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What does a contract require?

A contract will require each party to do something. Some of the requirements will be spelled out in the contract (called 'express terms'), while others are never mentioned, but are still part of the agreement (called 'implied terms').

Express Terms

Where the contract is written down and signed, both parties are bound to do what it says (subject to some exceptions). Where some terms are in writing but are not signed by the parties, they are only binding if the party concerned knew about them, or the other one at least took reasonable steps to bring them to their attention before the contract was made. For instance, if you buy a car-parking ticket, there may be printed conditions on the back of the ticket. If nothing is done to bring these to your attention and you do not see them before the contract is made, they may not form part of your contract. On the other hand, if the carpark staff tell you about the conditions first, you can be bound by them, even if you chose not to read them or ask about their meaning.

It is also possible for oral statements to form part of the contract. If an intelligent bystander, listening to your discussions, would have thought that a party was giving their word that the statement was true, it can be a term of the contract. If it turns out to be false, they may be in breach and liable to pay damages.

Implied Terms

Sometimes, terms which are never mentioned at all are, just the same, part of the contract. They may be implied by the circumstances. For instance, when you visit your doctor, you probably do not discuss whether the doctor will agree to keep your medical details confidential, or whether you will have to pay the doctor's bill. There is no need to, because these things are understood. Your doctor is still legally bound to keep your confidence, and you are still legally bound to pay the bill.

Terms can also be automatically implied into a contract by law, even if the parties do not know this. For instance, the Sale of Goods Act 1895 (SA) , requires that when goods are sold, they must be of merchantable quality and reasonably fit for their purpose. If they are not, the buyer is entitled to a refund or substitute goods, even though nothing was said about this at the time of the sale, or even if the seller said that they do not give refunds. Most terms that are implied by the common law are now stated in legislation such as the Sale of Goods Act 1895 (SA) and the Australian Consumer Law which provide for certain basic terms to be part of the contract. These terms are known as statute implied terms.

When a term is implied by an Act of Parliament, the Act will also say whether the parties have a choice to exclude that term. If it says that they cannot do that, then the term will still be part of the contract, even if both parties agree that it will not apply. For example, the parties cannot agree that the Australian Consumer Law will not apply to them. Such an agreement would have no effect.

What does a contract require?  :  Last Revised: Thu Dec 30th 2010
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