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Contracts

Northern Territory

Contracts happen every day in life. For many contracts you probably won’t even know you’ve entered into one. For example when you go to the corner store to buy a litre of milk – that’s a contract. Below you’ll find answers to some frequently asked questions that we’ve received through Lawmail. If you have a question about mobile phone contracts or rental agreements you can find more information on our Renting and Mobile phone pages, or, if you have a question that we haven’t answered here please send us a Lawmail.

 

What is a contract?

Can I enter a contract if I'm under 18?

What happens if I don't follow through with my end of the contract?

What happens if the other party doesn't follow through with their end of the contract?

How can I get out of my contract?


What is a contract?

Q: Hi, my name is Troy from the Northern Territory and I’m 14 years old.  My mum has promised to pay for my first car, registration and fuel costs until I’m 18. Is this a legal contract that will hold up in court if she stops paying? What exactly is a contract?

A: Hi, Troy.  Whether your mum’s promise is a contract will depend on a few key facts. If you both wanted the promise to be a contract, and if you made a promise to your mum in return, then you may have a contract.

A contract is an exchange of promises between two people that a court will uphold.  This makes a contract different from a gift. A gift is one person’s promise to give something to another person. A court will not uphold a promise to give somebody a gift.  A few things are needed to have a legal contract.  First, you need an offer (that is, an offer to give something or to pay for something, like your car costs).  Second, you need an acceptance of the offer. Third, you need “consideration.”  Consideration means that each party to the contract is making a promise to the other party to exchange something of value (like if you promised your mum that you would make high marks in school in exchange for her paying your car costs). Also, both parties must want to enter into a contract and expect the agreement to be upheld by a court. 

In most situations, a contract does not have to be in writing or “witnessed” (when someone who is not a party signs onto the contract to prove that it is trustworthy). That means you may enter into a contract with only spoken words or even actions.  However, it is always a good idea to have a written contract because misunderstandings are less likely and you may later prove to a court what the contract says.

 

Can I enter into a contract if I’m under 18?

Q: My name is Gracy.  I’m 16 years old and want to enter into a contract to buy a mobile phone. Can I enter into the contract even though I’m not yet 18? 

A: Hi, Gracy.  In the Northern Territory, you may sign the contract and both parties will be bound by the contract as long as the transaction is “necessary” for your standard of living based on a number of factors such as your age and means, which seems possible in this situation. Also, even if the contract is deemed a “contract of necessity,” the electricity company may want a parent’s signature as well as your own in order to “guarantee” the payment.

Generally, a contract entered into by someone under the age of 18 is not valid.   This means that if you enter into a contract (because there are no laws to stop someone under the age of 18 from signing a contract), and you do not fulfil your end of the bargain, the other party involved does not have any rights against you.

In certain situations, however, people under the age of 18 may be bound by contracts.  This happens when people under 18 enter into two kinds of contracts: “contracts for necessaries” and “beneficial contracts of service.” Contracts for necessaries are contracts to supply goods or services that are usual or appropriate to the way of life of the buyer, including food, clothing, and accommodation. A beneficial contract of service is a contract that provides employment or training for employment so long as the contract is in the benefit of the person under 18.

Another option is to have your parent sign the contract with you, as a ‘guarantee’ of your payment and that you will follow the terms of the contract. You would need to talk to your parents about this option, how you are willing to pay for the phone and how you plan to keep to the terms of the phone contract.

What happens if I don’t follow through with my end of the contract?

 Q: My name is Bella, I’m 16 years old, and I entered into a contract to buy a chair online through eBay with another person. However I’ve found another chair that I’d rather buy. What happens if I don’t follow through with the agreement to buy the first chair, especially because the seller has already organised for the travel arrangements?

A: Hi, Bella.  A contract is valid in Northern Territory if it is for your benefit, which may give someone a right to sue you for a “breach of contract,” meaning that you did not fulfil your end of the bargain. 

