Types Of Agreements Between Two Or More Parties: Business Guide

Setting up agreements between two or more people is part of doing business in Australia. Whether you’re launching a new venture, hiring your first team member, or partnering with another company, the right agreement helps set expectations, manage risk and protect your interests.

If you’re new to contracts, it can be tricky to know which agreement you need, what clauses to include, and how to sign it properly. Don’t stress - once you know the common agreement types and what they should cover, you’ll be able to move forward with confidence.

In this guide, we’ll walk through the most common types of agreements between two or more parties, how to choose the right one, what to include, and the Australian laws that can affect your contracts.

What Is An Agreement Between Two Or More Parties?

At its simplest, an agreement is when two or more parties (people or businesses) commit to do something (or not do something). When certain elements are present - offer, acceptance, consideration and an intention to be legally bound - that agreement becomes a binding contract under Australian law.

Contracts can be verbal, written or a mix of both. Verbal agreements are generally capable of being enforced, but they’re harder to prove if a dispute arises because there’s no clear written record of the terms. That’s why most businesses use written contracts - they give certainty, help prevent misunderstandings, and provide a clear reference point if something goes wrong.

Written contracts don’t need to be complicated. The key is that they’re clear, tailored to your situation, and properly executed (signed) by the parties.

Common Agreement Types For Australian Businesses

Here are the agreements you’ll most often see when two or more parties work together in business. Your needs may vary as your business grows, but this list covers the usual starting points.

Agreements Between Founders Or Owners

• Partnership Agreement: If you’re operating as a partnership, this sets out decision-making, profit sharing, roles, exits and dispute processes. A Partnership Agreement is essential if you’re running a business with another person outside a company structure.
• Shareholders Agreement: If you’ve set up a company and have two or more shareholders, a Shareholders Agreement covers how decisions are made, how shares can be transferred, what happens if someone leaves, and how disputes are handled. It sits alongside your Company Constitution and reduces the risk of deadlock.

Sales, Services And Supply

• Service Agreement: When you provide services to clients, a Service Agreement sets out scope, fees, timelines, IP ownership, confidentiality, liability and termination. It’s your safety net if expectations diverge.
• Terms And Conditions: If you sell online or at scale, website or platform terms can operate like a standard contract with your customers. They typically cover pricing, delivery, returns, warranties and acceptable use.
• Supplier/Distribution Agreement: If you depend on third parties to manufacture, supply or distribute your products, a Distribution Agreement or supplier contract helps lock in pricing, service levels, exclusivity (if any) and delivery obligations.

Protecting Confidential Information

• Non-Disclosure Agreement (NDA): When you’re sharing sensitive information (for example, with a potential investor, supplier or collaborator), a Non-Disclosure Agreement requires the other party to keep it confidential and sets permitted uses. It’s often used early, before you have a broader deal in place.

Hiring And Engagements

• Employment Contract: If you’re hiring staff, an Employment Contract sets expectations around duties, pay, leave, hours, IP and confidentiality, and it helps you comply with the Fair Work regime.
• Contractor Agreement: If you’re engaging an independent contractor, their scope, fees, deliverables and IP ownership should be documented. Clear terms help avoid sham contracting and misclassification risks.

Finance And Investment

• Loan Agreement: Documents the terms of a loan between parties, including interest, security and repayment.
• Share Subscription/Investment Documents: If you’re raising capital, you’ll need documents to issue shares, reflect new ownership and protect the company’s IP and confidential information.

There are many specialised agreements beyond these (for example, franchise, licensing, joint venture and manufacturing). The right choice depends on the parties, the arrangement and the risks you want to manage.

How Do You Choose The Right Contract?

Start by mapping the relationship and the outcome you want. A simple way to decide:

• Running a business together? If you’re not a company, you’re likely in a partnership - use a Partnership Agreement. If you have (or plan to have) a company, use a Shareholders Agreement alongside a Company Constitution.
• Selling to customers? If it’s services, use a Service Agreement or client terms. For online sales, use website or platform terms and clear refund and warranty clauses.
• Relying on suppliers or distributors? Use supplier or distribution contracts so your supply chain is predictable and enforceable.
• Sharing sensitive ideas? Use an NDA before you disclose confidential information.
• Hiring or outsourcing work? Use an Employment Contract for staff and a Contractor Agreement for genuine contractors.

If more than one scenario applies, you may need multiple contracts that work together. For instance, a tech startup with two founders might have a Shareholders Agreement between the owners, a Service Agreement for customers, NDAs for discussions with potential partners, and Employment Contracts as they build a team.

When in doubt, prioritise the contract that addresses your highest risk. If your biggest exposure is unpaid invoices or scope creep, your client Service Agreement comes first. If founder misalignment is the main risk, focus on your Shareholders Agreement.

What Should A Written Agreement Include?

Regardless of the type, most commercial agreements cover similar building blocks. Tailor these to your arrangement and industry.

