AUSTRALIAN CONTRACT LAW

Contracts are everywhere. They are part of our modern life and we enter into them - and perform them - every day. They are necessary to the day-to-day buying & selling of goods and services.

Some contracts are deliberately made - like a contract to purchase a house. Other contracts come into being because of conduct between parties that give rise to a contract - like a contract with our dry cleaner when we drop off our clothes.

In almost every case, it is important that terms of a contract are fairly negotiated, properly drafted and reviewed to ensure the contract meets the intentions of the parties.

A contract is a legally binding agreement enforceable in a court of law. However, not every agreement between two parties is a legally binding contract.

CHARACTERISTICS OF A CONTRACT

An Offer, which is a proposal to make a deal. An offer must be communicated to another person and remain open until it is accepted, rejected, retracted or expires. Some terms of an offer, like price, quantity, and description, must be specific & definite because the offer has to identify the basic obligation of the contract;

the Acceptance is an acknowledgment by the person to whom the offer was made that the offer is accepted. The acceptance must comply with the terms of the offer and must be communicated to the person who proposed the deal;

and the Consideration is the bargained for exchange. It is the legal benefit received by one person and the legal detriment imposed on the other person. Usually consideration takes the form of money, property, or services. An agreement without consideration is not a contract.

NEGOTIATING CONTRACTS

Negotiating a contract is very important. By negotiating contract terms, the parties to the contract bargain for their own best interests. While negotiating contracts, be aware of the following:

• Make certain you are comfortable with your duties and obligations
• Make your intentions, requirements and expectations of the other party clear at the beginning of negotiations
• Negotiate for a remedy within the contract if there is a breach by either party

DRAFTING CONTRACTS

Many parties use form contracts as a model when drafting their own contracts. When drafting the contract, it is important that each party knows exactly what is expected of them. Thus, if there are any words that could be misconstrued, or any terms that are ambiguous, define them within the contract. In drafting a contract, clarifying the terms and duties should be the goal.

Form Contracts: Form contracts are contracts with the language and terms already set. A common example of when form contracts are used is in landlord/tenant agreements. Parties usually do not negotiate when using form contracts. Thus, be certain to carefully review the terms of the contract so you are aware of your duties.

Legalese: Many parties use legal words and languagewhen drafting contracts. This may, however, make the obligations and terms of the contract confusing. Thus, use regular language to insure both parties understand what the contract says and means.

REVIEWING CONTRACTS

Before signing a contract - read it. In reviewing the contract, make certain you know what your stated obligations are under the contract. If you are uncertain as to your duties, and you sign the contract, you may be liable for breaching the contract.

Beside the fundamental elements of a contract, there are other legal requirements:

Competence to make a contract means the legal capacity to make a contract. Generally, people are ruled competent to make contracts if they are over 18 years of age and of sound mind.

Consent means that each party to the contract must agree to the terms of the contract. However, consent does not mean that you have to know what the contract says. For example, when signing a rental car agreement at the airport counter, you don't know what the terms are in this contract but you agree to them by signing the contract.

Legal subject matter, or Legality, is required for a contract to be enforceable. The law does not enforce contracts based on illegal activity.

Have a legal professional review the contract terms to insure that your needs will be met and that you will not obligated yourself unexpectedly.

BREACH OF CONTRACT

A breach of contract is a failure to fulfill the duties under the contract terms. A contract can be breached in several ways:

• One party does not perform as he or she promised
• One party does something that makes it impossible for the other party to perform the duties under the contract
• One party makes it clear that he or she does not intend to perform the contract duties

When one party breaches the contract, the party who has performed is entitled to various legal remedies for the breach, possibly including:

Consequential Damages: This requires the breaching party to pay the non-breaching party an amount that puts the non-breaching party in the same position they would have been in if the contract was performed.
Punitive Damages: Courts can force the breaching party to make a payment as a punishment for the breach.
Liquidated Damages: The parties agree, at the time they make the contract, that if one party breaches the contract, the breaching party should pay a specified sum. Thus, this is an amount written in the contract.
Nominal Damages: This is a minimal amount provided to the non-breaching party if that party won the case but did not financially lose much.

TYPES OF BUSINESS CONTRACTS

Once you begin engaging in business activities, there are many different types of contracts you may encounter. Some typical business contracts are:

• Agreement for the Sale of Goods
• Purchase Order
• Employment Agreement
• Confidentiality Agreement
• Lease for Real Property
• Franchise Agreement

Contract negotiations, especially in the context of important financial contracts, can be tolling and difficult. An attorney can assist you with negotiations so your needs and requirements will be met. Additionally, a lawyer can help you with drafting and reviewing contracts, and explain to you your duties under the contract.