ENTERING INTO A CONTRACT
In simple terms a contract is a promise or set of promises which the law will
enforce. Over many years, courts have developed principles which tell us whether
there is a legally binding or enforceable contract in existence.
In a contract for the sale of goods or services there is a legal agreement
between you and the person from whom you are purchasing goods or services
whereby they agree to sell you those goods or services and you agree to pay for
them at an agreed price or an agreed rate.
How do you know you have entered into a contract?
An agreement for sale of goods or services arises where the following
elements are present:
An offer and an acceptance of that offer
A few examples of how this happens in practice:
- When you are purchasing goods in a shop the offer is made not by the
shopkeeper displaying the goods but when you take the goods to the checkout and
offer to buy them.
- Generally, circulars and catalogues do not constitute offers but rather you
sending in an order form is the offer.
- At auctions, a bidder makes the offer and the offer is accepted by the
auctioneer with the fall of the hammer.
This element of a contract does not mean that you have to have given
consideration to whether to make the offer or to accept an offer! Consideration
is a term which simply means that each of the parties has to give something for
what they receive under a contract.
For example, you get the goods and the seller gets your money.
It is not always necessary that money must actually change hands before a
contract comes into existence: often the consideration is just a promise to pay
and that is sufficient.
Accordingly you cannot rely on the fact that you have not actually paid for
the goods as a basis for saying that there was no contract.
An intention to be legally bound
Generally where there are agreements which relate to family, social or
domestic relationships courts will presume that there is no intention to create
a legally binding agreement.
In commercial situations however, courts will presume that this intention
Sometimes courts will not enforce contracts entered into by people who are
mentally unable to understand what they are doing.
Persons who are under 18 are said to lack the capacity to enter into some
types of contracts but they can be held to other types of contracts.
Requirement of writing
The general law position is that contracts do not have to be in writing to be
enforceable. Parliament has however created certain laws which require writing
in some circumstances.
For example, if you were going to sue someone over a contract involving the
sale of land you would need to have some evidence of the agreement in writing
signed by the other person.
Even though it is not generally necessary to have a contract in writing, it
is generally advisable when larger purchases are involved and especially where a
contract is for the provision of services.
RIGHTS UNDER A CONTRACT
The general law of contracts derived from the decisions of courts over the
years gives you some rights if there is a breach of a term of the contract. The
general law may also give you some rights if the seller has engaged in certain
types of conduct such as fraud.
In Queensland there is also legislation called the Goods Act which may give
you additional rights under a contract in some circumstances. The Act does this
by saying that in certain types of contracts extra terms will be implied or read
into the contract by courts unless the contract expressly says that these
implied terms are excluded.
Some of these implied terms are:
- If you sell goods, you are promising that you own them in the first place and
have the right to sell them.
- That the goods are free from any debt or charge. You would not be able to
sell something which still had money owing on it unless the buyer agreed to
accept that before they entered into the contract.
- That where you are selling goods by description, that is where the buyer has
not seen the goods, they must match the description. Similarly, if the buyer has
bought something on the basis of a sample, the goods supplied must match the
- If a consumer makes it known to a seller the purpose for which they want to
buy goods, there is an implied term that the goods must be fit for the that
- That the goods must be of “merchantable quality”. This means that they
have to be fit for the purpose for which such goods are usually bought.
What rights do I have if a term of the contract has been breached?
If a contract has been breached, the general law of contract provides a range
of possible remedies, depending on how important the term was to the making of
It may be possible for you to:
- Terminate the contract. An example of this would be where you refuse to
accept goods delivered to you on the basis that they are defective.
- Obtain damages. An example of this would be where you have incurred some
expense in addition to the price of the goods in having them repaired.
- Obtain specific performance. This means that the court may order the other
party to carry out the things they promised to do under the contract.
When can I return goods?
You can return something for either:
- a refund of the monies you paid,
- repair of the goods or replacement of the goods if the goods are defective,
- the goods are not what was described by the salesperson or in advertising,
both generally or at the place where you purchased the goods, or
- you let the salesperson know why you wanted the goods and the goods are not
fit for the purpose you told the salesperson you wanted them for.
You do not have a right to a refund because:
- you bought goods which are the wrong size, or
- you changed your mind about the colour or decided you just do not like the
goods any more.
- Some stores will give you a refund or exchange the goods for other goods or
give you a credit note. However, they are not obliged to do so by law.
What if I return the goods and I only want a cash refund?
If the goods were faulty or inaccurately described or not suitable for the
purpose you made known to the salesperson you can insist on a cash refund and
you do not have to accept a credit note even if the store has a “No Refund”
Do not be deterred by "No Refund" signs as "No Refund"
signs only apply if you bought the wrong sized colour or changed your mind. They
do not apply when the goods are faulty, improperly described or not fit for the
purpose which you told the salesperson you were buying them for.
How long can I keep the goods for before I can demand a refund?
This depends upon the nature of the goods. For instance it may be considered
unreasonable to purchase an article of clothing to wear and wash it numerous
times and then to ask for a refund because stitching comes loose or the like.
Each case needs to be decided on its merits but there is a difference between
a defect, and fair wear and tear.
The nature of fair wear and tear depends upon the type of good purchased and
the use to which it is put. It also depends upon the type of materials of which
the goods are made.
In some cases goods may need small repairs. If the seller is able to make
those repairs without difficulty, the seller may be able to insist on repairing
the good rather than replacing it.
PRODUCT SAFETY AND PRODUCT INFORMATION
A significant part of consumer protection law depends on the schemes
developed by state and federal Parliaments to deal with the setting of minimum
If you have been supplied with goods which contravene a consumer safety
standard and you suffer loss or damage which would not have occurred if the
standard had been complied with, you may have the right to compensation.
