Contracting is a tool that is playing an increasing role in many health systems. Although contracting has the potential to add benefits to health systems it also adds further complexity. Following a substantial health sector reform and the introduction of a purchaser-provider split contracting became a central part of the management of New Zealand's publicly funded health system during the period 1993 to 2000. This publication examines a number of different aspects of New Zealand's experience of using contracts in the health sector including the contracting process contract content and form purchaser-provider relationships including sources of tension and factors that alleviated tensions and issues related to monitoring and accountability. This publication may assist other countries that are using or are planning to use contracts within their health systems.