Contract defined

1. Contract defined A contract can be defined as: • “An agreement concerning promises made between two or more parties with the intention of creating certain legal rights and obligations upon the parties to that agreement which shall be enforceable in a court of law.” • An agreement is NOT necessarily a contract because it may lack one of the principles governing contractual relations, e.g. intention, consideration, legality.

2. Sources of contract law Contract law in Australia is derived from: • common law • developed in the English common law courtsi.e. case law decisions • legislation • such as the Statute of Frauds 1677 (Imp) and much later Commonwealth, State and Territory legislation which amended or supplemented the common law rules.

3. Contract and agreement • These terms are often used to mean the same thing. • The traditional definition of a contract is: ‘a legally enforceable agreement’. • An agreement is NOT necessarily a contract.

4. Law of contracts • Legality • for legality, the agreement must contain a promise and must have been intended by the parties to be legally enforceable in a court of law.

5. Classification of contracts • A formal or a simple contract? Contracts Formal Contracts Simple Contracts Contracts under seal (e.g. deeds, gratuitous promises) Contracts of record (e.g. court records) No requirements In writing Evidenced in Writing

6. Classification of contracts • Formal contracts • may not be the result of agreement or require consideration • validity comes from form alone, e.g. contracts of record and contracts under seal • Simple contracts • if it is not a formal contract, it must be a simple contract • consideration must be present • subject to statutory requirements, contracts can be oral, in writing, or a combination of these 2 forms

7. Elements in a simple contract Essential elements in a simple contract

8. Determining validity • Validity of apparent simple contract • if the 3 essential elements: • intention; • agreement; and • consideration have been satisfied, then • for a contract to be valid the following 4 elements are required: • legal capacity; • consent; • legality of purpose; and • form

9. Essential element is missing • If one of these 4 elements is NOT satisfied, then the contract may be: Status of Apparent Simple Contract Voidable Void Unenforceable Illegal

10. Classification of contracts • Contracts are classified according to: • promise; • enforceability; • performance; and • formation.

11. Classification of contracts According to promise: • Depending on what the offeree must do to accept the offeror’s offer, contracts may be classified as: • bilateral – both parties have to perform their promises, i.e. ‘a promise for a promise’; or • unilateral – the offeror still has to perform their part of the bargain, i.e. ‘it is a promise for an act’.

12. Classification of contracts According to enforceability: • Valid – a contract which the law will enforce • Voidable– the contract remains valid and binding unless and until it is repudiated by the injured party • Void – no legal rights or obligations from the outset (void ab initio) • Unenforceable – valid on its face but no legal action can be brought on the contract, often because of a procedural defect • Illegal – the purpose of the contract contravenes a statute or the common law, and generally treated as void

13. Classification of contracts • According to performance: • executed contracts— where both parties have completed their respective obligations; or • executory contracts— relating to an action in the future.

14. Classification of contracts • According to formation: • express contracts — wholly in writing, wholly oral or a combination of the 2, but whichever way, all the terms are agreed upon; • implied contracts — look at the circumstances surrounding the acts or conduct of the parties; or • quasi-contracts — an obligation imposed by law on a particular person, usually to pay money to another on equitable grounds.