Essential Elements of a Legally Enforceable Contract in NSW

In New South Wales, a contract is generally legally enforceable when there is an agreement (an offer that has been accepted), each side gives something of value (consideration), the parties intend to be legally bound, the essential terms are certain and complete, and each party has the legal capacity to contract. The agreement must also be made with genuine consent and must not be for an unlawful purpose. Some contracts, such as contracts for the sale of land, generally cannot be enforced unless the agreement, or a note of it, is in writing and signed.

Element	What it means in plain English	Key authority
1. Agreement	One party makes a clear offer and the other accepts it on the same terms	Australian Woollen Mills Pty Ltd v Commonwealth [1954] HCA 20
2. Consideration	Each side gives or promises something of value in return for the other’s promise	Australian Woollen Mills Pty Ltd v Commonwealth [1954] HCA 20
3. Intention to be legally bound	Judged objectively from what the parties said and did	Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8
4. Certainty and completeness	The essential terms are agreed and clear enough to enforce	Masters v Cameron [1954] HCA 72
5. Capacity	Each party is legally able to enter the contract	Minors (Property and Contracts) Act 1970 (NSW); Gibbons v Wright [1954] HCA 17
6. Genuine consent	If a party was misled, pressured or unfairly taken advantage of, the contract may be set aside, varied or give rise to other remedies	Australian Consumer Law s 18; Commercial Bank of Australia Ltd v Amadio [1983] HCA 14
7. Lawful purpose	The contract is not for an illegal purpose	General law principle
8. Formalities (where required)	Some contracts cannot be enforced unless there is signed writing	Conveyancing Act 1919 (NSW) s 54A

If you are about to sign an important agreement, or you are unsure whether a deal you have already made is binding, our team at Caspian Legal can review it with you before you take the next step. Call 02 7264 3200 to book a consultation.

Who is this article for?

Contract problems often start well before any dispute. A Hornsby business owner agrees to supplier terms by email. A tradesperson in Waitara starts work on the strength of a text message. Family members lend money without writing anything down. When something goes wrong, the first question is often whether a binding contract was ever made, and on what terms.

This article is for individuals and small businesses in Hornsby and across the Upper North Shore who want to understand what makes a contract enforceable, before they sign or when a deal is in doubt.

Jurisdiction: this article explains the general law of contract as it applies in New South Wales, together with relevant Commonwealth laws such as the Australian Consumer Law. Other states and territories have their own legislation. Specialised contracts, such as employment, consumer credit, residential tenancy, home building and franchising contracts, can carry additional rules that are not covered here.

What do the key contract terms mean?

Term	Plain-English meaning
Offer	A clear proposal by one party to be bound on specific terms if the other party accepts.
Acceptance	Agreement to the offer on the same terms, without changes.
Counter-offer	A reply that changes the terms. It is generally treated as a new offer rather than an acceptance.
Consideration	The price paid for a promise. It can be money, goods, services, or a promise to do or not do something.
Deed	A formal written document that can bind a party even without consideration, if it is properly signed and meets the legal requirements for a deed.
Void	Treated as having no legal effect.
Voidable	Valid unless and until the affected party takes steps to set it aside, where the law allows this.
Unenforceable	An agreement may exist, but a court will not enforce it, for example because a required formality is missing.
Standard form contract	A pre-written contract prepared by one party and offered on a take it or leave it basis.
Execution	Formally signing a document so that it binds the person or company signing it.

What are the essential elements of a legally enforceable contract in NSW?

Australian contract law comes mainly from decisions of the courts, supported by legislation. The elements below are the ones courts commonly examine when deciding whether a contract exists and can be enforced.

1. Is there an agreement (offer and acceptance)?

Short answer: a contract needs a clear offer that is accepted on the same terms.

Courts look at the words and conduct of the parties objectively, rather than at what one party privately thought. Advertisements, price lists and general statements of intention are often not offers. In Australian Woollen Mills Pty Ltd v Commonwealth [1954] HCA 20, the High Court found that a government announcement about a wool subsidy was a statement of policy rather than a contractual promise, so no contract was formed.

