The importance of a written contract

Have you signed the contract?

The word “contract” is used in a huge variety of industries by an even wider variety of people. While the technicalities of a contract in legal interpretation are extensive, at its core, a contract is an understanding – a promise even – between two or more people/organisations to do certain things. 

What is a Contract?

For most, when a reference is made to a “contract”, it is a reference to an agreement between two or more parties. To be legally binding and enforceable, a contract needs to have six (6) key elements:

1. An offer and acceptance of that offer.
2. Evidence of intention by the parties to be bound by the Contract. 
3. The consideration which, in plain terms, is a transfer of something from one party to the other in exchange for something else e.g. money for goods/services.
4. The parties must have the legal capacity to enter into the Contract.
5. The parties must consent to the terms of the contract and not be agreeing to Contract terms because of misrepresentation, duress or undue influence from others. 
6. The Contract must be of a nature that is not otherwise illegal or purporting to do illegal things. 

If any of these six (6) elements are missing in the contract, then it will not be a legally binding and enforceable contract.

Why should I have my contract in writing?

“If a thing is worth doing, it’s worth doing well”. Contracts are no different. 

Everyone enters into contracts every day without even realising (or at least without taking them seriously); be it buying a coffee or renewing a Netflix subscription. However, in the world at large, contracts are what allow individuals, businesses, and even governments to operate. With so much at stake, written contracts are important to:

1. Provide certainty of the contract terms and conditions by reducing ambiguity. If an agreed condition is in writing, it is much harder to dispute.
2. Grant warranties, impose confidentiality and/or exclude liability which, depending on the greater transaction in question, can be absolutely essential for years even after the contract has been completed.
3. Set clear directions for dispute resolution with a view to any disputes being resolved sooner (if not immediately) rather than later.
4. Afford the contract an opportunity for the contract to continue via severance e.g. if only a small component of the contract is in dispute, this can be “severed” from the contract and dealt with separately while the undisputed component can continue uninterrupted. 
5. And if the worst should happen and a dispute cannot be resolved, a written contract will be significantly easier to enforce.

Does a contract have to be in writing?

Absolutely not. 

Although they are becoming less common, many contractual arrangements use verbal contracts. A “handshake” agreement may still be a contract by having all six (6) required elements. However, if the parties of verbal contracts enter into a dispute, there is the potential for significant uncertainty about each party’s rights and obligations making it difficult for anyone, even a Court, to determine what the original intent of the contract was. 

Who do I contact about contracts?

For advice on contracts, whether it is the purchase of a property or a review of your employment agreements, contact Rhys Larsen and the team at WGC Lawyers on 07 4046 1111 and cairns@wgc.com.au.