15 Types of Contracts You Need to Know About

No matter what kind of business you're in, you likely have to deal with a lot of contracts. In fact, about 70-80% of business transactions are governed by contracts opens in a new tab. That’s because contracts are essential for hiring employees, doing business with other companies, and protecting your business from lawsuits and other liabilities. 

Some of the most popular contracts include fixed-price contracts, cost-plus contracts, and time and materials contracts. While you can use software and other tools to help you generate professional agreements, you should still understand the basics of different types of contracts, as it makes it easier to choose the right contract type to protect your business ventures. 

If contracts are somewhat of a mystery to you, here's a clear overview to help you understand the essentials.

This blog post is offered for general information purposes only. It does not constitute, and is not a substitute for, legal advice.

What are the three common contract structures?

Many service-based agreements are built around one of three common pricing and scope structures. Regardless of which structure your business uses most often, keeping the execution process seamless is just as critical as choosing the right structure, and that’s where a reliable tool like Docusign eSignature can help.

7 types of general contracts

In addition to common pricing models, contracts can also be categorized by how they are formed, structured, and executed. These seven general contract types reflect the legal and procedural distinctions that shape how agreements function between parties.

• Unit pricing contracts: With unit pricing contracts, a contractor provides a set price for each defined unit of work. While material and labor costs inform the unit price, the customer typically sees only the per-unit rate. Contractors may also include an itemized breakdown showing how each unit price was calculated.

• Unilateral contracts: A unilateral contract is formed when one party makes a promise that the other party accepts by performing a specified action. Only the offering party is obligated to perform until the action is completed. These contracts are less common in business settings but are a recognized legal category.

• Bilateral contracts: A bilateral contract is formed when both parties make promises to one another and each takes on an obligation. Most everyday business agreements are bilateral because both sides agree to perform something in exchange for the other’s performance.

• Simple contracts: A simple contract is any agreement, whether written or oral, that is not executed under seal. These contracts are legally binding when they meet the basic elements of contract formation, such as offer, acceptance, consideration, and intent. Many modern agreements fall into this category.

• Implied contracts: An implied contract arises from the actions or circumstances of the parties rather than written or spoken words. For example when you order a drink at a bar, your conduct creates an implied agreement to pay for it.

• Express contracts: An express contract is formed when the terms of the agreement are clearly stated, either verbally or in writing. All parties understand and agree to the obligations involved. Written express contracts may be executed using electronic signatures when appropriate.

• Unconscionable contracts: A contract may be considered unconscionable if it is so one-sided that a court determined it should not be enforced. This typically involves both unfair bargaining practices and unfair substantive terms.

5 types of business contracts

In day-to-day operations, companies rely on a variety of agreements to clarify expectations, protect sensitive information, protect their interests and define business relationships. These five contract types are among the most widely used across industries and business sizes.

• Non-disclosure agreements (NDAs): NDAs opens in a new tab are commonly used to protect trade secrets, proprietary processes, client data, and other sensitive business information. Whether you're exploring a potential partnership, onboarding a new hire, or sharing proprietary data with a vendor, an NDA helps ensure that information remains protected.

For businesses of all sizes, NDAs are a foundational tool for maintaining competitive advantage and managing risk. A well-drafted NDA clearly defines what qualifies as confidential information, who is bound by the agreement, the duration of the obligations, and the consequences of a breach. Docusign offers a ready-to-use NDA template for teams that need a fast, standardized starting point.

• Bill of sale: A bill of sale is a legal document that records the transfer of ownership of property from one party to another party, typically in exchange for payment. Businesses use bills of sales when selling items such as cars, equipment, or materials. Because the document simply outlines the details of the transaction, it’s generally one of the simpler types of contracts to implement.

• Employment contracts: When you hire an employee, you may choose to have that employee enter into an employment contract. This type of agreement outlines key terms such as the duties an employee will perform, the compensation they will receive, and other essential terms.

• Licensing agreement: In a licensing agreement opens in a new tab, one party grants another party the right to use a product,service, or intellectual property under defined conditions. Compensation may take the form of royalties or other agreed-upon fees. The contract outlines the specific permissions granted, any payment terms, and the obligations of each party.

• Promissory note: A promissory note is a written agreement in which one party (the borrower) promises to repay a certain amount of money to another party. The note outlines key terms such as the repayment amount, interest rate, and when payment is due, whether on a set schedule, on a specific date, or in the case of a demand note, when the lender requests it.

Why do different contracts exist?

While a basic contract can work in some situations, different business scenarios call for different structures. Each contract type serves a specific purpose and helps clarify expectations, responsibilities, and terms between the parties involved.

Understanding the distinctions between contract types can help you identify which structure best fits a particular business relationship and what's included. A contract generally outlines key details such as the rights and responsibilities of the parties involved, timelines, and other essential terms. Clear, well-defined agreements help ensure both sides understand what they are agreeing to and how the relationship will operate.

Why it's important to understand the types of contracts

There are several practical benefits of understanding the different types of contracts. For starters, being able to distinguish between the various types of contracts helps you choose the format that best fits each business situation. It also makes it easier to understand the agreements presented to you and what you should expect from them. 

Contract knowledge also contributes to smoother operations overall by helping clarify expectations, reduce misunderstandings, and support stronger relationships with customers, partners, and vendors.

Operate your business with proper contract management

Understanding the different types of contracts is a strong foundation, but actively managing them across a growing business is a challenge of its own. As agreements proliferate across departments, relying on manual processes for everything from employment contracts to NDAs often creates bottlenecks, missed deadlines, and lost revenue.

For small and mid-sized businesses looking to scale, Docusign's Intelligent Agreement Management (IAM) platform can offer a smarter path forward. With IAM Core capabilities, your team can automate routine agreement workflows, accelerate turnaround times, and keep every contract type organized and accessible, without the administrative overhead that comes with manual processes. 

For businesses managing heavier agreement volumes or more complex enterprise needs, a dedicated Contract Lifecycle Management (CLM) solution goes further, automating end-to-end workflows, reducing risk, and giving your organization a centralized place to manage every agreement.

Explore Docusign's agreement management solutions to find the right fit for your business and keep contracts from slowing you down.