting the contract type right means understanding both the general principles and the specific legal context.

Learn About Australian Contract Law

Common Types Of Contracts Used By Australian Businesses

There are many types of contracts used by businesses in Australia in different scenarios and for specific requirements. Understanding when each applies helps businesses document relationships properly and avoid gaps in legal protection.

Employment Contracts

Employment contracts establish the relationship between employer and employee. They manage risk by defining obligations, entitlements, termination rights, and post-employment restrictions. Clear employment terms prevent disputes over pay, leave, duties, and what happens when someone exits the business.

Types of employment contracts in Australia include:

  • Full-time employment contracts – permanent ongoing employment with standard entitlements
  • Part-time employment contracts – regular scheduled hours less than full-time with pro-rata entitlements
  • Casual employment contracts – irregular hours with casual loading instead of paid leave
  • Fixed-term contracts – employment ending on a specified date or event
  • Independent contractor agreements – not employment per se; contractor provides services as a separate business

Getting the classification right matters. Misclassifying an employee as a contractor creates Fair Work compliance risks, superannuation liabilities, and potential penalties. The distinction turns on control, integration, and the reality of the working relationship, not just what the contract says.

Employment contracts must comply with the Fair Work Act, relevant Modern Awards, and enterprise agreements where they apply. They can’t reduce minimum entitlements, though they can provide additional benefits beyond statutory minimums.

Shareholder agreements govern relationships between shareholders in a company. They operate alongside the company’s constitution and prevent disputes before they arise. Startups use them to lock in equity splits and decision rights. Family businesses use them to manage succession. Growing companies use them to align investors and founders on exit strategy.

Common provisions include:

  • Ownership and voting rights – who holds what percentage and how decisions are made
  • Decision-making rules – which matters require unanimous consent versus majority vote
  • Exit provisions – drag-along, tag-along, and pre-emptive rights controlling when and how shares can be sold
  • Dispute resolution mechanisms – processes for resolving deadlock or disagreement

Shareholder agreements are critical when multiple people hold equity. Without one, minority shareholders may be locked in with no exit path. Majority shareholders may find their decisions blocked. The company constitution alone doesn’t provide enough protection.

Terms and conditions set the rules for how a business provides goods or services. They govern everyday transactions and allocate risk when something goes wrong. Online businesses, service providers, and suppliers all rely on well-drafted terms to protect their interests.

Common uses include:

  • Website terms and conditions – governing use of online platforms, purchases, and user-generated content
  • Terms of trade for goods and services – payment terms, delivery obligations, warranties, and return policies
  • Limitation of liability clauses – capping exposure for certain types of loss or damage

Terms and conditions must comply with Australian Consumer Law. They can’t exclude consumer guarantees or restrict rights in unfair ways. Businesses often use standard terms across all customers, but high-value or unusual arrangements may require tailored contracts.

Non-disclosure agreements protect confidential information shared during business discussions. They create legal obligations around what recipients can do with sensitive material. NDAs are common in commercial negotiations, investor discussions, and employment relationships.

Typical scenarios include:

  • Protecting confidential information – trade secrets, customer lists, financial data, business strategies
  • Discussions with investors – protecting pitch decks and commercially sensitive forecasts during fundraising
  • Employees and contractors – preventing disclosure of information accessed during the working relationship
  • Commercial negotiations – protecting information shared during merger, acquisition, or partnership discussions

NDAs must be specific about what’s confidential, how long obligations last, and what exceptions apply. Overly broad NDAs are difficult to enforce. Courts won’t protect information that’s already public or that the recipient independently developed.

Service agreements define the relationship when one party provides services to another. They’re critical for service-based businesses like consultants, agencies, contractors, and professional service providers. Clear service agreements prevent scope creep, payment disputes, and arguments over deliverables.

Key inclusions typically cover:

  • Scope of services – what’s included and what’s not
  • Payment terms – rates, invoicing, and when payment is due
  • Termination rights – how either party can exit and what notice is required
  • Liability allocation – who bears risk for different types of loss or error

Service agreements often include intellectual property clauses defining who owns work created during the engagement. Without clear IP provisions, disputes arise over whether the client or service provider owns deliverables, processes, or creative output.

Supply and distribution agreements govern relationships when one business provides goods to another for resale or distribution. Suppliers use them to control pricing, territory, and brand protection. Distributors use them to secure exclusive rights and protect their market position.

