Not all contracts are created equal. The type of contract you choose determines how risk is shared, how disputes are handled, and whether your agreement holds up when things go wrong.
Pick the wrong one, and you could end up locked into terms that do not reflect the actual scope of work, leave costs uncapped, or give the other party an easy exit.
This guide breaks down 20 types of contracts used across business and law.
Whether you need a basic NDA to protect sensitive information, a fixed-price contract for a defined project, or a licensing agreement to monetize your IP, you will find the right type of agreement here, along with what it covers, when to use it, and what to watch out for.
Different kinds of contracts suit different situations, and knowing which one applies to yours is the first step to protecting your business.
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What are contracts?
A contract is a basic agreement between two or more parties with terms that create legal obligations and are enforceable. In case of a breach, the remedies and penalties are clearly defined so that parties can perform their obligations in the contract without excuse.
Why do different types of contracts exist for different use cases?
Contracts pervade business and personal relationships. You need contracts to:
Lease an apartment — to define what you owe, what the landlord owes, and what happens if either side does not deliver
Take out a mortgage — to legally bind the lender’s obligation to fund and yours to repay
Start a business — to protect ownership, define roles, and set the rules between co-founders
Run the business — to govern vendor relationships, client work, and employee expectations
Get employed — to set compensation, responsibilities, and what happens when the relationship ends
See the vet — to authorize treatment and clarify who is liable if something goes wrong
Fix your car — to confirm the scope of work, the cost, and who is responsible for additional damage
Hire an accountant — to define the services, protect confidential financial information, and set payment terms
These daily operations are governed by the rights and responsibilities assigned in different types of contracts. So how many types of contracts are there? Legal systems recognize dozens depending on jurisdiction and industry. This guide covers the 20 most widely used types of contracts in business and law.
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Types of Contracts: Core Classifications
There are several kinds of contracts and understanding how they are classified helps you identify what type of agreement you are dealing with before you read a single clause. Types of contract in law recognize the following classes of contracts:
- Express vs. implied — Express contracts state terms clearly in writing or speech. Implied contracts arise from conduct, like paying for a meal you ordered without signing anything.
- Bilateral vs. unilateral — Bilateral contracts involve mutual promises from both parties. Unilateral contracts involve one party making a promise that the other accepts only by performing a specific act.
- Valid, void, voidable, and unenforceable — Among the most important kinds of contracts to distinguish. A valid contract meets every legal requirement. A void contract has no legal effect, usually due to an illegal purpose. A voidable contract stands unless one party cancels it due to fraud or lack of capacity. An unenforceable contract cannot be upheld in court due to a procedural failure such as a missing signature.
- Fixed-price, cost-plus, time and material — In business, types of legal contracts are also classified by how payment and risk are structured. These are covered in detail below.
Types of Contracts in Business Law
Types of contracts in business law govern how projects are scoped, priced, and delivered. These five types of contracts in business are most common in procurement, construction, consulting, and government engagements. These types of contract in business law differ primarily in how costs and risks are distributed between the buyer and the contractor.
- Fixed-price contracts — A service provider delivers at an agreed price regardless of actual costs. Low risk for the buyer, higher risk for the contractor.
- Cost-reimbursement contracts — The buyer covers actual costs incurred plus an agreed fee. Common where project scope is uncertain.
- Cost-plus contracts — A variation of cost-reimbursement where the contractor receives costs plus a predetermined profit margin.
- Time and material contracts — Billing is based on hours worked and materials used. Best for projects with evolving scope.
- Unit pricing contracts — Pricing is set per measurable unit of work. Common in construction and manufacturing.
Types of Service Contracts
Types of service contracts define the terms under which one party provides services to another. The most common types of agreements in this category include:
- Professional service agreements — Used when engaging consultants, lawyers, accountants, or agencies. Defines deliverables, timelines, and compensation.
- Retainer agreements — A client pays a recurring fee to secure access to a professional’s services over a defined period.
- Maintenance and support contracts — Cover ongoing services such as IT support, equipment maintenance, or facility management.
- Vendor agreements — Govern the relationship between a business and its suppliers or service providers, covering pricing, delivery terms, and quality expectations.
- Master service agreements (MSAs) — Framework agreements that set overarching terms for an ongoing relationship, with individual work orders issued underneath.
