Australian Contract Law

What is Australian Contract Law?

Australian Contract Law governs legally enforceable agreements and the rights and obligations arising from them. It provides the principles used to establish whether a contract has been formed, identify its terms, interpret those terms and decide the legal consequences when a party does not perform its contractual obligations.

There is no comprehensive Australian Contract Law Act containing all of these rules. A substantial part of Contract Law has developed through decisions of Australian courts. Equitable principles operate alongside the common law, while Commonwealth, State and Territory legislation modifies or supplements the general law in particular circumstances.

For a Business Owner or Contract Professional trying to work out the legal position under an agreement, the contract document is therefore only one source. The transaction may also be affected by legislation, previous court decisions and equitable principles, depending on the issue that has arisen.

Where does Australian Contract Law come from?

Common law provides many of the principles governing contract formation, interpretation, performance, breach and termination. These principles have developed through decisions of Australian courts, with binding decisions of higher courts establishing precedents that lower courts must apply in accordance with the doctrine of precedent.

Equity operates alongside the common law and addresses issues that cannot always be resolved by applying contractual rights alone. It includes doctrines such as estoppel, undue influence and equitable mistake, as well as remedies including rectification, rescission, specific performance and injunctions. Each has its own legal requirements.

Legislation can alter the position that would otherwise apply under common law or equity. Important Commonwealth examples include the Competition and Consumer Act 2010 (Cth), which contains the Australian Consumer Law, the Corporations Act 2001 (Cth) and the Electronic Transactions Act 1999 (Cth). State and Territory legislation adds another layer, including laws dealing with limitation periods, electronic transactions and particular categories of contracts.

What makes a contract legally binding in Australia?

Whether a binding contract exists depends on what occurred between the parties and the legal effect of their words and conduct. The usual formation analysis considers whether there has been:

• agreement between the parties;
• consideration;
• an intention to create legal relations;
• legal capacity to enter the contract; and
• sufficient certainty and completeness for the agreement to be enforceable.

Any formal requirements applying to the particular transaction must also be satisfied.

These requirements involve separate legal questions. For example, parties may have agreed on price and scope but expressly stated that neither will be bound until a formal agreement is executed. In another transaction, the parties may have intended to contract immediately but left an essential term so uncertain that the purported agreement cannot be enforced.

Particular contracts are also subject to formal requirements imposed by legislation or other law. These requirements depend on the type of transaction and the applicable jurisdiction.

A familiar example is a contract for the sale of land. Legislation in Australian States and Territories generally imposes writing requirements for contracts concerning the sale or disposition of interests in land. Deeds are another example: their legal effect does not depend on consideration, but they must satisfy the formal requirements applying to deeds in the relevant jurisdiction.

Offer and acceptance

Agreement is traditionally analysed by identifying an offer by one party that has been accepted by another. An offer needs to communicate terms upon which the person making it is prepared to be bound if the offer is accepted.

Not every proposal made during negotiations is an offer. A request for pricing, an invitation to tender or a proposal expressed as being subject to further agreement may have a different legal effect. The complete communication needs to be considered rather than assuming that the first document containing a price is necessarily an offer capable of immediate acceptance.

Acceptance ordinarily needs to correspond with the offer. If the recipient changes the proposed terms, the response may amount to a counter-offer instead. Negotiations involving several drafts, qualifications and revised proposals can make it considerably harder to identify the point at which agreement was reached.

Consideration

A simple contract generally requires consideration, meaning something recognised by law as being given in exchange for the contractual promise. Money is an obvious example, but consideration can also consist of performing an act, making a promise or agreeing to refrain from doing something.

The law does not generally require the consideration exchanged by the parties to have equivalent economic value. A commercially poor bargain does not cease to be a contract merely because one party later concludes that it agreed to too much or received too little.

Deeds operate differently. A deed can be enforceable without consideration where the requirements for creating and executing it have been satisfied.

Intention to create legal relations

The parties must objectively intend their agreement to create legal relations. This question is assessed from the circumstances rather than by relying on an intention that one party privately held but did not communicate.

