Speaker 1: Welcome to Law Path's legal education videos. My name is Damon Murdoch. I've been a lawyer for more than 10 years. Today's question is what makes a legal contract enforceable? Before we get into that, what we need to do is talk about what is a contract and what are the elements. Lawyers work in elements, so we have to prove certain things to establish certain things. So when we look at a contract, there needs to be an offer, a clear offer. There has to be an acceptance, again a clear acceptance. There has to be an intention to create a legal relationship, which we call a meeting of the minds, which is both parties actually understand what the offer was, what the acceptance was, and that they mutually agree to enter into that transaction. And there has to be consideration. Consideration is giving up something for something else. So I'm going to pay you money for good. That's what's called a consideration, and that makes a contract legally binding. So offer, acceptance, intention to create a legal relationship between you and understanding what that relationship is, and consideration, giving up something for something else. Now that is what a contract is. Now what makes it legally binding? And what doesn't make it legally binding? Now first of all, when you look at an offer, there's many different kinds of offers, and there's many different methods of acceptance, and there are many different items within each of these elements. But generally speaking, when you're looking at an offer, it can be a verbal offer. I offer to you to sell my laptop, and you saying I accept that offer, and here's the money. That's a fairly clear exchange because it's a tangible asset, and you can prove that there was an actual transaction done. But what happens if that laptop is no good? What happens if it's broken? Well, was it an intention to sell a broken laptop to you, and did you purposefully accept a broken laptop? You might have seen on Google or eBay where people sell an iPhone box, and they put in the ad, iPhone item for sale, and people pay $1,000 and get delivered an empty box. And then in the description, it says box only. Now the reality is that there was an offer, and there was an acceptance, but was there a mutual intention to legally be bound by the fact that you were only getting a box with no iPhone inside? And this is where you come into different defenses. There's a unilateral mistake, and there's mutual mistake. And where there's a mutual mistake, both parties says, look, we entered into this agreement, we didn't mean to, this is not what we intended, so we either change that agreement or we cancel that agreement. But there's situations where there's a unilateral mistake, where only one person has made a mistake, and they said, well, I didn't enter in to agree to pay $1,000 for an empty box. And that will come down to whether the courts feel that the other side has purposefully not disclosed the mistake, or knew that there was a mistake from the other side, and took advantage of that mistake. So in those circumstances, a contract can be set aside where it can be shown that someone knew the other side had a mistaken belief, and did not tell them about that mistake, and took advantage of that situation. So that is one grounds to find a contract not legally enforceable. You also have things like illegal contracts, where someone says, I am a real estate agent, I am going to sell this land to this person, and I will give you a cut over here if you take some cash from him, and then pay me a cut cash. Now that's going to be an illegal contract because real estate agents are not allowed to take an undisclosed commission. It's against their legislation that deals with their license. And therefore, if they're not allowed to take a secret commission, then in those circumstances the entire contract will be found null and void. So if party C introduced the real estate agent to party A, and then the real estate agent pays party C a referral fee, that could potentially, in New South Wales anyway, be an illegal contract between party C and party A being the real estate agent, or B being the real estate agent, because it's an undisclosed commission, and it's unlawful. And so an entire contract can fall over because it's an illegal contract. There are various different grounds to find a contract binding, and there's a very many ways to find it not binding, and that's why there are so many contract disputes in court. There's a Mateo case which deals with undue influence and duress, where someone didn't necessarily speak English, and in that circumstance they found the contract was unenforceable, because it was unconscionable for a bank to enter into a contract with someone that didn't know the language. There's undue duress, where you put someone into financial pressure, or some kind of duress to sign something, or else they'll do something. That contract's not going to be legally enforceable. There's undue influence, which is similar, where you're actually putting pressure, where sometimes undue influence has an established relationship, where it can be between school teacher and student, or parent and child. Normally it's an established relationship, and there's someone in a position of dominance, or there's someone in a position where they can influence the other. So one example is that lawyers are not supposed to borrow money from a client. It's one breach of their professional obligations, but also they're in a position of what's called a fiduciary position, where they can use influence against the client to get what they want. And in those circumstances, a contract can be found not to be binding. So in short, for a contract to be binding, must be a clear offer. Normally in writing is preferred. There must be acceptance. Preferred to be in writing, otherwise you've got to prove it, that there was an offer acceptance. A mutual understanding of what you're agreeing to, and normally this is why verbal agreements fail, because there might be a handshake, and there might be a mutual agreement on most of the parts, but if it's vague, ambiguous, or uncertain on other points, it's going to fall over. And that's why a written contract normally spells out exactly what the agreement is, and that's why a written agreement is more likely to be enforceable than a verbal agreement. And then you have consideration, giving up something, and the other person having a detriment. And none of these other defenses, no mistakes, no undue influence, no duress. And so if you have a contract, and you're concerned about it, make sure you get legal advice on whether it's binding, and whether it's enforceable. Because the last thing you want to do is issue legal proceedings, and find out afterwards that it's missing the key elements, or there's a very clear defense available to the defendant. Thank you very much for watching this video. If you enjoyed this video, please make sure you subscribe to our YouTube channel, and give us a thumbs up. If you have any questions, visit www.lawpath.com.au. Thank you very much, and I'll see you next time.