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Contract Law

What Makes a Contract Valid?

Freewill, informed agreement

The parties must be fully appraised of the terms, or at least have the opportunity to appraise themselves. If a party was not made aware of the terms on offer, then they cannot have agreed to the terms. This is dealt with in Oceanic Sun Line Special Shipping v Fay,[1] where a cruise ship ticket was issued subject to terms that sole jurisdiction would be with the courts of Greece. The plaintiff was injured on board and insisted on suing in New South Wales. The terms were written on the ticket and displayed at the company office, but the passenger had no reasonable opportunity to view them first.


The court ruled that the contract was formed at the moment of issue, so the terms on the ticket, which were only viewable after the issue of the ticket, were void. It was required by the court that the company should do all it reasonably can to bring the terms to the passenger’s attention; otherwise such terms cannot be relied on by the company in its defence. However the court found the rest of the contract not on the ticket was still valid.


Standard Form Contracts

Standard form contracts follow the same rules as any other written contract, just as if it was fully negotiated. In practice issues sometimes arise with opaque wording and onerous terms which can compromise a claim as to free, informed agreement...


This also applies to online contracts where a click of a button substitutes as a signature. Anything electronic can be falsified easily, so as evidence of the agreement, online contracts are flimsy – beware of the offeror.




[1] Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197.

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