The High Court considered intention to create contractual relations in Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8. The Court rejected the use of presumptions as substitutes for examining the particular circumstances and upheld the finding that a contractual relationship existed between Archbishop Ermogenous and the Community.

For business agreements, wording such as “subject to contract”, the status of negotiations and whether the parties contemplated signing a later formal document can become relevant to whether they intended to be legally bound at an earlier stage.

Capacity to contract

The parties need the legal capacity required to enter the contract. Different rules can apply to individuals, corporations and other entities, so capacity needs to be distinguished from the separate question of whether a particular person has authority to act for another contracting party.

A company has legal capacity in its own right. Section 126 of the Corporations Act 2001 (Cth) permits a company’s power to make, vary, ratify or discharge a contract, or execute a document including a deed, to be exercised by an individual acting with the company’s express or implied authority.

A Director’s signature is therefore not the only way in which a company can become contractually bound. The authority given to the person who negotiated, accepted or entered the agreement can be relevant.

Certainty and completeness

An agreement needs sufficient certainty and completeness for its contractual obligations to be identified and enforced. A purported agreement can fail where an essential issue remains unresolved or its terms are too uncertain to have an enforceable meaning.

Not every unresolved detail prevents contract formation. The effect depends on what remains outstanding, the significance of that issue to the proposed agreement and whether the parties provided a workable mechanism for resolving it later.

Does a contract have to be in writing in Australia?

Australian Contract Law does not impose a general requirement that every contract be written. Subject to formal requirements applying to particular transactions, a contract can be wholly written, wholly oral, partly written and partly oral, or established through conduct.

An oral agreement creates an obvious practical difficulty if the parties later remember the conversation differently. Emails, diary notes, invoices, subsequent communications and the way the parties performed the agreement can then become important evidence of what was actually agreed.

This distinction between validity and evidence is useful for Business Owners and Decision-Makers. An agreement does not become legally ineffective merely because nobody prepared a formal contract, but establishing its precise terms can become substantially harder.

Can a contract arise through conduct?

Conduct can establish contractual agreement where, viewed objectively in its context, it demonstrates that the parties entered a contractual relationship on identifiable terms. This sometimes occurs when work begins while a proposed formal agreement remains unsigned.

The difficult part can be identifying the contract that resulted. Starting performance does not automatically mean that every provision in the latest unsigned draft has been accepted. The parties may instead have contracted on earlier agreed terms, on terms found partly in their communications and partly in their conduct, or on another basis disclosed by the evidence.

A formation dispute can consequently require a detailed reconstruction of what happened. Draft agreements, emails, instructions, invoices, payments and performance can all become relevant to establishing when the contract arose and what it contained.

Are electronic contracts and electronic signatures valid in Australia?

Australian law recognises electronic transactions, although the applicable requirements depend on the document, transaction and legislation involved.

At Commonwealth level, section 8 of the Electronic Transactions Act 1999 (Cth) provides that a transaction is not invalid merely because it took place wholly or partly through electronic communications. The Act also contains provisions dealing with requirements for writing and signatures, production and retention of electronic documents, and the dispatch and receipt of electronic communications.

State and Territory Electronic Transactions legislation can apply where the relevant legal requirement arises under State or Territory law. The particular transaction still needs to be checked because exclusions and additional formal requirements can apply.

Electronic contracting also involves two different questions that are sometimes confused. An electronic signature can satisfy an applicable signing requirement without answering every question about formation, authority or enforceability, while an agreement made electronically can potentially become binding without a conventional signed document.

How does a company enter into a contract?

A company is a separate legal entity capable of contracting in its own name, but a human being must act for it. Depending on the circumstances, the legal analysis can concern the person’s authority, the formal execution of a document, or both.

Section 126 of the Corporations Act 2001 (Cth) deals with individuals acting with a company’s express or implied authority. Section 127 provides methods by which a company can execute a document itself, including execution by two directors, a director and company secretary or, for a proprietary company with a sole director, that director in the circumstances covered by the section.

Authority and execution are therefore different concepts. A company can potentially become contractually bound through an authorised representative even though the agreement was not formally executed under section 127.

How are the terms of a contract identified?

