Frequently Asked Questions
You need to check the relevant legislation in your State and Territory, as the rules are different in each jurisdiction.
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Is there any difference between a contract and an agreement?
- Technically yes. A contract is legally binding but an agreement is not.
- An agreement refers to a situation where there is no intention to create legal relations such as if you agree to lend your boat to your brother for the weekend.
- The terms “contract” and “agreement” are commonly confused and sometimes a person talking about an agreement may be referring to a contract that is legally binding.
- It is presumed that agreements between close friends or family members are not intended to be legally binding. However if the parties are strangers or “at arm’s length” and the agreement has a commercial basis it is much more likely to be intended as a legally binding contract.
- If you need more information about whether a specific agreement is legally binding you can use our free and anonymous Ask a Lawyer service.
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I have heard the term 'boilerplate clauses' when talking about contracts. What does this mean?
- The term 'boilerplate clause' describes the standard clauses that are sometimes inserted into contracts.
- These clauses are mainly used to assist with both the interpretation of the contract (normally inserted at the beginning of the contract) and to set out how the contract is to operate (usually inserted at the end of a contract).
- Boilerplate clauses are sometimes inserted into a contract as a matter of routine and without too much thought. It is important to read each clause in a contract including the boilerplate clauses to make sure they accurately reflect the intention of the parties. Doing so reduces the potential for disputes to arise later on.
- If a dispute does arise the contract assists the court to understand and give effect to the intention of the parties when deciding on the outcome of the dispute. As a result it is important to make sure that the whole contract including any boilerplate clause reflects the parties’ intention.
- Examples of boilerplate clauses include clauses giving definitions, clauses stating which law governs the contract and variation clauses setting out how the contract’s terms can be changed.
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I have been asked to sign a Memorandum of Understanding (MoU). Is this the same thing as a contract? If not, is it legally binding?
- A Memorandum of Understanding, also referred to as a 'MoU', 'heads of agreement' or a 'term sheet' is usually used to record key terms the parties have negotiated in a proposed relationship with a view to finalising a formal contract later. Whether the memorandum of understanding is legally binding will depend on the wording used in the document.
- For a memorandum of understanding to be legally binding it must be obvious from the wording that the parties intend it to be binding. An introduction or a term in the document may state that the parties intend the document to have legal effect. The terms that are set out must be clear and certain enough to be enforceable. If this is the case the parties will be legally bound by the memorandum of understanding even if a formal contract was not signed later on.
- If the parties have agreed on the terms of their proposed relationship but have stated that performance of the transaction is conditional on signing a formal contract then there may be a binding obligation to enter into a contract.
- Where words like 'non-binding', 'subject to contract' or 'subject to formal contract' are used it is clear that the parties did not intend the memorandum of understanding to be legally binding and a contract will need to be signed.
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I am being sued for breach of contract. Is there anything I can do other than getting a lawyer involved?
- If you are being sued it is likely that the other party has legal representation and it is in your best interests to make sure you are adequately protected by engaging your own lawyer. There are rules and procedures that need to be followed during legal action and instructing a lawyer that is experienced in contract law will help you navigate the legal system.
- If the breach is in relation to goods or services not being supplied by you or money not being paid by you then you could still see if the other party will accept a variation of the goods or services that were supposed to be supplied or a reduced amount of money.
- You can use our Phone a Lawyer service to get a preliminary consultation about your situation.
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I have signed a contract but due to unavoidable circumstances, I can no longer go through with it. Is there anything I can do so that I do not get sued?
- If the contract requires you to deliver goods or services or pay a sum of money you could try and see if the other party will allow you to subcontract the delivery of goods or services, pay a reduced sum of money or make payments in instalments.
- Depending on the terms of the contract it may be possible to terminate the contract after giving the other party notice.
- If you are unable to go through with the contract because an event that could not have been foreseen occurred and made performance of the contract impossible then the contract may come to an end due to a legal doctrine referred to as 'frustration.’ This is available only in very limited situations. If you think this may apply to you it is worth getting a second opinion from a lawyer.
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I have found a free contract template online which I can adjust to fit my situation, so do I really need to get a lawyer involved?
- Adjusting a free online template can be a cheaper alternative to using a lawyer to draft one for you. You will need to be very careful in how it is drafted and adapted to your situation. Otherwise it may still end up costing you in the long run if the contract does not adequately protect your interests and something goes wrong down the track.
- You could draft the contract yourself and then have a lawyer review it. Alternatively if there are any specific areas you are not sure about you could consult a lawyer on just those areas.
- If you are using a contract template that you have found online try and use one that is tailored to Australia. A common problem people find when using contract templates found online is that by not going through the contract carefully or not understanding the significance of it they have unwittingly agreed to have the laws of a state in the USA govern the contract even though both parties to the contract are based in Australia.
- It is advisable to get a lawyer involved where the transaction is complicated.
- You could use our Fixed Fee Quote service to call for tenders from lawyers to help you draft a contract suited to your needs.
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