Core Clauses To Cover

• Parties and details: Full legal names and ABNs/ACNs (if companies), plus contact details for notices.
• Purpose and scope: What the agreement is for, what’s in scope and what’s excluded.
• Deliverables and responsibilities: Who will do what, by when - with clear milestones or service levels if relevant.
• Fees and payment: Pricing, invoicing, payment terms, GST and what happens if payment is late.
• Term and termination: Start date, initial term, renewal and how either party can end the agreement early (including for breach).
• Intellectual property (IP): Who owns existing IP and anything created under the agreement, plus licences to use it.
• Confidentiality: What must be kept confidential and for how long.
• Warranties and liability: Any promises about quality or performance, limits on liability and indemnities where appropriate. Make sure these comply with the Australian Consumer Law.
• Dispute resolution: A practical process (often negotiations, then mediation, and only then litigation).
• Insurance and compliance: Any required insurance and compliance with applicable laws or industry codes.
• General clauses: Assignment, subcontracting, force majeure, notices, governing law and jurisdiction.
• Execution: Signature blocks that match the parties (individuals, companies or trustees).

Are Electronic Signatures Valid?

In many business settings, electronic signatures are valid in Australia and commonly used for day-to-day contracts. However, there are important exceptions and formalities.

• General commercial contracts: E-signatures are widely accepted if the method identifies the signer, indicates their intention to sign and is reliable for the purpose. Keep an audit trail.
• Company execution: Companies can generally execute documents electronically (including under section 127 of the Corporations Act), but you should use reliable e-signing platforms and follow your constitution or board approvals as needed.
• Documents with special formalities: Some documents still require “wet ink” or witnessing in specific ways (for example, certain deeds depending on the state or territory, wills, powers of attorney, and some land dealings). Check the specific requirements before relying on an e-signature.

If you’re unsure, build in a little extra time to arrange proper signing so your contract is enforceable from day one.

Australian Laws That Affect Your Agreements

Your agreements need to work in practice and comply with Australian laws that may apply to your industry or relationship. Key areas to keep in mind:

Australian Consumer Law (ACL)

If you sell goods or services to consumers, your agreements must align with the ACL, including consumer guarantees, remedies and rules around unfair contract terms and misleading or deceptive conduct. Make sure your limitation of liability and refund provisions are drafted with the ACL in mind, and that your advertising and sales practices are compliant.

Companies And Execution

Companies should ensure agreements are authorised and executed properly. Director approvals, board minutes and signing in accordance with section 127 can help avoid arguments about authority later. Your corporate governance documents (for example, a Company Constitution and a Shareholders Agreement) should complement how you enter into contracts.

Employment And Contractor Rules

Hiring staff or engaging contractors triggers obligations under the Fair Work regime, including minimum pay, leave entitlements, termination rules and workplace policies. Clear contracts, correct classification and good record-keeping are critical.

Privacy And Data Protection

If you collect personal information (for example, through your website or onboarding forms), make sure you’re transparent about how you handle it and that your practices match your Privacy Policy. Consider where data is stored, who can access it and how you’ll respond to a data breach.

Intellectual Property

Protect your brand and creations. Decide who will own IP created under your agreements and consider registering key rights (for example, trade marks for your brand name and logo). Also ensure you’re not inadvertently using someone else’s IP without permission.

Industry-Specific Rules

Some sectors (for example, health, finance, building and construction, liquor, childcare, transport) have licensing or code requirements that your contracts should reflect. If you operate across multiple states, check for differences in state-based rules (especially around deeds and witnessing).

What Happens If The Agreement Goes Wrong?

No one plans for a dispute - but good contracts do. If there’s a disagreement or a breach, follow the dispute resolution process in your agreement. Many contracts require issue escalation and mediation before going to court, which can save time and cost.

Practical steps that help if a dispute arises:

• Refer to the contract: Identify the relevant clause and obligations clearly.
• Keep records: Maintain emails, messages, change requests, purchase orders and meeting notes. This evidence is invaluable.
• Act promptly: Raise the issue early and follow the notice requirements in the contract.
• Stay commercial: Consider negotiated solutions that preserve the relationship where possible - litigation should be a last resort.

If termination is necessary, double-check the termination clause and any exit obligations (for example, final payments, return of confidential information, transition services or IP handover).

Key Takeaways

• Written contracts between two or more parties create clarity, reduce risk and provide a clear reference if things go wrong, while verbal deals can be harder to prove.
• Match the agreement to the relationship: founders use a Shareholders Agreement or Partnership Agreement, client work uses a Service Agreement, supply chains use supplier or Distribution Agreements, and confidential discussions use an NDA.
• Essential clauses include scope, fees, IP, confidentiality, liability, dispute resolution, termination and proper execution - keep them clear and tailored to your situation.
• Electronic signatures are widely used for commercial contracts, but some documents still require specific formalities; check the requirements before relying on e-signing.
• Make sure your contracts align with key Australian laws, including the ACL, companies law, employment rules, privacy and any industry-specific requirements - and ensure your practices match your Privacy Policy.
• If issues arise, follow the contract’s dispute process, keep thorough records and aim for practical solutions before escalating.

If you’d like a consultation on choosing or preparing the right type of agreement between two or more parties for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.