Contracts Act

This section provides definitions of terms used in the Act, including 'acceptance', 'agreement', 'coercion', 'consent', 'consideration', 'contract', 'currency point', 'documents of title to goods', 'mercantile agent', 'Minister', and 'misrepresentation'.

Communication of an offer, acceptance or revocation is effected by an act or omission of the relevant party that either intends to or has the effect of communicating it.

An offer is communicated (complete) when it comes to the knowledge of the person to whom it is made; for certain legal effects it is complete when put into a course of transmission so as to be out of the sender's power or when it comes to the other party's knowledge.

An offer or an acceptance may be revoked at any time before the communication of the acceptance is complete.

An offer is revoked by (1) communication of revocation by the offeror to the other party; (2) lapse of the prescribed time or a reasonable time; (3) failure of the acceptor to fulfil a condition precedent; or (4) the offeror's death or mental illness if known to the acceptor before acceptance.

An offer becomes a promise when acceptance is absolute, unqualified and expressed in a usual and reasonable manner; if an offer prescribes manner of acceptance and acceptance is not made in that manner the offeror may (within a reasonable time) demand prescribed manner, and if the offeror fails to demand, the offeror is deemed to have accepted the manner offered by the offeree.

Performing the conditions of an offer or accepting consideration for a reciprocal promise offered with an offer constitutes acceptance of the offer.

Defines a promise as either express (when an offer or acceptance is made verbally or in writing) or implied (when an offer or acceptance is not made verbally or in writing).

A contract contingent on an uncertain future event is not enforceable until that event occurs, and becomes void if the event becomes impossible.

If a contract depends on an uncertain future event that does not occur, the contract may be enforced only after it becomes impossible for that event to happen, and not before.

If a contract depends on a person acting at an unspecified time, the event is treated as unattainable when that person does anything that makes it impossible for them to act within a definite time or under further contingencies.

A contract contingent on an event occurring within a specified time becomes void if the fixed time expires without the event occurring, or if it becomes certain before that time that the event will not happen.

An agreement that is contingent on an impossible event is void.

If there is no contract to the contrary, a bailee must deliver to the bailor any increase or profit that has accrued from the bailed goods.

A bailor must compensate a bailee for any loss the bailee sustains if the bailor was not entitled to make the bailment, to receive the goods back, or to give directions about the goods.

A bailee may return bailed goods to one joint owner or follow that owner's directions without needing the other owners' consent, provided there is no agreement to the contrary and the goods were bailed by several joint owners.

If the bailor has no title and the bailee in good faith returns the goods to the bailor (or follows the bailor's directions), the bailee is not responsible to the owner for that delivery.

A person (other than the bailor) who claims bailed goods may apply to court to stop delivery to the bailor and to have the court decide who owns the goods.

A finder of goods generally has no right to sue the owner for compensation for trouble and expense incurred to preserve and locate the goods; however, if the owner offers a specific reward for return, the finder may retain the goods until payment and may sue for that reward.

If the finder cannot locate the owner or the owner refuses to pay lawful finder’s charges, the finder may sell the goods when they are in danger of perishing or losing most of their value, or when the lawful charges amount to two‑thirds of the goods' value.

A bailee may retain bailed goods until they receive the remuneration due for services rendered, subject to the bailment's purpose and absent a contrary contract.

Certain persons (bankers, brokers, warehouse keepers, advocates, insurance brokers or others authorised by law) may retain goods bailed to them as security for a general balance of account unless there is a contract to the contrary; other persons may not retain such goods unless there is an express contract.

A pledgee may retain pledged goods to secure payment of a debt or performance of a promise, interest on the debt, and necessary expenses for possession or preservation of the goods.

A pledgee must not retain pledged goods except for the purpose for which they were pledged, unless there is a contract allowing retention.

A pledgee must not receive from a pledgor extraordinary expenses incurred by the pledgee for preserving any pledged goods.

If the pledgor defaults, the pledgee may sue and keep the pledged goods as security or sell them after giving reasonable notice; if sale proceeds exceed the debt the pledgee must pay the surplus to the pledgor, and if proceeds are less the pledgor is not liable for the balance.

If a pledgor defaults when time is stipulated for payment or performance, the pledgor may redeem the pledged goods before they are sold and must pay any expenses arising from that default when redeeming.

A mercantile agent in possession of goods or their title documents with the owner's consent may validly pledge them when acting in the ordinary course of business; a pledgee under that pledge is treated as acting in good faith and without notice of lack of authority, and a pledgee who acts in good faith without notice acquires good title in the specified circumstances.

