Individuals and businesses enter into contracts regularly as part of their day-to-day activities. You may even have entered into a contract without realising it. Purchasing items from a shop, hiring a babysitter or ordering takeaway food are just some of the many examples of informal contracts that are made during an ordinary day.

Contracts can also be more formal in nature. This is when people negotiate with each other, write down what they have agreed and each person signs the contract.

An oral (unwritten) contract can involve detailed negotiation but the terms of the agreement reached may never be written down. In theory this type of contract is just as binding as a written contract. In practice it is much more difficult to prove that all the requirements for a binding contract have been satisfied.

Regardless of whether a contract is formal or informal there are certain requirements that need to be met for a contract to be enforced in a court. The key elements of a valid contract are:

• an offer that sets out the terms on which a person or business is willing to be bound if the offer is accepted;
• an acceptance of the offer in its entirety:
  • if any part of the offer is not accepted it is considered a counter-offer and not acceptance;
• an intention by all the parties (persons or businesses) to enter into a legally binding transaction; and
• consideration (something given or given up) in exchange for the promise by the other party. This is usually money in exchange for goods or services but there can be many other forms of consideration.

This Legal Guide on Contracts sets out the requirements for a valid contract. You will find a checklist of questions you should be asking yourself when negotiating or reviewing a contract. This Guide also provides information on how contracts come to an end and what options are available where a contract has been breached. Before making important decisions it is advisable to obtain legal advice specific to your situation. LegalEagle’s™ free directory profiles all lawyers in Australia. You can use it to Find a Lawyer near you who specialises in contract law.

Please select from our Articles, FAQ and Questions & Answers sections all written by experienced lawyers. Our Glossary helps explain the meaning of any words you are unsure about. You can also Ask a Lawyer a question yourself. It is free and anonymous.

Warning: Information provided through LegalEagle™ is for general guidance. It is not legal advice. Laws and procedures referred to may change and differ between states, territories and nationally. There may also be important exceptions or qualifications. Only a lawyer providing formal legal advice can assess your particular circumstances to determine how the law will apply.