Express Contracts – An Explainer

What is a contract?

A contract is an agreement which creates legally enforceable obligations between parties. For the contract to be legally binding, both parties must evidence an intention to create legal relations. This can be express or implied depending on the circumstances.

For a contract to be binding under Australian law, certain elements must be satisfied. These include:

• Offer
• Acceptance
• Consideration
• Intention
• Certainty
• Capacity
• Formalities

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What is an Express Contract?

An express contract is a legally binding agreement, the terms of which are all clearly stated either in writing or orally stated. For the formation of a contract, there must be an offer made by one of the parties, and acceptance of that offer by the other party. To determine if an express contract has been properly formed, courts will analyse the communications made between the parties during the formation of the contract.

The effect of a signature

A party that has written and signed a agreement is now legally bound by the terms inside the contract.

Exceptions to the rule

In the absence of fraud or misrepresentation within an agreement, a signed agreement binds a party to the obligations. Regardless or whether he or she had read the document.

There are three exceptions to the rule on signatures:

• Where an agreement does not appear to have contractual effect
• A person who relies on the exemption clause misrepresents the clause or also its effect
• Where the signer pleas non est factum (a disability or claim of no capacity)

A Written vs Unwritten Contract

Contracts are common throughout our daily lives. Some examples include train tickets, entry to parking lots and also purchasing products. These are unwritten contracts and further, are not incorporated into express contracts. Despite this, the transaction is still binding.

As such, the terms a party wishes to impose upon others must be explicitly incorporated into the contract by giving reasonable notice. 

Key requirements to satisfy incorporated terms are that:

• The other party should view terms before the contract is formed
• The terms will have a contractual effect
• A party who seeks to rely on terms must have taken reasonable steps to bring them to attention of the other party

Pre-contractual Statements and the Courts’ Approach

Also, parties can rely on prior course dealings as a basis for incorporating terms. There are two requirements for this:

• Consistent and sufficiently long course of dealing
• Evidence of assent to terms (not mere prior use, but objective evidence of assent to terms like failure to object to terms at issue)

There are three types of pre-contractual statements:

• Mere puffs or statements of opinions that have no contractual effect
• Terms or warranties
• Mere representations with no contractual effect

Thus, the courts will consider pre-contractual statements by considering the importance of the statements, words used and the relative knowledge and expertise of the parties. 

Parole Evidence rule

Furthermore, statements made during negotiation do not become part of the contract. However, false statements during the negotiation can amount to misrepresentation misleading/deceptive conduct. 

Final Thoughts

In conclusion, express terms for example in an employment agreement include the specifically agreed terms which include wage, hours and holiday leave. Also, implied terms may be present in an agreement.

If you are considering entering into a contractual relationship with another party, it is a recommend to seek advice from a contract lawyer. Lawpath can connect you with a contract lawyer through our Lawyer Directory. A contract lawyer can assist you in understanding the legal implications of any contract you enter, and also ensure your contract is air-tight.