If a person pledges goods in which they have a limited interest, the pledge is valid to the extent of that interest.

If a third person wrongfully deprives or damages bailed goods, the bailee may use the remedies the owner could have used; a bailor or bailee may sue that third person; any relief recovered is allocated between bailor and bailee according to their interests.

Defines terms used in this Part: bailee, bailment, bailor, pledge, pledgee, and pledgor.

If a person in possession of goods under another contract holds the goods as bailee, that person becomes the bailee and the owner becomes the bailor of the goods.

Delivery to a bailee may be effected by any act that puts the goods into the possession of the intended bailee or a person authorised to hold them for the bailee.

A bailor must disclose to a bailee any fault in bailed goods that the bailor knows about and that materially interferes with use or exposes the bailee to extraordinary risk; bailee should inspect on delivery when practicable; bailor is liable for damage if disclosure is not made and is liable for damage for goods bailed for hire even if unaware of the fault.

A bailee must take as much care of the goods bailed to them as a prudent person would take of their own goods of the same bulk, quantity and value.

If there is no special contract and the bailee exercises the care required by section 91, the bailee is not responsible for loss, destruction or deterioration of the bailed goods.

The bailor may void a contract of bailment if the bailee does any act in relation to the bailed goods that is inconsistent with the bailment's conditions.

If a bailee uses the bailed goods contrary to the bailment conditions, the bailee must compensate the bailor for any damage to the goods caused by that use.

When a bailee mixes the bailor’s goods with the bailee’s goods with consent they share ownership proportionally; without consent separable goods remain the parties’ property and the bailee must bear separation costs and damages; if inseparable the bailor is entitled to compensation.

When goods are bailed and the bailee receives no remuneration, the bailor must repay the necessary expenses the bailee incurred for the bailment.

A bailee must return or deliver the bailed goods to the bailor without demand, following the bailor's directions, when the bail period or purpose ends.

If a bailee's fault causes goods not to be returned on time, the bailee is responsible to the bailor for any loss, destruction or deterioration of the goods from that time.

A gratuitous bailment ends when any of these occur: the goods are returned; the bailment time expires; the parties agree; the subject matter is destroyed; or the bailor or bailee dies.

A person who supplies necessaries to someone incapable of contracting is entitled to be reimbursed from that incapable person's property.

A person who enjoys a non-gratuitous benefit must compensate the provider for what was done or delivered; no compensation is due if the beneficiary had no opportunity to accept or reject the benefit.

A person who finds goods belonging to another and takes them into custody must have the same responsibilities as a bailee.

A person who receives money or anything by mistake must repay or return it.

An injured party is entitled to compensation from the party who breaches a contract for loss or damage caused by the breach, but not for remote and indirect loss.

A person who breaches the condition of certain instruments is liable to pay the whole sum mentioned; the party complaining of a breached contract is entitled to reasonable compensation up to the sum or stipulated penalty.

A party who rightfully rescinds a contract is entitled to compensation for damage caused by the contract's non-fulfilment.

A party is not entitled to specific performance of a contract in certain listed situations; where a party is in breach the other party may seek a court order for specific performance, and where breach is not fundamental specific performance may be available subject to paying compensation.

A person who is not a party to a contract may enforce a contractual term in their own right where the contract expressly allows it or the term confers a benefit, subject to specified exceptions; the third party must be identified and has the remedies available to a contracting party.

When a contract is frustrated or becomes impossible to perform and the risk of impossibility was not assumed, the parties are discharged; the other party may recover from the party who obtained a benefit a sum not exceeding the value of that benefit, and the court may allow retention or recovery of sums to cover expenses.

Rights, duties, or liabilities under a contract may be varied by express agreement, by the parties' course of dealing, or by usage or custom that would bind both parties.

This Part provides definitions for terms used in the Part, including creditor, continuing guarantee, contract of guarantee, contract of indemnity, guarantor, indemnity and principal debtor.

A promisee under an indemnity contract is entitled to recover from the promisor damages, costs, and sums paid in compromise of suits subject to the conditions stated.

Anything done or any promise made for the benefit of a principal debtor may be sufficient consideration to a guarantor to give a guarantee.

A guarantor is liable to the same extent as the principal debtor, unless a contract provides otherwise.

A guarantor may revoke a continuing guarantee for future transactions at any time by giving notice to the creditor; the guarantor's death revokes the continuing guarantee for future transactions in the absence of a contrary contract.

