A contract is a legally binding agreement.
It can be verbal or written but it is better to have a written contract or agreement when you buy goods or services.
You can think of a contract as a bargain or deal involving payment of money in exchange for a good or service.
All of the following are examples of contracts:
- a tenancy agreement between a landlord and tenant
- a written policy between a person insuring their car and the insurance company
- a mobile phone contract for a fixed term of one year
- an agreement with a builder for building work to be done at a set price.
If you breach a contract
If you enter a contract you must hold up your end of the bargain.
If you don't you may be in breach of contract. A court may decide you should pay compensation to the other party.
Find out more about going to court and small claims.
Contracts do not have to be in writing. Unwritten contracts are usually enforceable by law.
However, if two people have a verbal contract it can be difficult to confirm terms and conditions if there is no witness to the agreement.
You should always get a written quote, especially when there are large sums of money involved.
Find out more about quotes and estimates.
Before you sign a contract
In most cases the law will assume that, if you have signed something, you have also read and understood it.
Before you sign a contract you should do all of the following:
- don’t allow anyone to rush you
- read all the small print
- if there is anything you don’t understand, take the unsigned contract away and get some independent advice before you sign
- never sign a contract with blank spaces - you should draw a line through the space and each party should initial any changes
- understand exactly what you’re getting for your money, how the charges will be calculated and check the figures are correct
- make sure any verbal agreements are included in writing
- changes made at a later date or increased costs for extra work should be in writing and both parties should initial the changes
- get a copy of the contract and store it in a safe place
- all contracts, even those called ‘standard’, can be altered by you and the trader subject to mutual agreement.
For more advice contact NT Consumer Affairs.
Last updated: 11 June 2015
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