The New Zealand law of contracts differs little from that of England, and consequently this article deals with certain aspects only.
A contract is essentially a bargain between two or more persons. All contracts involve a promise but a mere promise is not enough to constitute a contract. Such a promise may be legally binding, for instance, when it takes the form of a deed or, sometimes, where the promisee changes his position in reliance on it. What is necessary to make a contract, however, is that something should be promised or done by the other party in return for the promise. It may be purely nominal, but there must be something to characterise the transaction. This is known technically as consideration. Moreover, the parties must intend to enter into a legal relationship – a social or domestic arrangement is not ordinarily a contract. Most contracts may be oral or in writing. A few contracts are, however, made unenforceable unless in writing. Examples are contracts for the sale, mortgage, or charging of land or for certain other dispositions of land (for example, many leases), contracts of guarantee, customary hire purchase agreements, and agreements with moneylenders.
The Law Reform (Testamentary Promises) Act of 1949 enables effect to be given to an otherwise unenforceable oral agreement to leave land by will in return for the performance of services. The Court is, however, not bound by the exact terms of the agreement and can look at the merits of the case and make whatever order it considers just.
The most important modern development in the field of contract has been the growth of standard contracts, often used by all the members of a particular trade. In certain spheres this has made freedom of contract illusory. An individual wishing to enter into a transaction is often confronted with a standard form of contract, the terms of which he is virtually powerless to alter. Moreover, such contracts often purport to exclude or limit liability. Occasionally Parliament intervenes to prescribe the terms subject to which particular contracts must be read – for example, contracts for the sea carriage of goods and hire purchase agreements, or contracts to prohibit the exclusion of liability, as in the Carriers Act. It is a question, however, whether regulation of the provisions of some other types of standard contract would not be in the public interest.
by Bruce James Cameron, B.A., LL.M., Legal Adviser, Department of Justice, Wellington.
- The Law of Contract, Cheshire, G. C., and Fifoot, C. H. S. (N.Z. Ed. 1961).