The contract is unlikely to be valid because a chair is unlikely to be considered “necessary” to your way of life and is not a beneficial contract of employment. If the seller tries to enforce an invalid contract against you should contact them and try to negotiate a solution. 

If a contract is valid and you do not fulfil the terms, the other party will have the right to sue you for a breach of contract.  The court will decide what happens, but some options include:

  • awarding a sum of money to the other party (“damages”)
  • ordering you to do what you originally promised to do under the contract (for example, to pay a certain amount of money for goods or services you received).

 

What happens if the other party doesn’t follow through with their end of the contract?

Q: My name is Lizzy, I’m 15 years old, and I have a gym membership contract.  They changed their rates without telling me, which is against the terms of the contract.  What can I do?

A: Hi, Lizzy.  If your contract says that you can “terminate" the contract if someone breaches, then you can choose to end the contract.  You also have the right to sue the gym in court to get back any money you spent unfairly or any other remedy the court may choose.  However, before you do this, there a number of other options you should explore.

You should first tell the gym what is going on to try to fix the problem.  Try to negotiate with the gym directly or file a written complaint with them.  If the gym is unwilling to negotiate or if you cannot reach an agreement with them, you may also consider filing a complaint with the Office of Fair Trading.  Next, you should check the contract to see if it says that a breach entitles you to end the contract.  If so, you may end the contract at your option.  However, if you decide to continue, or if there is no option to end the contract, you may try to resolve the issue in a tribunal (an informal way of solving disagreements outside of court). 

Finally, you have the right to sue the gym in court for a breach of contract.If you choose to pursue this option, you should contact an adult, your community legal centre, the Northern Territory Department of Consumer Affairs or Legal Aid to help you through the process.  You may then be entitled to a number of remedies, including: awarding a sum of money to reimburse your losses (“damages”), ordering the other party to stop breaching the contract, or ending the contract and ordering the other party to pay damages.

 

How can I get out of a contract?

Q: Hi, my name is Jasmine.  I’m 17 years old and entered into a contract to rent a house in Northern Territory yesterday for the Easter break with my friends, but now I’ve realized that it will be too expensive. Can I get out of the contract?

A: Hi, Jasmine.  A holiday house is not considered a ‘necessary’ item for you, which may make the contract invalid in the Northern Territory as you are under 18. It is important to look at the terms in your contract to see if there is something that will allow you to end the agreement without penalty.

If a contract is necessary for you and there are no terms to end the agreement, you may be bound by the contract and not fulfilling your end of the contract will give the other party the right to sue you for “breach of contract.” 

However, if the other party acted unfairly or dishonestly, you may be able to get out of the contract without penalty. Also, if you agreed to hire the holiday house after being approached by a salesperson at your front door, over the phone, or in a public place, you have ten days to change your mind and cancel the agreement.

If you are in a contract, both parties are bound by the terms and conditions of that contract.  If you want to end your contract, the other party may try to recover any losses that result from your breach. Be sure to read the terms of your contract to see if there are provisions allowing a party to end the contract early and whether there is a penalty for doing so.

In limited circumstances, you may end an agreement without penalty.  If the other party has misrepresented the goods, services, terms, or conditions to you, you may be able to end your contract without penalty.  If a court finds that there were unfair circumstances when the contract was made, the contract may be void. Contract terms may be deemed unfair by a court in a number of circumstances including if the term is much more beneficial to one party than the other, if it would cause harm to one of the parties, and if the term is not stated clearly. 

Australian law also gives a “cooling-off” period for contracts entered into when a salesperson approaches you at your front door, over the phone, or in a public place (“unsolicited consumer agreements”). This gives buyers the right to “cool off” on their decision to enter into these purchase agreement within 10 business days.  So if you change your mind within those 10 business days, you may end the agreement with either oral or written notice. Written notice may be preferable in case you need to prove that you ended the contract.

Help

If you have a question about a contract that you have entered into (for example online shopping) or about contracts in general, please send us a Lawmail.

This page was last updated 16 April 2015.





 

 
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