Australian contract law
“A contract is a promise (or a set of promises) that is legally binding”
— Clarke & Clarke, Contract Law: Commentaries, Cases and Perspectives, (3rd edn, OUP 2016)
This section examines what is required for a promise to be legally binding (formation), how to determine who is bound by the contract, the terms of that contract and their meaning (scope and content), how contracts might be avoided, not withstanding that they appear to have been validly formed, as a result of some ‘vitiating factor’ (avoidance), what is required to perform a contract (performance) and how a contract might otherwise be brought to an end (termination) and the remedies available to a contracting party in the event the other party breaches their contractual obligations.
For more detail on each broad topic see below.
Formation
A contract is a promise or a set of promises that is legally binding. In this context a promise is an undertaking by one person to do something or refrain from doing something if another person does something or refrains from doing something or makes a promise in return. A promise or set of promises will be legally binding if certain criteria are met. In Australia this requires that there be:
an agreement (comprising an offer and acceptance)
Scope and content
A contract is generally only enforceable by and against parties to the contract.
There are also rules to determine the terms of the contract, their meaning and their classification. There are also some special rules relating to exclusion clauses - those clauses that seek to reduce or remove liability for certain conduct.
Avoidance
A contract validly formed may nevertheless be avoided as a result of a number of possible 'vitiating factors'. Most of these involve some form of unfair or unconscionable dealing by one of the parties.
Performance
Most contracts come to a natural end as a result of the parties performing their respective obligations. The requirements for 'performance' to discharge contractual obligations are discussed in this section.
Termination
Most contracts come to a natural end as a result of the parties performing their respective obligations. A contract may also come to an end by agreement between the parties or as a result of the breach of contract by one of the parties. Finally, a frustrating event might prevent parties from performing as planned and this may have the effect of terminating a contract.
Remedies
Where a breach of contract has occurred the non-breaching party is entitled to remedies; in particular, they are entitled to damages as a matter of right. The procedures for determining the extent of damages available are discussed in this section. Parties may also make provision in their contract for the payment of a liquidated sum upon breach; the effect of these clauses will be discussed.
In addition to common law remedies, parties may seek the equitable remedies of specific performance or injunctions for contractual breach (or threatened breach) - these are not available as a matter of right but are awarded at the discretion of the court.