Click on the links below to learn more

The law recognises that legally binding contracts can be written, verbal, or a mixture of both. However, for business purposes, written contracts are usually preferred due to the following reasons:

• The contents (‘terms') are in writing for all to see
• They can ensure that precise language is used in describing the terms of the agreement
• There is, therefore, less opportunity for misunderstandings and conflicting assumptions
• There is less need to rely on memories of what was originally agreed
• The individuals involved in the transaction may change over time.

Written contracts

If the contract has been formally written and signed by the parties, there is an assumption that all the terms of the agreement are contained in the written document regardless of what may have been verbally agreed. Additionally, contracts can be a combination of written and verbal agreements if the written agreement lacks detail and only covers very few terms. Prior to signing, a written contract must:

• Be presented to and understood by all parties to be valid; and
• Be recognised by all parties as a contract, that is, it must look like a contract and not simply a receipt or docket

Also, once a contract is signed, it is assumed that all the terms have been read and agreed to.

Verbal agreements

Verbal agreements rely on the good faith of all the parties involved and can be difficult to prove as opposed to written contracts. The following are some ways in which verbal agreements can be supported:

• The conduct of the other party both before and after the agreement
• Specific actions of the other party
• Past dealings with the other party

As desirable as a written contract is, in certain situations it may be counter-productive, such as:

• If the value of the transaction is not particularly high; and/or
• The presentation of a substantial document, possibly with many provisions, may raise more questions and uncertainty in the minds of the parties involved than it resolves, often ending in the transaction not proceeding.

For further information read "Working with contracts" provided by Department of Innovation, Industry, Science and Research.