Types of Contracts in Project Management
Understanding the types of contracts project management teams work with helps you make the right call before a project starts. The type of contract you choose directly affects how risk, cost, and scope are managed between client and contractor. The three most common are:
- Fixed-price (lump sum) — Best for well-defined projects. The client knows total cost upfront; the contractor absorbs overruns.
- Time and material — Best for projects where scope evolves. The client pays for actual hours and materials.
- Cost-plus — Best for research or government projects where scope cannot be fully defined upfront. The client reimburses costs and pays an additional fee.
20 common types of contracts
As foundational documents for human and social cooperation, contracts play a crucial role in business transactions for clear, accountable, and legally protected business relationships. Below is a breakdown of 20 basic contract agreements used across types of contracts in business. Each entry explains a different type of contract — what it is, how it works, and when to use it — so you can identify the right one for your situation.
General business contracts
This refers to a broad category of contracts used in business dealings and covers a range of business arrangements like employment, sales, services, and more.
For example, a standard business contract between a company and vendor, or a partnership agreement that outlines each partner’s contributions and profit-sharing terms.
Non-disclosure agreements
A contract that creates a confidential relationship between parties and prevents one or more parties from sharing sensitive assets, information, material, or information for a specific period. They are usually signed at the beginning of a business relationship or large financial exchange.
NDAs can be unilateral or bilateral depending on the types of business (M&A, joint ventures, teaming agreements), reciprocity, and number of parties involved.
When onboarding a new client, your organization is privy to the company’s sensitive information calling for an NDA. For example, a software company and a freelance developer sign an NDA before sharing proprietary source code — a standard example of contracts between two parties that restricts disclosure for two years.
Professional service agreements
Professional service agreements are contracts between a company or agency and a highly skilled professional vendor or partner, like a large consulting firm or an independent consulting subject matter expert. The contract defines expectations and compensation within the project schedule.
Among the most common industries and specialties that use professional service agreements are:
Consulting services
Legal services
Marketing & advertising agencies
Accounting and financial services
Technology services
Educational services
For example, you need a professional service agreement when you hire a market research firm before the development of a software product.
Bill of sale
Bills of sale are contracts that transfer the property ownership from seller to buyer. They can be of two types:
Absolute bill of sale: They act as evidence or assurances of the sale of assets, goods, or personal chattels covered by common contract laws.
For instance, when you take a loan to buy a car, the conditional bill of sale gives the bank the right to repossess the vehicle if the buyer defaults on loan repayments.
Conditional bill of sale: They act as a security for the payment of money in favor of the grantee of the bill where the grantee is given the personal right to seize or possess the goods, assets, or personal chattels transferred.
For instance, when you buy a vehicle, the bill of sale confirms the full transfer of ownership when the buyer makes the payment.
Employment agreements
In employer agreements, an employer extends to an employee setting the terms and conditions of employment. It usually specifies the date of commencement, job title and description, duration of employment, compensation and benefits, rules and compliance policies, confidentiality clauses, non-compete clauses, dispute resolutions, termination, and so on. For example, a sales manager joins a company and signs an employment agreement defining base salary, commission structure, a non-compete clause, and 30-day termination notice.
Licensing agreement
A licensing agreement gives one party the right to use the property owner’s brand, patent, or trademark in return for royalty fees or revenue.
For instance, a toy manufacturer signed a licensing agreement with Disney for the legal authority to produce toys and merchandise based on the studio’s motion picture characters.
Promissory note
A promissory note is a written promise offered by one party to another. Typically issued by a financial institution or organization, the promissory notes allow any receiver to act as a lender.
Some examples are investment promissory notes or student loan promissory notes.
Fixed price contract
In a fixed price contract, a service provider agrees to offer services or complete a project for a final contract price that remains constant despite variables in time, resources, or costs.
For instance, a fixed price type contract for custom-built interiors allows for clearly defined expectations and cost estimates.
Cost-reimbursement contracts
A cost reimbursement contract is an agreement where two parties agree to cover the actual costs incurred by the seller or contractor during a project.
For instance, a construction project that specifies that the owner reimburses the contractor for costs incurred.
Cost-plus contract
A cost-plus contract is an agreement between a project owner and contractor where in addition to reimbursing these expenses, the contractor may receive an additional payment to cover profit, known as a cost plus incentive fee.
For instance, NASA contracts a firm to develop a spacecraft, covering all costs plus a 10% profit.
