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Temporary Update: Common Questions regarding Contracts and COVID-19

Some contracts include a force majeure clause. They are more common in commercial contracts. A force majeure clause will govern who bears the loss when a contract cannot be performed because of a pandemic or other event outside of the control of the parties.

Be careful if relying on a force majeure contract in a consumer or small business contract. The Australian Consumer Law protects consumers and small business from unfair contract terms. A court can declare that a contract term is void if it is unfair. An unfair contract term example might be a force majeure clause that says a consumer cannot get a refund if the supplier cannot supply the service.

For more information about unfair contract terms, see Unfair Contract Terms.

In the absence of a force majeure clause, the parties may rely on the doctrine of frustration.

Frustration applies when something out of the control of the parties stops the performance of the contract. The common law doctrine of frustration says that the losses lie where they fall. This means that neither party is liable to compensate the other for any loss suffered.

The Frustrated Contracts Act 1988 (SA) changes the common law doctrine and can assist parties to reach a fair result. Get legal advice if you are unsure how this legislation applies to your situation.

Contract law is very complex. Although the information given here may be helpful in deciding if a right or remedy exists, expert advice will still be needed.

A person should not sign a contract unless they have read it, understood it, agree with it, and want to be legally bound by it. If they are not sure, they should get legal advice before signing the contact. Once a contract is signed it is usually a legally binding agreement.

What is a contract?

  • A contract is a legally binding agreement between two or more people or companies (called the parties).
  • It is an agreement that the parties intend to be legally binding - or that they would have intended to be legally binding.
  • A contract is made when promises are exchanged to do something in exchange for something else, for example, to supply goods or services for payment of a specified sum of money.
  • Each party to a contract is legally obliged to carry out her or his part of the bargain and a party who fails to do so is in breach of contract - see Breach of Contract. A court can require that person to put things right either by fulfilling the contract (called performance) or paying compensation for any loss (called damages) - see Remedies for Breach of Contract.
Contracts  :  Last Revised: Tue May 5th 2020
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.