Finding that a contract exists does not establish everything the parties agreed. The next task is to identify the contractual terms, which can include express terms, terms incorporated from other documents and terms implied under recognised legal principles.

This can become difficult where negotiations took place through several documents or conversations. A statement made during negotiations is not necessarily a contractual promise, while another document can sometimes form part of the agreement through incorporation even though its provisions are not reproduced in the main contract.

Identifying the terms comes before interpreting them. The first enquiry establishes what forms part of the agreement; interpretation addresses what those terms legally mean.

Express terms

Express terms are provisions that the parties have expressly agreed, whether in writing or orally. A formal written contract will ordinarily provide the main record of those terms, but the circumstances surrounding formation can raise questions about other communications.

A statement made before signing might be a contractual term, a representation or neither. Its legal character depends on matters such as the words used, their importance to the transaction and the circumstances in which they were communicated.

Terms incorporated by reference

Contractual terms do not have to appear on the face of the principal document. An agreement can incorporate provisions contained in another document where the legal requirements for incorporation are met.

This is common where a document refers to separate Terms and Conditions. Whether those terms actually became part of the contract depends on the circumstances, including the contractual wording and notice given before or when the contract was formed.

Implied terms

Australian Contract Law recognises circumstances in which a term can form part of an agreement even though the parties did not express it in words. Different legal tests apply depending on the basis upon which the term is said to be implied.

A term is not implied simply because it would improve the agreement or produce a fairer result for one party. The recognised requirements for implication must be established.

How are contracts interpreted in Australia?

Contractual interpretation concerns the legal meaning of the terms the parties agreed. Australian courts approach that task objectively, reading the language in the context of the contract as a whole rather than asking what one party privately intended the words to mean.

The High Court’s decision in Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37 is an important Australian authority on contractual construction and the role of surrounding circumstances. The dispute concerned royalty provisions in a 1970 mining agreement and required the Court to construe expressions including “MBM area” and “deriving title through or under”. The High Court ultimately held that Mount Bruce Mining was liable to pay royalties in respect of iron ore mined from both the Eastern Range and Channar areas.

A clause also needs to be read with the rest of the agreement. Definitions, schedules and connected provisions can materially alter the meaning that might be attributed to one sentence viewed by itself.

What is an entire agreement clause?

An entire agreement clause generally identifies the written contract as containing the parties’ complete agreement and limits arguments that previous negotiations or statements became additional contractual terms. The precise effect depends on its wording and the legal issue being considered.

For example, a clause might provide:

Entire Agreement: This Agreement constitutes the entire agreement between the parties concerning its subject matter and supersedes all previous agreements, negotiations, representations and understandings concerning that subject matter.

That example should not be treated as a clause suitable for every contract. An entire agreement provision needs to be drafted in the context of the particular agreement and should not be assumed to exclude statutory rights or every claim arising from pre-contractual conduct.

In particular, an entire agreement clause does not automatically prevent a claim for misleading or deceptive conduct under the Australian Consumer Law. Contractual wording and the statutory basis of the claim need to be considered separately.

What can affect the enforceability of a contract?

A contract can satisfy the ordinary requirements for formation but still be affected by legal principles concerning how the agreement was obtained, what the parties understood or whether the law permits the obligation to be enforced.

Relevant doctrines include misrepresentation, mistake, duress, undue influence, unconscionable dealing, illegality and public policy. Depending on the facts, they can affect the contract in different ways. A contract or term might be void, voidable, unenforceable or capable of being set aside, while another doctrine may instead give rise to a separate remedy.

The distinction is significant. Duress, for example, concerns illegitimate pressure affecting a party’s decision to contract. Misrepresentation concerns a false representation that induced entry into the agreement. Illegality raises a different question about whether the law will recognise or enforce the transaction.

A Business Owner who believes a contract is “unfair” therefore needs to identify what actually happened. Commercial disadvantage alone does not establish misrepresentation, duress, unconscionable dealing or another recognised ground for challenging the agreement.

How does the Australian Consumer Law affect contracts?

The Australian Consumer Law is contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth). Despite its name, important parts of the legislation apply to dealings between businesses as well as transactions involving individual consumers.