Example: a Pennant Hills café owner emails a supplier offering to buy 50 units at $20 each. The supplier replies, “Yes, but $22 each.” That reply is a counter-offer, not an acceptance, and there may be no contract until the café owner agrees to the new price.

Risk: long email chains with changing terms can make it unclear what, if anything, was finally agreed.

2. Has something of value been exchanged (consideration)?

Short answer: each party must give, or promise to give, something in return for the other party’s promise.

Consideration does not have to be money, and as a general rule courts do not ask whether the bargain was a good one. What matters is that the promise and what is given in return are linked as a bargain. In Australian Woollen Mills, the High Court explained that the promise must be offered in exchange for the act, and the act must be done in exchange for the promise. A bare promise to make a gift is generally not enforceable as a contract. A properly executed deed is the usual exception.

Example: a parent says they will give an adult child $10,000 as a gift. That is generally a promise of a gift, not a contract. If the child promises to repay the money by instalments, the arrangement may look more like a loan.

Risk: informal loans between family members and friends are a common source of disputes about whether money was a gift or a loan.

3. Did the parties intend to be legally bound?

Short answer: the parties must objectively intend their agreement to have legal consequences.

In Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8, the High Court held that intention to create legal relations is assessed objectively, by looking at what the parties said and did and at all the surrounding circumstances. The Court doubted the usefulness of relying on fixed presumptions. In practice, commercial dealings are usually found to be intended as binding, while arrangements between family members or friends need closer examination of the facts.

Example: two neighbours in Wahroonga agree to share the cost of a new boundary fence. Whether that is a binding contract depends on what they said, whether it was written down, and how they acted afterwards.

Risk: assuming that a family or social arrangement can never be binding, or assuming that it always is.

4. Are the essential terms certain and complete?

Short answer: the essential terms must be agreed and be clear enough for a court to enforce.

An agreement that leaves important terms to be agreed later, or uses vague language, may not be a contract at all. In Masters v Cameron [1954] HCA 72, the High Court described three types of situations where parties reach agreement but intend to sign a formal document later. In broad terms:

• the parties are bound straight away, and the formal document will simply record what they have agreed;
• the parties have agreed on all the terms, but performance of one or more terms depends on signing the formal document; or
• there is no binding contract at all until the formal document is signed.

Which category applies depends on the intention of the parties, assessed objectively. Words such as “subject to contract” or “subject to formal documentation” often point to the third category, but the wording is not always decisive.

Example: a buyer and seller of a small business in Hornsby sign heads of agreement “subject to a formal sale agreement”. The buyer later pulls out. Whether the buyer was bound will depend on the whole document and the surrounding circumstances.

5. Do the parties have legal capacity?

Short answer: each party must be legally able to enter into the contract.

Minors: in NSW, contracts with people under 18 are governed by the Minors (Property and Contracts) Act 1970 (NSW). Under Part 3 of that Act, a contract that is for the minor’s benefit at the time it is made is presumptively binding on the minor (section 19). Other provisions of the Act deal with when a minor can repudiate (reject) a contract and how a court may adjust the parties’ positions.

Mental capacity: in Gibbons v Wright [1954] HCA 17, the High Court held that the level of understanding required depends on the particular transaction. Each party must be capable of understanding the general nature of what they are doing. Where a person lacked that capacity, the contract may be set aside in some circumstances, particularly where the other party knew or should have known of the incapacity.

Companies: a company enters contracts through authorised officers or agents (see also section 126 of the Corporations Act 2001 (Cth)). Under section 127 of the Corporations Act 2001 (Cth), a company may execute a document without a common seal if it is signed by two directors, a director and a company secretary, or, for certain proprietary companies, a sole director. Section 127 is not the only way a company can sign, but using it generally allows the other party to rely on statutory assumptions about proper execution (sections 128 and 129). Those assumptions cannot be relied on by a person who knew or suspected they were incorrect.

6. Was consent genuine?

Short answer: a contract may be set aside or affected if a party was misled, pressured or unfairly taken advantage of.

