Contracts and Agreements are a part of every business transaction, whether extending project or arranging sub contracting that will last for years, or purchasing manufacturing supplies.

The Nature of a contract is often not understood, even by savvy business people. It is quite common to hear a business talk of “we can do this deal without a contract or agreement lets keep it simple”.

There is often a misunderstanding that if it is only a deal there are no legal issues involved and therefore no need to progress into the formality of a contract or an agreement etc.

A Contract and or Agreement can take place in various forms some of which are not correctly acknowledged by parties involved. Such as the simple acceptance of a purchase order and general terms this transaction represents. Parties involved must understand the limitations of discussions, negotiations and other preliminaries involving a binding contract.

Another well spoken comment is “a formal contract was negotiated but never signed and both parties have been dealing for years with no problem”. The problem with this is the people at the company you deal with today may not be there in the future. This can cause obvious problems and possibly have to recommence dealings from the initial stage in which can lead to frustration and damage a business relationship.

Contract – a legally binding agreement by both parties enforceable by law. A contract can be either formal or implied. For a contract to be legally binding, it must have all the major elements in it being:

1. Offer
2. Acceptance
3. Consideration
4. Intention to create a legal relationship
5. Legality of object
6. Parties are of legal capacity to enter into a contract

It has been accepted that an invitation to tender is an invitation to make an offer to the “purchaser” in accordance with the terms and conditions stipulated within the package. However an invitation to tender is not an offer and a contract is not complete until the “purchaser” accepts one of the tender submittals after all commercial clarifications have been negotiated, acknowledged or closed.

Acceptance has many elements to consider;

• Conduct
• Unqualified Acceptance
• Communication of Acceptance
• Australian Postal Act Rules
• Instructional Acceptance

Acceptance can be the final and clear unequivocal acceptance of an offer terminating all negotiations. After this point an offer cannot be revoked, hence a contract comes into existence.

Like Acceptance Termination has more than one method to reach the same objective. Areas for termination can be clear cut such as a basic withdrawal prior to acceptance. Or a Tender offer that is rejected due to an expired validation period (lapse of time). Discharge by Breach, Performance or Frustration.

Stamp Duty is a revenue government tax related to the sale of goods transfer or undocumented acquisitions, such as transfer agreements.

The party to the transaction who is responsible for the payment of the duty is usually the purchaser or borrower. Documents must be lodged within 2 months of execution and Stamp duty must be paid in full within 1 month.

A verbal statement made during negotiations which have influence on the outcome or initiation of a project for example may have legal consequences, if the statement is misleading or incorrect (Estoppel). Many things said during commercial clarification and other verbal negotiations never appear to be as clearly defined in some contracts. Reference then should be made to the Trade Practices and Fair trading Act 1974 (misleading conduct).