Section 18 prohibits misleading or deceptive conduct in trade or commerce. This can be relevant before a contract is entered into where representations were made about matters such as a product, service, price, capability or other aspect of the proposed transaction. A claim under section 18 is statutory and is not simply another claim for breach of contract.

The ACL also prohibits unconscionable conduct in circumstances covered by its provisions. It contains rules governing false or misleading representations and other unfair practices, as well as Consumer Guarantees applying to qualifying supplies of goods and services.

Whether the Consumer Guarantees apply depends on the statutory definition of “consumer”, not simply whether the purchaser is an individual. A business acquisition can fall within that definition where the statutory criteria are met.

The legislation can also affect the contractual terms themselves. Consumer Guarantees cannot simply be contracted away where the ACL prohibits that result, while the Unfair Contract Terms regime can render an unfair term in a qualifying standard form contract void. Depending on the statutory provision, the parties’ contractual wording may therefore be ineffective to the extent that it conflicts with mandatory legislation.

Contractual and statutory rights can also operate in relation to the same events. A false statement made during negotiations might have consequences under the ACL even though the resulting written contract contains provisions dealing with the same subject.

For businesses, the ACCC’s information about contracts and the Australian Consumer Law provides useful regulatory guidance about these obligations.

What are Unfair Contract Terms under the Australian Consumer Law?

The Unfair Contract Terms regime applies to qualifying standard form consumer contracts and small business contracts. Since 9 November 2023, the small business protections apply to new or varied standard form contracts where at least one party has fewer than 100 employees or annual turnover below $10 million, subject to the remaining statutory requirements.

Under section 24 of the Australian Consumer Law, a term is unfair where three requirements are satisfied: it causes a significant imbalance in the parties’ rights and obligations; it is not reasonably necessary to protect the legitimate interests of the party advantaged by it; and it would cause detriment if applied or relied upon. The court must also consider the transparency of the term and the contract as a whole.

The legislation gives examples of terms that may be unfair rather than declaring that every clause of that type is automatically prohibited. Examples include provisions allowing only one party to terminate, avoid or limit performance, penalise the other party for breach or termination, or restrict the other party’s right to sue. The actual term must still be assessed against the statutory test and the contract as a whole.

The consequences are now more significant than under the original UCT regime. A term of a qualifying standard form contract is void if it is unfair, while the remainder of the contract continues to bind the parties if it can operate without that term. Since the 2023 reforms, proposing an unfair term and applying, relying on or purporting to apply or rely on an unfair term can also contravene the ACL and attract penalties.

Business Owners and Contract Professionals using standard agreements should therefore consider the UCT regime when preparing their own terms as well as when receiving another party’s contract. Read our Unfair Contract Terms information for a more detailed explanation of how the regime affects Australian business contracts.

What is estoppel and how can it affect contractual rights?

Estoppel can prevent a person from departing from an assumption or expectation that the person has induced or encouraged another party to adopt where that other party relied on it and the applicable requirements for estoppel are established. Its purpose and operation depend on the particular form of estoppel and the circumstances.

A simple contractual example helps explain the concept. Suppose a contract requires payment on the first day of each month. One party represents that payment on the fifteenth will be accepted for the next six months, and the other party relies on that representation when arranging its affairs. Depending on all the circumstances, an estoppel may affect whether the first party can later insist that the agreed departure never applied.

The doctrine is considerably more precise than a general rule against inconsistent behaviour. The representation or assumption, reliance, detriment and other requirements need to be established on the evidence.

Estoppel is useful in understanding why the written contract does not always provide the complete answer to a contractual dispute. What the parties say and do after formation can have legal consequences even though the written terms themselves have not been formally amended.

Can a contract be varied after it is made?

Parties can change their existing contractual rights and obligations through an effective variation. Whether a purported change has that effect depends on the existing contract, what the parties subsequently agreed and the legal requirements applying to the variation.

A written contract may prescribe a particular process for making changes. The parties may nevertheless later exchange emails, give instructions or behave in a way that raises questions about whether the original agreement was varied or whether another legal principle affects reliance on its original terms.