• Misleading or deceptive conduct: section 18 of the Australian Consumer Law prohibits conduct in trade or commerce that is misleading or deceptive, or likely to mislead or deceive. Depending on the facts, a court may award damages or make other orders, which can include varying or setting aside the contract (ACL sections 236, 237 and 243). An “entire agreement” clause in a contract will not necessarily prevent a claim of this kind.
• Unconscionable dealing: in Commercial Bank of Australia Ltd v Amadio [1983] HCA 14, the High Court set aside a guarantee and mortgage where the bank took unfair advantage of elderly guarantors who were at a special disadvantage. The Australian Consumer Law also prohibits unconscionable conduct (sections 20 and 21).
• Unjust contracts: the Contracts Review Act 1980 (NSW) allows the court to grant relief where a contract was unjust when it was made (section 7). Relief is generally not available to a person so far as they entered into the contract in the course of, or for the purpose of, their trade, business or profession, other than a farming undertaking (section 6(2)).
• Unfair contract terms: Part 2-3 of the Australian Consumer Law deals with unfair terms in standard form consumer and small business contracts. According to the ACCC, since 9 November 2023 proposing, using or relying on unfair contract terms in these contracts is prohibited and penalties can apply.
• Duress and undue influence: under the general law, a contract obtained through illegitimate pressure or improper influence may also be set aside.

Risk: these remedies depend on the facts, can involve court discretion, and may be subject to time limits. They are not automatic.

7. Is the purpose lawful?

Short answer: courts will generally not enforce a contract made to achieve an illegal purpose.

The consequences of illegality vary. Sometimes the whole contract is unenforceable, and sometimes only part of it. The answer can depend on the terms of the relevant legislation and the facts, so this is an area where individual advice is important.

8. Does the contract need to be in writing or signed?

Short answer: many contracts can be made orally, in writing, or by conduct, but some must be in writing and signed.

• Land: under section 54A of the Conveyancing Act 1919 (NSW), no action can be brought on a contract for the sale or other disposition of land, or any interest in land, unless the agreement (or a note or memorandum of it) is in writing and signed by the party against whom it is being enforced, or by a person lawfully authorised by them. The section preserves the law of part performance and confirms that electronic contracts and electronic signatures are not invalid for that reason alone.
• Electronic signatures: section 9 of the Electronic Transactions Act 2000 (NSW) allows a legal requirement for a signature to be met electronically if the method identifies the person and indicates their intention, the method is reliable enough for its purpose (or in fact fulfils those functions), and the person receiving the signature consents to that method.
• Companies: see the section 127 execution rules described above.
• Specialised contracts: some areas, such as home building, consumer credit and residential leases, have their own documentation requirements.

Void, voidable or unenforceable: what is the difference?

Status	What it means	Example
Valid and enforceable	All the essential elements are present and any formalities are met	A signed supply agreement between two businesses
No contract formed	An essential element is missing, so no contract ever came into existence	Terms were still being negotiated when one party walked away
Void	The law treats the contract as having no legal effect	An agreement the law declares to be of no effect
Voidable	Valid until the affected party takes steps to set it aside	A contract obtained by unconscionable dealing or misrepresentation, subject to the court’s approach to relief
Unenforceable	An agreement may exist, but a court will not enforce it	An oral agreement to sell land with no signed written note or memorandum (s 54A), subject to part performance

Is a verbal agreement legally binding in NSW?

Often, yes. A verbal (oral) agreement can be a binding contract if all the essential elements are present, unless the law requires signed writing before that type of contract can be enforced, as with a contract for the sale of land. The practical difficulty is proof. Without a written record, it can be hard to show what was agreed, so emails, messages, invoices and payment records often become important evidence.

How should you check a contract before you sign it?

