What is a Contract?
Imagine you’re buying a bike from a friend. You agree on a price, and your friend promises to deliver the bike next week. This agreement you’ve made is a contract. Simply put, a contract is a promise or agreement the law will enforce.
For a contract to be valid, a few things need to happen:
- Offer and Acceptance: Your friend offers to sell the bike, and you accept the offer.
- Consideration: This means there’s something of value being exchanged. In this case, it’s the bike for money.
- Intention to Create Legal Relations: Both you and your friend must intend for the agreement to be legally binding. You’re not just chatting; you’re making a real deal.
- Capacity: Both of you have to be old enough and mentally capable of understanding the agreement.
- Legal Purpose: The contract can’t be for something illegal.
Types of Contracts
Contracts can come in different forms:
- Express Contracts: You and your friend might write down all the bike sale details. This written agreement is called an express contract.
- Implied Contracts: Sometimes, contracts need to be written down. For example, when you buy something at a store, you make an implied contract to pay for it.
- Void and Voidable Contracts: Void contracts aren’t legally binding from the start. For example, the contract is void if you agree to buy something illegal. Voidable contracts are valid contracts, but one party can cancel them. For instance, if a minor signs a contract, they can cancel it.
Breach of Contract
When someone doesn’t do what they promised in a contract, it’s called a breach of contract. Here’s what can happen:
- Damages: The person who didn’t keep their promise might have to pay money to the other person.
- Specific Performance: Sometimes, a Court can make the person do what they promised in the contract.
- Cancellation and Restitution: The contract is cancelled, and both parties get back what they put into it.
Australian Contract Law
- In Australia, contract law is mainly based on common sense and fairness. However, there are also some laws about contracts.
- Commonwealth Legislation: Some laws cover competition, consumer rights, and investments.
- State and Territory Legislation: Each state and territory have laws about contracts and consumer rights, such as: Australian Consumer Law and Fair trading Act, Goods Act, Common law principles, etc .
Understanding contracts is essential because they’re a big part of everyday life. Whether buying a bike or starting a business, knowing your rights and obligations is crucial. Getting legal advice is a good idea if you need clarification on a contract.