Consideration can also be relevant to a variation of a simple contract. Authority becomes important where the person agreeing to the change acts for a company or another party. These issues mean that an informal instruction described commercially as a “change” is not necessarily a legally effective contractual variation.

How can a contract come to an end?

A contract can end through performance, meaning that the parties have fulfilled their contractual obligations and the contract naturally reaches completion. A fixed-term agreement can instead expire when its agreed term ends, although some provisions may continue to operate after expiry.

The parties can agree to bring their contract to an end before completion. An express termination clause might also allow one party to terminate when a specified event occurs, subject to complying with any requirements imposed by that clause.

Common law rights provide another basis for termination in appropriate circumstances, including repudiation and particular forms of sufficiently serious breach. Frustration operates differently and can discharge a contract where a supervening event produces the legal consequences required by that doctrine.

How the contract ends affects what happens afterwards. Completion by performance ordinarily means the parties have done what the contract required. Termination for breach can leave accrued rights intact and give rise to a damages claim. Expiry can end future obligations while provisions drafted to survive expiry continue operating. Frustration has its own consequences for future performance and any applicable statutory adjustment.

The reason the contract ended therefore needs to be identified before deciding which rights and obligations remain.

What is a breach of contract?

A breach of contract occurs where a party fails to perform a contractual obligation in accordance with its terms. Missing a contractual deadline, failing to make a required payment or supplying something that does not meet an agreed contractual requirement can each constitute a breach, depending on the contract.

The consequences are not identical for every breach. A breach may support a claim for damages while the contract remains on foot, whereas another breach may also give the innocent party a right to terminate. The nature of the term, seriousness of the failure and applicable contractual provisions need to be considered.

Establishing breach also does not establish the amount recoverable. A damages claim raises further questions about loss, causation, remoteness and mitigation.

When does a breach of contract allow termination?

Not every breach gives the innocent party a right to terminate. The entitlement can arise from an express termination provision in the contract or under common law principles, and the requirements of the particular right need to be satisfied.

At common law, termination can be available for breach of a condition or for a sufficiently serious breach of an intermediate term. Repudiation can provide another basis for termination.

In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61, the High Court recognised intermediate terms in Australian Contract Law and considered when their breach is sufficiently serious to justify termination. Sanpine had seriously breached administrative obligations under a joint venture agreement, including failures concerning financial records, banking and expenditure. The High Court held that those breaches were sufficiently serious to justify Koompahtoo’s termination of the agreement.

A party contemplating termination therefore needs to establish more than the existence of a breach. Wrongfully terminating a contract can itself expose that party to substantial contractual consequences.

What is repudiation of a contract?

Repudiation occurs where a party’s words or conduct, assessed objectively, show an unwillingness or inability to render substantial performance of its contractual obligations. An express statement that the party will not perform is one possible example, but repudiation can also be established through conduct.

The concept should not be used as another name for breach. A failure to perform one obligation might constitute a breach without demonstrating that the party will not substantially perform the contract.

Koompahtoo also considered this distinction. The High Court distinguished renunciation, involving an unwillingness or inability to render substantial performance, from breach that itself justifies termination, and confirmed that different legal routes can lead to a right to terminate.

Where repudiation has occurred, the innocent party generally faces a choice whether to accept it and terminate or affirm the contract, subject to the applicable law and circumstances. That choice should be made with a clear understanding of the contractual position because treating conduct as repudiation when the legal threshold has not been met can create a new dispute about the purported termination.

What remedies are available for breach of contract in Australia?

Damages are the principal common law remedy for breach of contract. Their purpose is compensatory: subject to the rules governing recoverable loss, damages seek to place the innocent party in the position it would have occupied had the contract been performed.

That does not mean every financial consequence following a breach is recoverable. The claimant needs to establish the required connection between the breach and loss, while principles concerning remoteness and mitigation can affect the damages awarded. Contractual provisions can also affect the parties’ liability.

Equity provides remedies that operate differently from an award of damages. Specific performance can require performance of a contractual obligation in circumstances where that remedy is available, while an injunction can restrain particular conduct. Equitable remedies are discretionary and subject to their own requirements.

