- Do you know about the factors that form a contract?
- Do you know about standard form contracts?
- Are you aware of the reasons a contract can be cancelled?
When someone buys products or services from your small business, they are entering into a contract with you, the seller. Your small business will also enter into contracts with other businesses.
Checklist before you sign a contract
- Read each contract carefully before agreeing to it.
- Make sure you understand the key parts of the contract such as cost and how long the contract is for.
- If the contract is a standard form contract, check it for any unfair terms.
- If you think a term is unfair, ask the other party to remove or amend it.
- If needed get independent legal advice.
When an agreement forms a contract
A contract is an agreement made between 2 or more parties that is legally enforceable. If one of the parties breaks the contract, the other party can take legal action against them.
There is generally a contract whenever a seller makes an offer and a buyer accepts it.
The buyer can accept a contract in different ways:
- by signing a written document
- by saying they accept it
- through actions such as paying for a product or clicking ‘I agree’ on a website.
Terms and conditions in a contract
Written contracts have terms and conditions that describe the rights and responsibilities of the buyer and seller.
When you buy a product or service, certain consumer rights always exist under the law, and the terms and conditions of a contract can’t take away these rights.
Example
A furniture store includes a clause in its sales contract stating: ‘All sales are final. No refunds or replacements will be provided under any circumstances.’
A customer buys a sofa and uses it normally. The sofa develops a structural fault within two months.
Despite the clause, the store is still legally required to provide a remedy. A seller cannot use contract terms to avoid rights the law guarantees to consumers.
Standard form contracts
Often a business will use a pre-written contract for all their customers that cannot be changed, the buyer can only take it or leave it. This is called a standard form contract.
Standard form contracts are often used for the supply of products and services.
It is assumed that an agreement is a standard form contract unless the party that prepared the contract can prove that it isn’t.
Most small businesses are protected by the law from unfair terms in standard form contracts. Any business that offers a standard form contract to a consumer or small business must make sure that it does not contain unfair terms.
Ending a contract
A contract can be ended by a consumer at no charge if:
- the business has said anything false or misleading about the products, services, terms or conditions
- in some cases, when a product or service has not met a consumer guarantee
- the consumer is in a cooling-off period.
Learn more in the toolkit about unfair contract terms and consumers and unfair contract terms with other businesses.
Learn more about contracts.