Time and material contract
A time and material contract typically outlines the labor in hours, materials, labor costs, and material costs incurred to complete a project. They are flexible, open-ended, and best suited for construction, consulting, and engineering projects.
For instance, a home renovation project would need an itemized time and materials contract with or without a fixed fee for the consultation.
Unit pricing contracts
Also known as a measurement contract, the pricing is based on unit cost rather than a lump sum. It is best suited for industries where quantity may vary and costs scale with volume increase.
For instance, a contractor may be paid per square foot of road pavement completed, given that the route is already established.
Unilateral contracts
A unilateral agreement is a one-sided agreement created by an offeror on a take-it-or-leave-it basis. The other party accepts the offer by performing the act. It is often used in rewards, performance-based agreements, and loyalty programs.
For instance, an incentive contract in which a small business owner motivates an independent sales consultant with an incentive of $500 for a minimum 20% increase in month-on-month sales.
Bilateral contracts
A bilateral agreement is signed between two parties when each party makes a mutual promise and agrees to fulfill their side of the bargain. It is the most common form of contract where obligations exist on both sides.
For instance, sales contracts in which businesses agree to deliver products and customers agree to pay — one of the most straightforward examples of contracts between two parties where obligations exist equally on both sides.
Implied contracts
An implied contract is a legally binding contract type that is derived from the actions, conduct, or circumstances of the parties involved. No words are explicitly mentioned or documented. It is implied-in-fact (by behavior) or implied-in-law (by legal obligation) and is harder to prove than a written agreement.
For example, you walk into a restaurant as a customer to order food, implying that you will pay after the meal.
Express contracts
In express agreements, parties explicitly state contract terms in written or spoken form. It specifies the rights, obligations, and expectations of parties. It leaves little room for misinterpretation and can be enforced in courts of law.
For example, when a company signs a contract with a supplier for monthly deliveries.
Simple contracts
Simple contracts require no formal legal process or notarization to certify the authenticity of a signature. They can be verbal or oral.
For example, a small business that agrees to buy office supplies from a vendor on WhatsApp.
Unconscionable contracts
An agreement that describes unjust terms, and favors the party with superior bargaining power, contrary to the good conscience of the courts. Such contracts are held unenforceable. They usually lack consideration or the lack of choice with maximum incentive for one party.
For instance, a lender extorts borrowers at a 200% interest rate.
Adhesion contracts
Contracts of adhesion are standard-form contracts drafted by the party with greater bargaining power. They are typically instituted in industries like insurance, telecommunications, software licensing, and SaaS sales agreements.
For example, an insurance contract with policies for medical expenses, deductibles, exceptions, and co-payments.
Aleatory contracts
An aleatory contract is an agreement that outlines terms that depend on events beyond the control of either party, such as death, accidents, or natural disasters. They are typically used in contracts related to speculative investments, life annuities, and gambling.
For example, annuity contracts promise to give investors a steady income helping retirees tackle the risk of outliving pension or savings.
These are the different contract types that allow businesses to establish a contractual relationship, set expectations, manage risk, and ensure legal compliance across various aspects of business.
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To sum up, most contracts are legally binding documents that define obligations between parties.
Businesses and individuals rely on them for various transactions. All of them contain key elements such as an offer, acceptance, awareness, consideration, contractual capacity, and legal purpose.
But choosing the right type of contract is only half the work. How you manage it after signing matters just as much. Types of contract management range from manual tracking in spreadsheets to AI-powered contract lifecycle management platforms that handle drafting, approvals, e-signatures, obligation tracking, and renewals in one place.
Traditional contract management is time-consuming and prone to errors. But with HyperStart’s AI-powered contract lifecycle management, businesses can cut contract admin time by 80%, accelerate reviews 5x faster, and ensure never missing a renewal again.
Instead of manually tracking contract obligations, HyperStart auto-extracts key contract data with 99% accuracy, enabling businesses to streamline compliance, automate renewals, and minimize legal risks.
HyperStart’s AI-driven platform has helped businesses boost legal operations efficiency by 80%. For instance:
LeadSquared, a fast-growing SaaS company, struggled with manual contract workflows. After implementing HyperStart, they automated approvals, reduced risk, and improved contract turnaround times.
Qapita, a fintech leader, scaled from manual processes to full contract automation, enhancing efficiency across legal and finance teams.
HyperStart helps you simplify, automate, measure contract performance, and get the full value of the different types of contracts you handle. Book a demo to learn how.