Statutory remedies can arise from the same events where legislation has also been contravened. A contractual dispute involving misleading conduct, for example, may raise remedies under the Australian Consumer Law in addition to whatever contractual rights exist.

What is the difference between termination and rescission?

Termination generally brings future primary contractual obligations to an end while preserving rights that have already accrued, subject to the contract and applicable law. It can arise through an express contractual right or common law principles.

Rescission addresses a different problem. Where a recognised ground for rescission exists, the transaction can be set aside and the parties restored, so far as legally and practically possible, to their pre-contractual position.

The available grounds and consequences need to be considered before deciding which concept applies. A right to terminate because of breach and a right to rescind because of circumstances affecting entry into the contract are not interchangeable.

What is the difference between a contract and a deed?

A simple contract generally requires consideration. A deed can create an enforceable obligation without consideration, which is one reason deeds continue to be used for particular promises, releases and other transactions.

The difference is not limited to consideration. A deed is subject to formal requirements concerning its creation and execution, which depend on the applicable legislation, jurisdiction and type of party executing it.

Limitation periods also need to be checked by jurisdiction rather than assuming that every Australian deed provides a longer enforcement period. In Queensland, for example, section 10 of the Limitation of Actions Act 1974 (Qld) currently provides a six-year limitation period for an action founded on a simple contract and also six years for an action upon a deed. Other Australian jurisdictions can have different limitation regimes.

How does Australian Contract Law apply to Commercial Contracts?

Business Owners and Decision-Makers regularly encounter Contract Law through agreements with customers, suppliers, Consultants, service providers, business partners and other counterparties. The general principles explained above govern those agreements, while the particular contract determines the commercial obligations and allocation of risk between the parties.

If you are negotiating, preparing or reviewing business agreements, our Commercial Contracts information explains what to look for in Commercial Contracts, how different contractual provisions affect the business and where legal issues commonly arise during negotiation and performance.

How does Australian Contract Law apply to Construction Contracts?

Australian Contract Law applies to Construction Contracts, but Contractors, Subcontractors, Suppliers and Consultants also work within Construction Industry legislation and detailed contractual procedures that can materially affect their rights.

If your contract relates to a Construction Project, our Construction Contracts information explains issues including Contract types, risk allocation, Variations, Extensions of Time, payment, delay, Security of Payment and Contract Administration.

When should you speak to a Contract Lawyer?

A Business Owner or Decision-Maker usually needs more than general Contract Law information when the answer depends on the wording of an actual agreement, what happened during negotiations or performance, or a decision that will change the parties’ legal position.

A Contract Lawyer can advise before you sign an agreement, when you are negotiating amendments, if there is uncertainty about what a provision means, or when a problem has developed during performance. Legal advice becomes particularly important before terminating an agreement, accepting an alleged repudiation, signing a substantial variation or taking a position that could affect existing contractual rights.

Rachelle Hare advises Business Owners, Decision-Makers and Contract Professionals on Commercial Contracts and Construction Contracts. Her background as a Commercial Lawyer, Construction Lawyer, General Counsel and Commercial Manager means the advice can address both what the contract legally requires and how the contractual position affects the business or Project.

FAQs About Australian Contract Law

1. What is Australian Contract Law?

Australian Contract Law is the body of common law, equitable principles and legislation governing legally enforceable agreements in Australia. It covers formation, contractual terms and interpretation, performance, circumstances affecting enforceability, discharge, breach, termination and remedies.

2. Is there an Australian Contract Law Act?

There is no single Australian Contract Law Act containing all of the law governing contracts. Many Contract Law principles come from court decisions and equity, while Commonwealth, State and Territory legislation modifies or supplements those principles for particular transactions and legal issues.

3. What are the elements of a legally binding contract in Australia?

The elements of a legally binding contract in Australia generally include agreement, consideration, intention to create legal relations, capacity and sufficient certainty and completeness. Particular transactions can also be subject to formal requirements such as writing or execution requirements.

4. Does a contract have to be in writing in Australia?

A contract does not generally have to be in writing in Australia. Written, oral and partly oral agreements can be binding, and a contract can also arise through conduct, although legislation and other legal rules impose formal requirements on particular transactions.

