Are You Bound by a Contract?

Lower Hunter Star – 25 September 2003

By Kellie Tranter

A contract typically hinges upon four “ingredients”:

• a party has to make an offer;
• another party has to accept the offer;
• the offer must include a consideration such as money or goods; and
• all parties must intend to be bound by the deal.

The law states that with exceptions (i.e. real estate contracts and leases), provided that these four “ingredients” are present, you can effectively have a legally binding contract without it being in writing. Certain things need to be understood between the parties and effectively the terms of the agreement need to be clear.

It is unfortunate that many people are still under the misconception that a contract needs to be in writing for it to be binding. Inexperience often leads to a party becoming legally bound where they assume that the “deal” is subject to something being placed in writing and the other party does not.

Although the general principle of a contract is to ensure that the “deal” ought to stand and be abided by the parties, the law has endeavoured to generate some exceptions to this principle in order to accommodate the position of parties that are unfairly done by, for example, misrepresentation, frustration and illegal transactions.

Think before you sign..

• force yourself always to read the fine print;
• always keep a signed copy of the contract;
• do not sign a contract with another party until you know all their business details. If a business is about to “go bust” this could have a detrimental impact on your business;
• be courageous and negotiate the terms of the agreement in a contract; and
• always seek professional assistance if  you are too busy to read a contract or if you are unable to understand the terms of the agreement.