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Disclaimer: I’m not a lawyer and I have no claim that this advice should be taken as legal advice in replacement of seeking out professional help. What I hope to do is educate you over a series of small posts about what constitutes a contract and you should be able to figure out when you might need to see a real lawyer. Although this series is in the Australian context many of the principles apply in other countries.

Throughout the Contracts 101 series there has been a central theme that has been driven home – contracts are not flippant agreements that we should be self-authoring. In the web development profession, of which I would claim a token place, there is strong industry-wide promotion of the cost savings for self-authored contracts. Therefore my main point, if you take anything away from this series, is to appreciate the complexity of the simple contract under Common Law.

Avoid Potential Catastrophic Costs

First, there should be an appreciation for why we make contracts. My personal opinion is that a contract is not primarily entered with the motivation of forcing the other party to comply. I would contest that you enter a contract to protect yourself from having to hire lawyers and defend yourself within your own country’s legal system or abroad in other legal systems. The potential catastrophic cost of being held accountable for a misunderstanding between contract parties far outweighs the big stick mentality that most small businesses appear to associate with contractual relationships. Particularly under Common Law systems there needs to be a detailed contract drawn up that covers a lot more than you would need in a Civil Law juristiction.

Only enter Win-Win Contracts

Second, there needs to be an appreciation that contracts should always be worth the cost of creating and performing to your business. By that I don’t mean to denegrate contracts or suggest that you should omit them from your business processes. However, I do mean that flippantly signing contracts that you cannot afford to defend or enforce seems to be a waste of your business time. In other words, negotiation of the contract and ensuring that both parties come to a fair win-win outcome is far more important than the documentation that you walk away with after the agreement is struck. Because the court will not enforce one-sided unfair contracts that you bullied others into entering. And, when you think about it, the unhappy party in a win-lose contract may take your case to court for a judicial outcome – which is expensive and may take months to a decade before resolution.

Know When to Consult a Lawyer

Third, there needs to be an appreciation that hiring a lawyer is a business expense that we need to be prepared to endure. If you cannot justify the expense then the contract is probably not worth your while to take on board. Do you hire an architect? A database engineer? A doctor? An accountant? Then why does it seem to be a catch-cry of the web development industry that we self-author contracts? Hire a legal professional as the need arises – with a view to the potential losses of not hiring them. This boils down to a simple business risk-management decision. Or, more succinctly, if you write your own contracts then employ a legal professional to offer you advice to it’s flaws and validity under Common Law.

Thankyou and Acknowledgements for this Content

Finally I need to reinforce upon you that I am not a lawyer. However, the resources used to collate the Contracts 101 series are taken directly from the University of Tasmania’s MBA program. To that extent, these installments were taken directly from my personal study notes taken early in 2009 and due to the nature of those notes there may, and probably will, be paragraphs or examples directly taken from several of the following resources. As such the sources need to be given and appreciated and I thank the respective authors in advance for their understanding that this information is not repeated in a commercial context.

There is a strong hope on my part that small businesses, particularly web developers, might take this series on board and become a lot smarter about how we deal with contracts.

Resources for this Series

The bulk of this information is obtained through Australian Business Law 26^th edition by Paul Lattimer, Managers and the Law: A guide for Business Decision Makers by Lynden Griggs, Eugene Clark and Ian Iredale, A Guide to Business Law thirteenth edition by John Carvan, John Gooley and Evelyn McRae, Law in Commerce third edition by Brendan Sweeney and Jennifer O’Reillly, as well as through the MBA unit BFA682 Law for Managers taught at the University of Tasmania by Simone Watson in 2009. These resources are highly recommended for improving your understanding about these issues. Many case files hyperlinked within this series are directly accessed via the Austlii database (Australia) and the BAILLI database (United Kingdom).

Installments in Contracts 101

• Contracts 101 – Part 1: Outline
• Contracts 101 – Part 2: Which Contract?
• Contracts 101 – Part 3: The Six Elements
• Contracts 101 – Part 4: The Agreement
• Contracts 101 – Part 5: The Offer
• Contracts 101 – Part 6: The Acceptance
• Contracts 101 – Part 7: Battle of the Forms
• Contracts 101 – Part 8: Consideration
• Contracts 101 – Part 9: Capacity
• Contracts 101 – Part 10: Legality of Object
• Contracts 101 – Part 11: Possibility of Performance
• Contracts 101 – Part 12: Genuine Consent
• Contracts 101 – Part 13: Promissory Estoppel
• Contracts 101 – Part 14: Ending the Contract
• Contracts 101 – Conclusion: Protect your Business