You may also be entitled to recover from the supplier any money paid for the
goods or a court can order that the goods be repaired or modified.
UNFAIR SELLING PRACTICES
Misleading and deceptive conduct
The federal Trade Practices Act prohibits corporations from engaging in
conduct which is misleading or deceptive or likely to mislead or deceive.
Examples of the sort of conduct which might be caught by this provision include:
- A “half truth” in advertising.
- Suggesting that a product has some association with a well known personality
when in fact it doesn't.
- Comparing one product with another may be misleading if there is not enough
information provided to make a fair comparison.
- Stating that a product is made in one country when in fact it has been made
in another country.
- Using a logo similar to a well-known manufacturer or supplier.
- Starting up a business with a name similar to a competitor.
- Using packaging similar to a competitor.
- Misleading explanations about the risks involved in a contract.
- Overly optimistic statements about the expected returns in an investment
- False or misleading labels.
The federal Trade Practices Act also prohibits false and misleading
statements about specific characteristics of goods or services. For example, it
is prohibited to:
- Falsely represent that goods are of a particular standard, style, type or
- Falsely represent that goods have a sponsorship or approval or benefits which
they do not have.
- Falsely represent that goods are new when they are not.
- Make false or misleading representations about the availability of repair
facilities, the place of origin of goods, or the price of goods.
Offering Gifts and Prizes
Under federal and state legislation, it is illegal to offer gifts and prizes
in connection with the supply or possible supply of goods or services if there
is no intention of providing them, or of not providing them as offered. Examples
of the sort of conduct which might be caught by this provision include:
- Failing to state the closing date for the period during which the offer will
- Failing to tell consumers that to win a prize they must first acquire other
goods or services from the advertiser.
- Advertisements which offer money but in fact all the consumer gets is a
voucher, or a lottery ticket in a draw to win the amount offered as a prize.
- Inflating the cost of the goods to cover the cost of the gift.
State and federal legislation prohibits advertising goods or services at a
specified rate if there are reasonable grounds for believing those goods or
services will not be available in sufficient quantities over a reasonable period
This practice is commonly known as “bait advertising” because the cheap
goods are used as a bait to get customers into a store so that sales staff can
attempt to interest them in other goods and services.
What is “sufficient” and “reasonable” depends on all the
Referral selling is a selling technique by which a customer is persuaded to
enter into a contract on the basis that he will be able to recover the money he
has agreed to pay out under the contract by receiving a rebate or commission for
introducing other customers.
The important factor is not whether a customer can earn a rebate or
commission or spotting fee – these are permitted provided the promise of such
fees is not used to talk the customer into the contract in the first place.
Misleading representations about certain business activities
Federal law prohibits the making of false or misleading statements about the
profitability or risk of a business that is claimed by the seller to be able to
be carried out in a person’s home.
It is also illegal to make false or misleading statements about the
profitability or risk associated with a business activity in which a person has
been invited to invest time or money.
Pyramid selling is prohibited under Australian law. Pyramid selling schemes
vary in their structure but the basic characteristics are:
- Payment by a person for a right to become a distributor of goods or services
- The receipt of some benefit or award for recruiting new distributors
- The whole purpose of such schemes is to make money from recruiting new
distributors rather than from selling goods or services. These schemes are
outlawed because it is often the case that people who participate lose their
money and very few benefit.
Contact Sales (ie. Door-to-Door Sales)
In Queensland, the Fair Trading Act is also designed to protect the consumer
in door-to-door sales situations, that is where a salesperson calls at a person’s
home for the purpose of selling goods or services.
The Act applies to sales at a customer’s residence and at their place of
work and covers sales of over $50.00.
The legislation does not apply in certain circumstances, including situations
- the salesperson comes to their home or place of work at a customer's request
- the sale is conducted over the internet or telephone
- the sale is for an amount more than $5,000
- the whole of the purchase price in cash or cheque is handed over at the time
the agreement is made
The effect of the Act is that an agreement will not be enforceable by the
seller unless it is in writing and a copy is given to the customer at the time
the agreement is made.
A prescribed notice must also be given to the purchaser before they enter
into the agreement. If the agreement is in handwriting, it must be legible and
if typed it must be in print of a certain size.
The information that the seller must supply include:
- the total cost of the goods or services
- the fact that there is a 5 day cooling-off period
- how to exercise any right to cool-off
- supplier's contact details
If the seller does not provide the purchaser with such notifications, the
cooling-off period automatically extends to 30 days.
Unsolicited goods or services
Federal and state laws make it an offence to assert a right to payment from
any person for unsolicited goods. It is not unlawful to send the goods but it is
prohibited to demand payment.
These laws are aimed at preventing situations where consumers have been
billed for goods sent to them which they did not request.
You are not liable for payment for unsolicited goods. Such goods will in fact
become your property if not collected by the seller after either:
One month from the date the sender is notified to collect them. You send a
written notice to the sender with your name, your address, the address where
they can collect the goods, and a statement that the goods are unsolicited.
Three months after the date you received them even, if you don’t notify the
This Information Outline is provided courtesy of Hall Payne Lawyers who are
experienced in this area of law. They are located at Level 9, 344 Queen Street,
Brisbane, QLD 4000 or call them on (07) 3221-2044 if you would like more
information on the legal topic, or you wish to obtain formal advice regarding
Hall Payne Lawyers are an established Queensland firm practicing in the areas
of employment law (unfair dismissal etc), accident compensation (WorkCover,
motor vehicle accident, personal injuries), anti-discrimination &
harassment, consumer law, family law, wills & estates, criminal law and
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