Common examples include:

  • Supplier agreements – terms under which a supplier provides inventory to a retailer or manufacturer
  • Distributor or reseller arrangements – granting rights to sell products in specific territories or markets

Risks arise when these relationships aren’t documented. Suppliers may find distributors competing directly or selling outside agreed territories. Distributors may find their supply cut without notice. Supply agreements should address exclusivity, minimum purchase volumes, pricing mechanisms, and termination rights.

Choosing The Right Types Of Contracts

Different situations require different types of contracts. The right contract depends on your business structure, industry, and risk profile. A tech startup needs shareholder agreements, NDAs, and contractor arrangements. A retail business needs supply agreements, employment contracts, and terms and conditions.

Consider what you’re trying to achieve. Are you hiring someone? You need an employment contract or contractor agreement. Are you taking on investors? You need a shareholder agreement. Are you selling products online? You need terms and conditions that comply with consumer law.

Risk profile matters too. High-risk industries or relationships justify more detailed contracts with stronger protections. Low-risk, routine transactions can often rely on standard terms. The key is matching the contract type and level of detail to the commercial reality.

Written VS Verbal Contracts in Business

In Australia, the formation of a contract can occur in several ways. In business settings, written and verbal contracts are the most common, with the key difference being the level of practical risk each carries.

Written Contracts

  • Document every obligation and term
  • Provide clear evidence of what was agreed
  • Create commercial certainty with a reference document
  • Easier to enforce when disputes arise
  • Standard practice for business relationships

Verbal Contracts

  • Rely on disputed recollections
  • Require witness testimony and circumstantial evidence
  • Create uncertainty over scope and obligations
  • More difficult to enforce without documentation
  • Carry significant cost and risk

Is a verbal agreement legally binding? Yes, if the essential elements are present. The difference is proof. Written contracts document the terms. Verbal agreements require other evidence to establish what was actually agreed.

The risks of relying on verbal agreements in business are significant. Disputes over terms, scope, and obligations become harder to resolve when there’s no written record. Most businesses insist on written documentation for this reason. 

How Do You Write A Contract?

Writing a contract requires clarity, specificity, and legal compliance. Generic templates often miss risks specific to your business or industry. Poorly drafted contracts create gaps that become problems later.

Basic steps include:

Templates can provide structure, but they rarely suit all businesses. A retail service agreement differs from a construction contract. An employment agreement for a casual worker needs different terms than one for a senior executive. Contracts work when they reflect the actual commercial relationship and allocate risk appropriately.

Learn How To Create Contracts

Why Businesses Should Get Legal Advice On Contracts

Legal advice on contracts is preventative, not reactive. It’s about avoiding disputes, not just handling them after they arise. Businesses should consider legal input when entering growth stages, negotiating high-value agreements, or establishing employment arrangements.

High-value agreements justify the cost of legal review. When deals involve significant money, long-term commitments, or complex obligations, getting the terms right matters. The cost of fixing a poorly drafted contract or challenging a signed contract later far exceeds the cost of legal advice before you draft or sign.

Consult An Agreements Lawyer

Summary

  • Different types of contracts serve different commercial purposes in Australian business operations.
  • Employment contracts manage workforce relationships and ensure Fair Work compliance.
  • Shareholder agreements prevent disputes over equity, decision-making, and exit provisions.
  • Terms and conditions protect businesses in everyday customer and supplier transactions.
  • NDAs safeguard confidential information during negotiations, employment, and investor discussions.
  • Service agreements define scope, payment terms, deliverables, and liability allocation.
  • Supply and distribution agreements govern product relationships and territorial rights.
  • Written contracts provide clear evidence and commercial certainty compared to verbal agreements.
  • The contract type you need depends on your business structure, industry, and risk profile.
  • Legal advice on contracts prevents disputes before they arise, particularly during growth stages or high-value arrangements.

About Mark Lazarus – Director, Lazarus Legal

Admitted in both Australia and the UK, Mark brings more than two decades of global legal experience to Lazarus Legal. Having worked as a barrister, in private practice, and as in-house counsel for a major international consumer brand he combines courtroom-honed advocacy with commercial insight. Specialising in commercial law, intellectual property and dispute resolution, Mark advises startups, creative businesses, and established enterprises on transactions, trademarks, contract drafting, and litigation strategy. His cross-jurisdictional background and history as a former in-house legal director give clients confidence that their legal issues will be managed with both strategic foresight and commercial realism.