This paper will investigate the effects of performance contracts on the governance of third sector organisations to which governments have outsourced responsibility for delivery of important human and welfare services. As governments have retreated from direct delivery of such services under the impetus of the New Public Management (NPM) reform agenda, they increasingly have had to rely on third sector organisations to play the role of service providers. From a public administration point of view, dominance of the purchaser/provider funding and regulatory model has been one of the most significant results. Under this model, performance contracts or so-called ‘service agreements’ are used to manage the relationship between the government as purchaser of services and the service provider organisations. These contracts or agreements subject provider organisations to a strict funding, governance and accountability regime. The danger for many third sector organisations is that in striving to meet the performance, governance and accountability criteria set down in the contracts, their ability to meet the needs of the communities they serve becomes seriously constrained and compromised. This paper will explore these themes by considering the recent experience of the NSW community legal sector. The NSW community legal sector is comprised of about 40 community legal centres (CLCs) scattered throughout the state of NSW. Like its counterparts in the other states and territories that belong to the Australian Federation, the NSW sector has as its self-proclaimed raison d’être the improvement of access to justice and equality before the law for all Australians, in particular, poor and otherwise disadvantaged citizens. However, all of its funding is provided by the Australian and NSW governments the conditions for acceptance and continuation of which are contained in service agreements with the two governments. This paper will report the findings of a recent survey of NSW CLCs conducted by the author that focused on how the performance, governance and accountability requirements contained in the agreements affect the work of centres. The views of key personnel of the surveyed CLCs were sought on the effects of these requirements on a centre’s ability to provide and improve access to justice for the individuals and communities it serves. The findings suggest that service agreement requirements do have a significant impact on the work of centres, imposing onerous time and resource constraints that divert them from their core business. However, it appears that inadequate government funding remains the greatest concern of CLC workers because it so seriously limits the capacity of centres and their staff to meet the legal needs of their clients.