A contract will require each party to do something. Some of the requirements will be spelled out in the contract (called express terms), while others are never mentioned, but are still part of the agreement (called implied terms).
Some contract may also contain exclusion clauses which limit the liability or responsibility of one party for certain happenings.
Where the contract is written down and signed, both parties are bound to do what it says (subject to some exceptions). Where some terms are in writing but are not signed by the parties, they are only binding if the party concerned knew about them, or the other one at least took reasonable steps to bring them to their attention before the contract was made.
It is also possible for oral statements to form part of the contract.
Sometimes terms which are never mentioned at all are still part of the contract. They may be implied by the circumstances. For instance, when a person visits their doctor, they probably do not discuss whether the doctor will agree to keep their medical details confidential, or whether they will have to pay the doctor's bill. The doctor is still legally bound to keep the patient’s confidence, and the patient is still legally bound to pay the bill.
Terms can also be automatically implied into a contract by law (i.e. by legislation or regulation), even if the parties do not know this. Most terms that are implied by the common law are now also stated in legislation such as the Sale of Goods Act 1895 (SA) and the Australian Consumer Law which provide for certain basic terms to be part of the contract. These terms are known as statute implied terms.
When a term is implied by legislation, the Act will also say whether the parties have a choice to exclude that term. If it says that they cannot do that, then the term will still be part of the contract, even if both parties agree that it will not apply. For example, the parties cannot agree that the Australian Consumer Law will not apply to them. Such an agreement would have no effect.
Exclusion clauses are clauses, usually written down, that say that one party to the contract will not be responsible for certain happenings.
These clauses can be valid as long as:
- they have been properly included in the contract; and
- are not contrary to law.
To be properly included in the contract, the clause cannot be tacked on after the contract has been made. If there is a signed contract containing the clause, this will usually have the effect of including it. If there is no signed contract, but there are printed documents or signs posted stating the terms, these can be included in the contract if they are brought to a person’s attention before the contract is made.
The exclusion also has to be legal. For example, there are some important obligations to a consumer that are placed on a trader and these are implied by statute into consumer contracts and cannot be excluded, see: Unsatisfactory Goods and Services.
Courts often give exclusion clauses the narrowest reading possible.
An exclusion clause will generally not cover a breach which occurs outside the 'four corners' of a contract, such as where a trader does something that was not authorised by the contract.
Where a trader has attempted to limit or exclude liability of an implied term a consumer should seek legal advice as the law on this point is both complex and uncertain.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.