LAWS6991 Chap.1 Contract Law Foundations and the Objective Theory
Contract Law Foundations and the Objective Theory
The opening seminar sets out what a contract is and what the unit will ask of you. A contract is an agreement or promise that the law will enforce, and a valid one needs agreement, certainty, intention to create legal relations, consideration, capacity, genuine consent and legality. Contract belongs to the common law, but equitable doctrines and statutes such as the Australian Consumer Law shape it heavily.
Courts read intention objectively, and while freedom of contract remains important, Parliament rather than the judges now corrects most unfair bargains.
What this chapter covers
- 01
Definition of a contract
- 02
Requirements of a valid contract
- 03
Formal and simple contracts
- 04
Bilateral and unilateral contracts
- 05
Void and voidable contracts
- 06
Common law, equity and statute
- 07
Freedom of contract
- 08
The objective theory of contract
Worked example · free
Void or voidable after a mistaken signature
- 1The teenager raises capacity. Minors' contracts are generally not enforceable against them, with exceptions for necessaries and beneficial contracts of service such as apprenticeships and employment.
- 1A gym membership is unlikely to be a necessary or a beneficial contract of service, so the membership is probably not enforceable against the minor.
- 1The adult's case raises genuine consent. A contract induced by misrepresentation is not missing an essential element of formation; consent was impaired.
- 1Impaired consent makes the supply contract voidable rather than void: it stands until the misled party elects to set it aside.
Key terms
- Simple contract
- A contract made orally, in writing, partly both, or by conduct, which needs consideration to be enforceable.
- Deed
- A formal written instrument, signed, sealed and delivered, that binds without consideration.
- Voidable contract
- A contract that is valid until the party whose consent was impaired chooses to rescind it.
- Freedom of contract
- The principle that parties of full capacity may set their own terms, departed from only for good reason.
- Promisee
- The person to whom a promise is made and who seeks to enforce it.
Contract Law Foundations and the Objective Theory FAQ
What makes an agreement legally binding?
A court looks for offer and acceptance, certainty of terms, an intention to create legal relations and consideration. Even then, enforcement can fail for lack of capacity, illegality or impaired consent such as misrepresentation, duress or undue influence.
Does a contract have to be in writing?
Usually not. Simple contracts can be oral, written, partly both or made by conduct. Writing is required only where a rule, typically a statute such as section 54A for land sales in New South Wales, demands it.
What is the difference between common law and equity in contract?
Contract itself is a common law subject, but equity contributes doctrines such as estoppel, specific performance, undue influence, duress and unconscionable conduct. Answers often need both, because equity can relieve where the common law would enforce.
Why do courts ignore what a party privately intended?
The objective theory means intention is judged by words and conduct. If private thoughts counted, a party could escape any bargain by claiming a secret contrary intention, which would make every agreement fragile and hard to prove.
Is freedom of contract still the starting point?
Yes. The High Court accepts that courts have moved away from the strongest nineteenth century statements, but freedom of contract remains important and exceptions need good reason. Statutory regimes now handle much of the unfairness that judges will not correct.
Which statutes overlay the common law of contract?
The seminar names the Australian Consumer Law, the Contracts Review Act 1980 (NSW) and the Frustrated Contracts Act 1978 (NSW), together with formal requirements such as those in the Conveyancing Act 1919 (NSW) and the National Credit Code.
Exam move
Start the unit by building the frame you will reuse for every problem: the list of formation requirements, the separate list of grounds that make a formed contract unenforceable or voidable, and the three sources of law that supply the rules. Learn the vocabulary pairs, because problem questions are faster when you can classify a contract in one sentence.
Practise explaining the objective theory in your own words and applying it to a short set of facts, since it underlies offer, acceptance, intention and terms. Ask Sia to give you quick scenarios to classify and to check your reasons.
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