By Samuel McMahon

4 June 2019

People sign contracts every day for every kind of transaction. It might be a contract to purchase real estate. It might be an employment contract. It might be an estate agent’s sale authority. It might be a contract formalising a new business relationship.

All these contracts have one thing in common: you are going to be at a disadvantage if you are relying on any understanding, or assumption, that is not written there in black and white.

Often people have discussions with the other party, or read marketing material, prior to signing a contract. In the context of an off-the-plan purchase, there might be an assumption that the colour scheme will be as per the display unit. In the context of a business deal, you may have read a brochure or had discussions about the other party’s general operational practices. In the context of an agent’s sale authority, you may have discussed circumstances when an agent’s commission would be payable – and when it wouldn’t.

But unless these specific matters are written into the contract, the other party may change its mind later. Without the obligation or situation you proceeded on the basis of being written into the contract, you may find yourself in a difficult situation. More often than not, you may find you are left with no way of enforcing what you assumed was understood.

Of course, in many contexts, there is scope to get around the fact that something may not be explicitly written in to a contract, such as in some areas covered by the Australian Consumer Law. The point to be made is that, whether or not you can try to use these get-arounds, you are still at a disadvantage compared with the situation where the contract explicitly deals with the situation. It is the difference between a straightforward contractual obligation you can rely on, versus a sometimes nebulous general statutory idea that goods ought to be of “acceptable quality”, whatever that may mean in the context of your case. Further, what is “acceptable quality” may not specifically reflect your understanding or needs. A blue product is equally “acceptable quality” as a pink product, but it may not be what you wanted or believed you were getting.

A common mistake is not to ask for an amendment of the contract in the belief that the contents of a contract are not negotiable. This is particularly so when a contract is perceived to be a “standard form contract”, or you are dealing with the other party through a broker or other intermediary.

Even standard form contracts can have words added or taken away – and usually the only time this can be done is before the contract is signed. If your request to add or take away words is reasonable, you may be surprised how receptive the other party is to making the change you request. On the other hand, if there is resistance, it is better to be aware of the other party’s different perspective beforehand rather than after you are signed up and locked in.

If you are signing a contract, of whatever kind, seek legal advice from a qualified lawyer before signing, and contribute to the process of contract review by actively turning your mind to the kind of assumptions you are making, or the particular things you want out of a contract.

 

For more information please contact Samuel McMahon or a member of our Commercial Litigation Team.

 

Disclaimer
The material contained in this publication is meant to be informational only and is not to be construed as legal advice. Tisher Liner FC Law will not be held liable or responsible for any claim, which is made as a result of any person relying upon the information contained in this publication.

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