Contracts
Contracts are everywhere; renting a house, employing a gardener or placing your money in a bank account but what is a contract and what does it legally mean? This chapter explores the essence of the law of contracts (effects of signing a contract, elements needed to create a contract and fulfilling or ending a contract) as well as considering some of the pitfalls of a contract (uncertain terms or illegal contracts).
Acknowledgment
We would like to thank Dr Nicholas Seddon and the ACT Law Handbook for contributing this section on Contract Law.
What is a Contract?
A contract is a legally binding agreement between two or more parties (but usually two). The law will consider a contract to be valid if the agreement contains all of the following elements: An intention between the parties to create legal relations; The parties to the contract must be...
The Effects of Signing a Document
Under common law principles contracts do not have to be in writing. Legislation provides that some contracts must be in writing or be evidenced by a written document. These include contracts involving interests in land (for example, sale, lease or mortgage) and all contracts regulated by consum...
Elements Necessary for a Contract
Intention to Create Legal Relations A contract does not exist simply because there is an agreement between people. The parties to the agreement must intend to enter into a legally binding agreement. This will seldom be stated explicitly but will usually be inferred from the circumstances in...
Who has Legal Capacity?
The law requires that a party to a contract has capacity to enter a contract. This means that the person is recognised in law as being able to commit to a contract. Most people and companies have capacity and so in the vast majority of contracts this is not a problem. In the following circumst...
Uncertainty
It is common for the terms of a contract to be uncertain in some respect. There may be terms that contradict each other, a term may be ambiguous or it may be very difficult to decide what a particular term means. A possible consequence of an uncertain term or terms is that the terms are sev...
Exclusion of Responsibility Terms
It is possible to have a term in the contract which excludes one of the parties from responsibility for something that may go wrong in the performance of the contract or limits that responsibility. It is called an exclusion clause, an exemption clause or limitation of liability clause. For ex...
When is a Contract not a Contract
Entering into a contract must involve the elements of free will and proper understanding of what each of the parties is doing. The law recognises that various forms of defective negotiation may provide the ‘victim’ with an excuse which allows that person to cancel the contract (and possibly a ...
Illegal Contracts
The law will not enforce all contracts. There are some categories of contract to be wary of. Where a contract is illegal, this may affect its enforceability. Contracts may be illegal under common law principles or they may be illegal under legislation. Contracts illegal under common law The law...
Fulfilling or Ending a Contract
A contract may end in any of the following ways. Performance; Agreement between the parties; Impossibility of performance; Termination for breach of contract; Performance When the parties to the contract completely fulfil their obligations to one another, whether by paymen...
Page last updated 19/03/2018