Where two persons are jointly liable to a third party, a separate private agreement between those two that one will act as guarantor for the other does not reduce or alter their liability to that third party, even if the third party does not know about the private agreement.

If a principal debtor and creditor vary a contract without a guarantor's consent, the guarantor is discharged from any transaction after that variance.

A guarantor is discharged when a contract between the creditor and the principal debtor releases or otherwise discharges the principal debtor.

If a creditor compromises with or gives time to the principal debtor or agrees not to sue, that contract discharges the guarantor unless the guarantor assents.

If a creditor contracts with a third person (not the principal debtor) to give time to the principal debtor, the guarantor is not discharged.

Mere forbearance by a creditor to sue the principal debtor or to enforce any remedy against the principal debtor does not discharge the guarantor, unless the guarantee provides otherwise.

If a creditor releases one co‑guarantor, that release does not discharge the other co‑guarantor nor free the released guarantor from responsibility to the other.

A guarantor is discharged if the guarantor's eventual remedy against the principal debtor is impaired because a creditor either does acts inconsistent with the guarantor's rights or omits acts the creditor owes to the guarantor.

When a guaranteed debt is due or the principal debtor defaults, and the guarantor pays or performs what they are liable for, the guarantor acquires all the rights the creditor had against the principal debtor.

A guarantor is entitled to the benefit of every security a creditor has against the principal debtor when the guarantorship contract is made; if the creditor loses or parts with that security without the guarantor's consent, the guarantor is discharged to the extent of the value of the security.

If a creditor makes, or knowingly assents to, a misrepresentation about a material part of the transaction by which a guarantee is obtained, the guarantee is void.

A guarantee that a creditor will not act until a co‑guarantor joins is invalid if that other person does not join.

In a contract of guarantee, the principal debtor implicitly promises to indemnify the guarantor; the guarantor is entitled to recover from the principal debtor any sum the guarantor rightfully paid under the guarantee.

Co-guarantors must each pay an equal share of the whole debt (or the unpaid part) between themselves unless a contract says otherwise.

Co-guarantors bound in different sums must pay equally, subject to the limits of their respective obligations.

Defines the terms “agent”, “principal” and “sub-agent”.

A person may employ an agent if the person is eighteen years or above, of sound mind, and not disqualified by law.

A person may act as an agent if they are at least eighteen years old, of sound mind, and not disqualified by any law.

Consideration is not necessary to create an agency.

An agent's authority may be express (given by spoken or written words) or implied (inferred from the circumstances).

An agent authorised to do an act may do anything lawful and necessary to carry out that act; an agent authorised to carry on a business may do anything necessary for carrying on the business or usually done in conducting it.

In an emergency, an agent has the authority to do any act to protect a principal from loss, limited to what a reasonably prudent person would do in similar circumstances.

An agent must not employ another to perform an act the agent undertook to perform personally; however, a sub-agent may be employed when ordinary trade custom or the nature of the agency allows it.

If an agent properly appoints a sub-agent, the principal is treated as represented by that sub-agent and is bound by the sub-agent's acts; agents are responsible to principals for sub-agents' acts; sub-agents are responsible to agents but not to principals except for fraud or wilful wrongdoing; agents may not delegate their authority.

When an agent who lacked authority appoints a sub-agent and stands as principal to that sub-agent and is responsible for the sub-agent's actions toward the principal and third persons, the original principal is not represented by or responsible for the sub-agent's acts, and the sub-agent is not responsible to the principal.

A person named by an agent to act for the principal is not a sub-agent of the principal but is an agent for the part of the business entrusted to them.

When choosing another agent for a principal, an agent must exercise the same discretion an ordinarily prudent person would; if the agent does so, the selecting agent is not responsible to the principal for the acts or negligence of the selected agent.

A person on whose behalf an act is done may either ratify or disown that act.

Ratification can be either express or implied by the conduct of the person on whose behalf an act is done.

Only a person whose knowledge of the facts is not defective may validly ratify an act.

If a person ratifies an unauthorised act done on their behalf, the whole transaction of which that act forms part is ratified.

An unauthorised act done for another person that would, if authorised, harm a third person (by causing damages or ending a third person's interest) cannot be made to have that effect by ratification.

An agency ends in specified circumstances, including revocation by the principal, renunciation by the agent, completion of the agency business, death or mental illness of principal or agent, adjudication of insolvency of the principal, mutual agreement to terminate, or frustration of the agency purpose.

If an agent has an interest in the property that is the subject matter of an agency, the agency must not be terminated so as to prejudice that interest unless there is an express contract.

