LAW REPORT
Contract law : Do you know what makes a contract ?
Ingrid Pagura | BA , LLB
A
new financial year is often a time to review existing contracts and enter into new ones . It has been a while since I reviewed the elements of a contract , so before making a change , read this article to refresh your memory . Contracts underpin most things in our business but many of us don ’ t really take the time to think about what a contract is and how it binds us .
So , first , what is a contract ? It is defined as a bargain which parties intend to be legally binding , or which they would have meant to be so , had they stopped to think about it .
Contracts are part of everyday life . In a health setting , there are many contracts such as consultations with clients , contracts to rent space , employment contracts and insurance , to name a few . For example , clients enter into a contract with the Massage Therapy Clinic when they book in for a massage . By definition , they are considered to be consumers and so consumer law applies to them . This is the same for all health care practitioners .
To prove a contract exists we must prove three things : agreement , consideration , and intention to enter legal relations .
Agreement
An agreement will only exist if there is a definite offer by one person to undertake a commitment and an unconditional acceptance of that offer . The contract is formed at the moment the offer is accepted and then both parties are bound . There are some rules relating to agreements .
First , to enter into a contract a person must be an adult and of sound mind . There are special rules relating to minors ( under 18 years ) and people with intellectual disabilities .
Second , there must be identifiable parties to the agreement , that is , one party must make the offer and the other must accept it . Either party need not be named as long as they can be pointed to .
Finally , terms must be sufficiently certain for an agreement to be formed . Terms are promises made by the agreement and the details included . For example , if you are buying a car , you would need to have finalised the price , the car , date of delivery etc . If you are seeing a herbalist you would need to have sorted out the price of the consultation and its length . There may still be a few things to iron out , but the bulk of the agreement must be certain .
Consideration
The next to be proven is consideration . This is a legal term and has nothing to do with considering the other person ’ s feelings . It means that each party must be able to point to the obligations undertaken by the other . There must be give and take on both sides . There must be an exchange . Consideration means that each party should be able to identify what they need to do and what the other party needs to do to fulfil the terms of the agreement . For example , if goods are supplied they must be paid for , and the same applies to a service , like a massage : if it has been provided you are required to pay for it . The price does not legally need to be in proportion to the service provided , but real value has to be given .
Consideration also includes barter agreements , where people swap services or goods . If an acupuncturist gives a person a session in return for their bookkeeping , then this would be a consideration , as each person can point to fulfilment of their obligations .
Gifts or free items do not have consideration as there is no exchange . This means that gifts and free items are not contracts and so not subject to consumer law . For naturopaths , for example , consideration exists when a person pays for the consultation they have received . Rather than give away free sessions , consider discounting as a way of giving the client a benefit but still being covered by consumer law .
Intention
Intending the contract to be binding is the third element though is not usually stated , but rather is implied . It is often inferred from the circumstances surrounding the agreement . Some things that may go towards proving this point are :
160 | vol29 | no3 | JATMS