Under Australian contract law, a valid contract in Australia involves several essential elements that make the agreement legally binding. These elements ensure that both parties have protection, and the terms of the contract are enforceable in a court of law.
Let’s check the key elements that must be present for a contract to be valid.
Firstly, there should be an offer and acceptance. A contract begins with an offer, which is a proposal outlining the terms of the agreement. The offer must be clear, definite, and communicated to the other party. Once the other party agrees to the terms without any modifications, it becomes an acceptance.
Secondly, there should be consideration. This refers to something of value that is exchanged between the parties as part of the contract. It could be money, goods, services, or a promise to do something. Each party must provide consideration to the other; otherwise, the contract may lack enforceability
Moreover, it is important to check if the parties entering into the contract have legal capacity. This means they must be of legal age (18 years or older) and be of sound mind. Minors and individuals with diminished mental capacity might not be able to enter into a legally binding contract. It is essential to speak with a lawyer to seek advice in such circumstances.
When entering contracts, genuine consent is very important. Both parties must give their consent freely and without any form of:
- coercion,
- undue influence, or
- misrepresentation.
Note that if one party uses deceit or pressures the other into the contract, the agreement may be voidable.
Moreover, you will need to check whether all parties who are entering into the contract intend to create legal relations. This means they need to understand the consequences of failing to fulfil their obligations. The aggrieved party can then take legal action.
Legality of purpose is also an essential element. The purpose of the contract must be legal. If the contract involves illegal activities or goes against public policy, it will not be enforceable in a court of law.
The terms of the contract must be clear and specific. In other words, there must be certainty of terms. All important details, such as the subject matter, price, quantity, and timeline, must be clearly outlined to avoid any confusion or disputes later on.
Lastly, while many contracts can be oral, some contracts must be in writing to be legally enforceable. For instance, contracts for the sale of land or contracts that cannot be performed within one year.
In case any of these elements are missing, the contract can be considered void and unenforceable. Therefore, it’s essential to ensure that all parties understand and agree to the terms before entering into any contractual agreement. Your legal team can provide all necessary support and advice when it comes to executing legal contracts.