A principal may revoke authority given to an agent before it is exercised to bind the principal, subject to section 135.

A principal must not revoke an agent's authority after that authority has been partly exercised for acts and obligations arising from acts already done under the agency.

If an agency is ended or renounced without reasonable cause in breach of a contract promising it would last for a set period, the principal or the agent must compensate the other party.

A party who revokes or renounces an agency must give reasonable notice to the other party and must make good any damage suffered.

Revocation and renunciation may be express or implied.

Termination of an agent's authority does not take effect until the agent knows of it, and with regard to a third party until the third party knows of it.

When an agency ends because the principal dies or suffers mental illness, an agent must take all reasonable steps to protect and preserve the interests entrusted to them.

If an agent’s authority is terminated, the authority of any sub-agent appointed by that agent is also terminated, subject to section 146.

An agent must follow the principal's directions when conducting the principal's business, or if there are no directions, follow local usage and customs; where the agent acts contrary to that duty the agent must make good losses and account for profits.

Agents must act with reasonable diligence and skill and must compensate principals for direct losses caused by the agent's neglect, lack of skill or misconduct, except for indirect or remote losses; the principal's notice of lack of skill by the agent is a qualification.

An agent must render proper accounts to a principal on demand.

An agent must, when in difficulty, use all reasonable diligence to communicate with the principal and seek the principal's instructions.

The principal may repudiate a transaction if an agent, dealing on the agent's own account without the principal's consent and without informing the principal of material circumstances, has dishonestly concealed material facts or the agent's dealings are unfavourable to the principal.

A principal may claim from an agent any benefit the agent gained from dealing in the agency's business without the principal's knowledge and consent.

An agent may retain sums received on account of the principal to cover advances, expenses and remuneration; an agent may also retain sums received on account of goods sold even if consignment sales are incomplete.

An agent must pay to the principal all sums received on the principal's account, subject to deductions under section 150(1).

If there is no special contract, payment for performing an act must not be made to an agent until that act is completed.

An agent who is guilty of misconduct in the agency business must not be paid for that part of the business.

An agent is entitled to retain a principal's goods until the principal pays or accounts for amounts due for commission, disbursements and services.

A principal must indemnify an agent for lawful acts done by the agent within the authority given, and must indemnify an agent who, acting in good faith under the principal's employment, suffers loss or liability from that act.

If a principal employs an agent to commit a criminal act, the principal is not liable to indemnify the agent for the consequences of that act.

A principal must compensate an agent for any injury caused to the agent by the principal's neglect or lack of skill.

Contracts made through an agent and obligations from the agent's acts are enforced as if made or done by the principal.

If an agent's action can be split into parts within and beyond authority, only the part within the agent's authority binds the principal; if the parts cannot be separated, the principal is not bound by the transaction.

A notice given to or information obtained by an agent in the course of the agent's business for the principal has the same legal effect between the principal and a third party as if the principal had given or obtained it.

An agent, unless there is a contract stating otherwise, must not enforce a contract made on behalf of a principal and must not be bound by it, except in specified situations (sale/purchase for a merchant resident abroad; agent not disclosing principal's name; disclosed principal cannot be sued).

If a principal reveals themselves before a contract is completed, the other contracting party may refuse to perform if they can show they would not have entered the contract; if an agent contracts with a person unaware of the agency, the principal may require performance, and the other contracting party has the same rights against the principal as they would have had against the agent.

If a principal contracts with someone who is actually acting through an agent without knowledge or reasonable grounds to believe so, the principal may obtain performance only subject to the rights and obligations between the agent and the other contracting party.

If an agent is personally liable, a person dealing with that agent may hold the agent, the principal, or both liable.

A person who induces an agent or principal to act under the belief that the other will be liable must not later seek to hold that agent or principal liable.

A person who fraudulently represents themselves as another's authorised agent and induces a third person to deal with them as agent must compensate that third person for any loss or damage if the alleged principal does not ratify the acts.

A person who falsely represents themselves as an agent, but is acting on their own account, may not require performance of the contract.

If an unauthorised agent acts or incurs an obligation on behalf of a principal, the principal is bound if the principal induced the third person by word or conduct to believe the agent had authority.

If an agent, acting in the course of business for a principal, makes a misrepresentation or commits fraud, that misrepresentation or fraud has the same effect on the agreement as if it had been made or committed by the principal.

The Minister may, by statutory instrument and with Cabinet approval, amend the Schedule to this Act.