Contract Law

A contract is a legally binding agreement between two or more parties creating obligations which are enforceable by one party against the other.  A contract could be looked upon as involving an obligation to honour a promise that is made in return for another promise.

Contracts may take the form of a confidentiality agreement to preserve business know how or trade secrets which are a source of value to a company.

There is a wide body of law governing contracts ranging from issues relating to the formation of the contract (such as consideration for the making of the promise), to the capacity of the parties to enter the contract and issues relating to legality and avoidance of obligations.  Although contracts are governed by common law, there are statutes which affect this field such as the Sale of Good Acts and the Australian Consumer Law.

One of the issues in contract law is when the parties reach an agreement but a formal contract with all the terms remains to be completed. This is a situation which often arises and the question is whether there is a binding agreement before signing off on a formal contract.

The Courts have placed these types of cases into 4 classes:

  1. Where the parties have reached final agreement on the terms of their contract and agree to be immediately bound but wish to restate those terms in a fuller or more precise way in a formal document;
  2. Where the parties have reached final agreement on all the terms and intend not to depart in any way from them but the performance of some part of the contract is made conditional on the execution of a formal contract;
  3. Where the parties intend there not to be a concluded contract unless and until a formal document is executed.
  4. Where the parties were content to be bound immediately by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.

The vital question is always what the parties intended by the words they have used. In a case where the parties have expressly or impliedly indicated that there will be a further agreement, it is a question of construction whether the execution of a further contract is a condition of the bargain or else is merely an expression of the desire of the parties as to how their transaction will be completed. Each case turns on its own facts.

LincolnContract Law