Transactional and relational terms are fundamental components of most employment contracts. Rousseau proposed a 2x2 model of contemporary psychological contracts which includes the transactional and relational contracts mentioned above.

The two proposed factors of the model are time frame and performance requirements:

It is widely believed that the longer a relationship continues between employer and employee, the greater the involvement between the two parties gets fostering feelings of trust, loyalty and mutual support. The 2x2 model creates a framework of four possible types of contract - not only transactional (short term, specified performance) and relational (long-term, non-specified performance) as considered above, but transitional (short-term, non specified performance) and balanced (long-term, specified performance) contracts are also present.

The transitional contract is usually present when elements of an organization change, such as during a merger or acquisition, causing uncertainty, distrust and instability in the workforce along with the possibility of high turnover. A practical transactional contract is often required to restore even a degree of trust between employees and employer. Conversely, a balanced contract is the hybrid of the relational and transactional contracts where shared values and commitments are present alongside the need to attain specific business goals (see Rousseau, 1995).

Although transitional and balanced contracts have previously been less prevalent, as the economic climate changes they are becoming increasingly widespread. Changes in technology and the emergence of the 'flexible firm' have significantly changed the nature of employer-employee relationships. This model, proposed by Rousseau, reduces the dichotomous nature previously associated with psychological contracts and, instead of appearing to be mutually exclusive, transactional and relational terms are now seen to interact with each other to a far greater extent.