1. Confirm who the parties are. Use full legal names, and the correct company name, ACN or ABN.
2. Check what each side is giving and getting: price, scope of work, deliverables and dates.
3. Make sure the essential terms are complete. Watch for phrases such as “to be agreed”.
4. Look for conditions, “subject to” wording and any cooling-off period.
5. Read the termination, liability, indemnity, guarantee and automatic renewal clauses carefully.
6. Check how the document must be signed: by a company under section 127, with a witness, as a deed, or electronically.
7. Keep a complete signed copy, including all schedules and attachments, and the key correspondence.
8. Get legal advice before signing contracts that are high value, long term, involve land or a business sale, or include a personal guarantee.

What documents should you bring to a consultation?

• The contract or draft contract, including every version you received
• Emails, text messages and other messages exchanged during negotiations
• Quotes, invoices, receipts and bank records of any payments
• Company or business details, such as an ASIC company extract or ABN lookup
• Any letters of demand or notices you have sent or received
• A short timeline of key dates and events
• The names and roles of the people involved

What should you not do?

• Do not sign under pressure or before you have read the whole document, including attachments.
• Do not rely on verbal promises that are not in the written contract. Many written contracts include an “entire agreement” clause, which may limit reliance on things said outside the document, although it will not necessarily prevent statutory claims such as misleading or deceptive conduct.
• Do not start work or pay money before the terms are settled, unless you are prepared to be bound.
• Do not ignore a letter of demand, statement of claim or other court document.
• Do not send emails or messages about a dispute that concede fault or liability before getting advice.
• Do not assume an online template suits NSW law or your circumstances.
• Do not let time limits pass while you wait to see what happens.

What are the common myths and mistakes?

Myth	The legal position
“It’s not a contract unless it’s signed.”	Many contracts can be formed orally or by conduct. Some types, such as land contracts, generally cannot be enforced without signed writing.
“An email can’t be a binding contract.”	Emails can form or record a contract, and electronic signatures are recognised in many cases under the Electronic Transactions Act 2000 (NSW).
“Subject to contract means we are never bound.”	It usually indicates there is no binding deal yet, but the overall intention of the parties decides the question (Masters v Cameron).
“A handshake deal with family can’t be enforced.”	It depends on the objective intention of the parties and the circumstances (Ermogenous).
“If a term is unfair, I can just walk away.”	Relief depends on a specific legal basis and the facts. Walking away without advice may itself be a breach of contract.
“A template covers everything.”	Templates often miss terms that matter to your deal, or include terms that do not suit NSW law or your business.

Are there time limits for contract claims in NSW?

Yes. Under the Limitation Act 1969 (NSW), an action founded on a contract generally cannot be brought more than six years after the date the cause of action first accrues (section 14), and an action on a deed generally has a 12-year limitation period (section 16). Other claims, such as those under the Contracts Review Act 1980 (NSW) or the Australian Consumer Law, have their own time limits, which may be shorter. Working out when time starts to run can be complex, so it is safer to seek advice early rather than wait.

Where can you get contract advice in Hornsby?

Caspian Legal is a Hornsby law firm, established in 2015, located at Suite 1, 22-28 Edgeworth David Avenue, Hornsby. We assist individuals and small businesses in Hornsby and surrounding Upper North Shore suburbs, including Waitara, Asquith, Wahroonga, Normanhurst, Thornleigh, Pennant Hills and Berowra. Consultations are available in English and Farsi (Persian).

We can review a contract before you sign it, explain what your obligations are, and help you understand your options if there is a disagreement about whether a contract is binding.

What happens at your first consultation?

1. We review your contract, correspondence and timeline.
2. We identify the key issues, such as whether a contract was formed, what the terms are, and any time limits.
3. We explain your options and the likely next steps in plain English.
4. We explain our fees and give you costs information as required under the Legal Profession Uniform Law before any further work begins.

Frequently asked questions

What makes a contract legally binding in NSW?

Generally, there must be an offer and acceptance, consideration, an intention to be legally bound, certain and complete terms, and parties with legal capacity. Consent must be genuine and the purpose lawful. Some contracts also need signed writing before they can be enforced.

Is a verbal agreement legally binding in NSW?

It can be, if the essential elements are present and the law does not require writing for that type of contract. For example, under section 54A of the Conveyancing Act 1919 (NSW), a contract for the sale of land generally cannot be enforced by court action unless the agreement, or a note or memorandum of it, is in writing and signed, subject to the law of part performance.

