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 offerors 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.