5. Does a contract have to be signed to be legally binding?

A contract does not generally have to be signed to be legally binding. The question is whether the legal requirements for formation have been satisfied, subject to any writing, signing or execution requirements applying to the particular transaction.

6. Can an email form a legally binding contract in Australia?

An email can form part or all of a legally binding contract where the communications and surrounding circumstances satisfy the requirements for contract formation. The wording of the emails, any qualifications or conditions and whether the parties intended to become bound at that point can all be relevant.

7. Can a verbal contract be legally binding in Australia?

A verbal contract can be legally binding where the ordinary formation requirements are satisfied and the transaction is not subject to a requirement for writing or another formality. The practical problem is often proving the precise terms if the parties later give different accounts of the conversation.

8. Can a contract be formed through conduct?

A contract can be formed through conduct where the parties’ behaviour, assessed objectively and in context, establishes an agreement and intention to create legal relations on identifiable terms. Communications between the parties can also be relevant to determining what those terms were.

9. Can a contract be changed after it has been made?

A contract can be changed through an effective variation. The existing contractual requirements, what the parties agreed, consideration, the authority of the people agreeing to the change and equitable principles can become relevant to whether the variation is legally effective.

10. Does every breach of contract allow the other party to terminate?

A breach of contract does not necessarily give the innocent party a right to terminate. The right may arise under an express contractual provision or common law principles concerning conditions, sufficiently serious breaches of intermediate terms and repudiation.

11. What remedies are available for breach of contract?

Remedies for breach of contract can include damages and, where the legal requirements are satisfied, equitable remedies such as specific performance or an injunction. Statutory remedies can also be available where the conduct giving rise to the dispute contravenes legislation.

12. What is the difference between a contract and a deed?

A simple contract generally requires consideration, while a properly created deed can be enforceable without consideration. Deeds are subject to additional formal requirements, and limitation periods for enforcing contracts and deeds differ between Australian jurisdictions. In Queensland, the current statutory limitation period is generally six years for both an action founded on a simple contract and an action upon a deed.

13. Does the Australian Consumer Law apply to business contracts?

The Australian Consumer Law can apply to dealings between businesses because several of its protections are not confined to personal or household transactions. For example, section 18 applies to misleading or deceptive conduct in trade or commerce, while the Unfair Contract Terms provisions apply to qualifying standard form small business contracts. Consumer Guarantees can also apply to business acquisitions where the statutory definition of consumer is satisfied.

14. What happens if a contract conflicts with legislation?

A contractual term cannot override mandatory legislation merely because the parties agreed to it. The legal consequence depends on the particular statute: a conflicting term may be void, unenforceable or ineffective to the extent of the inconsistency, or the legislation may impose obligations or remedies despite what the contract says.

15. Is Australian Contract Law the same in every State and Territory?

The general common law principles of Contract Law operate throughout Australia, but State and Territory legislation can create different rules for particular transactions and issues. Limitation periods, property transactions and some formal requirements are examples where the applicable jurisdiction needs to be checked.

Get Contract Advice Before Your Position Becomes Harder to Fix

Business Owners and Decision-Makers often contact Rachelle when a contract is about to be signed, negotiations have reached a difficult point, an important contractual obligation is unclear or the other party has taken a position that could affect the business or Project. At that stage, the useful question is usually not “what does Australian Contract Law say generally?” but what the agreement, applicable law and actual events mean for the decision that now needs to be made.

Rachelle Hare has more than 25 years of experience across Commercial Law and Construction Law, including private practice, Australian Government legal roles, General Counsel and Senior Legal Counsel engagements and six years working full-time as a Commercial Manager on major ICT and Construction Projects. She advises Business Owners, Decision-Makers and Contract Professionals on Contract Drafting, Contract Review, Contract Negotiation, interpretation, contractual rights and obligations, breach and pre-litigation contractual disputes.

If you need advice about a business agreement, use our Contract Lawyer services or contact Blaze Business & Legal to request a fixed-price quote. Contractors, Subcontractors, Suppliers and Consultants dealing with a Construction Contract can also find out about our Construction Contract Legal Services.