Are electronic signatures valid in NSW?

In many cases, yes. Section 9 of the Electronic Transactions Act 2000 (NSW) sets out when an electronic signature satisfies a legal requirement for a signature. Some documents have special signing or witnessing rules, so check before relying on an electronic signature for an important document.

Can I get out of a contract I have already signed?

It depends. The contract may contain a termination or cooling-off right, or you may have a legal basis such as misleading conduct, unconscionable conduct or a serious breach by the other party. Ending a contract without a proper basis can expose you to a claim, so get advice before you act.

Is a contract with a person under 18 binding?

In NSW, a contract that is for the minor’s benefit at the time it is made is presumptively binding on the minor under the Minors (Property and Contracts) Act 1970 (NSW). Other contracts may not bind the minor, and the Act contains detailed rules about repudiation and court orders.

Does “subject to contract” mean the deal is not binding?

Usually it indicates that the parties do not intend to be bound until a formal contract is signed, but courts look at the whole of the circumstances. The High Court’s decision in Masters v Cameron is the leading authority.

How long do I have to take action for breach of contract in NSW?

Generally six years from when the cause of action accrues, or 12 years for a deed, under the Limitation Act 1969 (NSW). Different time limits may apply to other types of claims.

Do I need a lawyer to make a contract?

No. Most contracts do not need a lawyer to be valid. However, legal advice can help you avoid gaps and unfavourable terms, particularly for high-value, long-term or land-related agreements.

Speak with a Hornsby contract lawyer

If you are about to sign an agreement, or you are unsure where you stand under a contract you have already made, it is worth getting advice before you take the next step. Contact Caspian Legal to discuss your options.

Caspian Legal Pty Ltd
Level 1, 22-28 Edgeworth David Avenue, Hornsby NSW 2077
Phone: 02 7264 3200
Website: caspianlegal.com.au
Visit our Google Business Profile to read more reviews and get directions to our Hornsby office.

About the reviewer

Reviewed by Ryan Lasaki, Principal Solicitor, Caspian Legal. Ryan is the Principal Solicitor of Caspian Legal Pty Ltd, a New South Wales law practice based in Hornsby.

Last updated: September 2026.

Disclaimer

This article is general information only and is not legal advice. It reflects the law in New South Wales and relevant Commonwealth law as at the date above. The law and its application can change, and your situation may involve facts or exceptions not covered here. You should obtain legal advice about your specific circumstances before acting.

Sources

1. Conveyancing Act 1919 (NSW) s 54A: classic.austlii.edu.au/au/legis/nsw/consol_act/ca1919141/s54a.html
2. Electronic Transactions Act 2000 (NSW) s 9: classic.austlii.edu.au/au/legis/nsw/consol_act/eta2000256/s9.html
3. Minors (Property and Contracts) Act 1970 (NSW): legislation.nsw.gov.au/view/whole/html/inforce/current/act-1970-060
4. Contracts Review Act 1980 (NSW): legislation.nsw.gov.au/view/whole/html/inforce/current/act-1980-016
5. Limitation Act 1969 (NSW): legislation.nsw.gov.au/view/html/inforce/current/act-1969-031
6. Competition and Consumer Act 2010 (Cth) Schedule 2 (Australian Consumer Law): legislation.gov.au/C2004A00109/latest/text
7. Corporations Act 2001 (Cth) s 127: austlii.edu.au/au/legis/cth/consol_act/ca2001172/s127.html
8. Australian Woollen Mills Pty Ltd v Commonwealth [1954] HCA 20; (1954) 92 CLR 424: hcourt.gov.au
9. Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353: hcourt.gov.au
10. Gibbons v Wright [1954] HCA 17; (1954) 91 CLR 423: hcourt.gov.au
11. Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447: austlii.edu.au/au/cases/cth/HCA/1983/14.html
12. Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95: hcourt.gov.au
13. ACCC, Contracts (unfair contract terms guidance): accc.gov.au/business/selling-products-and-services/contracts