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Contracts

Victoria

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.

 

What is a contract?

Can I enter into a contract if I am 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 Charlotte from Victoria and I’m 14 years old.  My mum has promised me that she will pay for my school fees when I start at my new private school.  Is this a legal contract that will hold up in court if she changes her mind? Do I need to get her to write it on paper?

A: Hi, Charlotte. Whether your mum’s promise is a contract will depend on a few key facts. If you both intended the promise to be a contract, and if you made a promise to your mum in return, then you may have a contract. While your agreement does not need to be on paper, it is always a good idea to write it down just in case you later need to prove what was said.

A contract is an agreement between two or more people that is intended by all parties involved to be upheld by a court. 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 private school fees).

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 school fees). 

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 Taj. I’m 16 years old and want to enter into a contract to get a warranty on a used car that I’m buying with cash.  Can I enter into the contract even though I’m not yet 18? 

A: Hi, Taj.  In Victoria, you may sign the contract, but the contract is only valid and binding if a court were to decide that the warranty for your car is “necessary” for your standard of living based on a number of factors such as your age and means. 

In Victoria, certain types of contracts with minors have been declared invalid, including contracts for money loans and contracts for goods (other than necessities). This means that if you enter into one of these types of contracts (because there are no laws to stop someone under the age of 18 from signing a contract), and one party does not fulfil their end of the bargain, the other party will not be able to sue or force the non compliant party to follow the contract. 

In other situations, however, people under the age of 18 may be bound by contracts. In Victoria, “contracts for necessaries” with people under the age of 18 are valid. 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.

Other types of contracts with people under 18 that have not been declared invalid in Victoria include “beneficial contracts of employment.” A beneficial contract of employment is a contract that provides employment or training for employment so long as the contract as a whole is in the benefit of the person under 18.

 

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

Q: My name is William, I’m 15 years old, and I entered into a contract for a membership with a fitness centre. I was supposed to pay a fee when I joined, but I missed the payment and now they’ve charged late fees that I can’t afford. Can the fitness centre sue me in court?

A: Hi, William. The contract is likely to be invalid in Victoria because a membership with a fitness centre is unlikely to be considered “necessary” to your way of life and is not a beneficial contract of employment.  The fitness centre will not be able to get a remedy from the court based only on your breach. 

In Victoria, even after you turn 18, the other party cannot confirm a contract that you signed when you were under 18 so that you then become bound by it. If the fitness centre tries to enforce an invalid contract against you, you should contact them and try to negotiate a solution. You may want to ask to cancel the contract or ask if you can pay the cost in instalments that you can afford. 

If this does not work, you may send them a written complaint explaining why the contract is improper and that you should be able to get out of it.  You also have the option of contacting the Victorian Department of Consumer Affairs to complain if the fitness centre is unresponsive or continues with its action against you.

If the contract was valid and you did not fulfil your end of the terms, the fitness centre would have the right to sue you for a “breach of contract,” meaning that you did not carry out your obligations under the 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: Hi, my name is Naseem. I’m 17 years old, and I have an employment contract with the restaurant where I work. The contract says that I will receive a bonus at the end of each year, but I never received it this past year. What can I do?

A: Hi, Naseem. If your contract says that you can “terminate" the contract if someone breaches (meaning one party does not fulfil their end of the contract), then you can choose to end the contract. You also have the right in Victoria to sue your employer in court to get back any money held from you unfairly or any other remedy the court may choose.  However, before you do this, there are a number of other options you should explore.

You should first tell your employer what is going on to try to fix the problem. Try to negotiate with your employer directly or file a written complaint with them. If your employer is unwilling to negotiate or if you cannot reach an agreement with them, you may also consider filing a complaint with the Fair Work Commission or speaking with the Fair Work Ombudsman.

Next, you should check the contract to see if it says that a breach entitles you to end your 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 (a more formal way of solving disagreements outside of court). 

If none of these options are successful, you have the right to sue your employer in court for a breach of contract. If you pursue this option, you should contact an adult, your community legal centre, the Victorian 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 my contract?

Q: Hi, my name is Elena, and I’m 16.  I entered into a purchase agreement to buy a car this past weekend, but now I really want to get out of it because I found one more affordable. Can I get out of the contract?

A: Hi, Elena.  If a car is considered a “necessary” item for you (making the contract valid in Victoria), and if there are no terms in your contract allowing you to end the agreement without penalty, you are bound by the contract.  Not fulfilling your end of the contract will give the other party the right to sue you for “breach of contract,” which means that you did not do what you promised to do under the agreement.

However, if the other party acted unfairly or dishonestly, you may be able to get out of the contract without penalty. Also, if you bought the car 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.


This page was last updated 16 April 2015.


 
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