Why do I need a contract?

Jacqui Doyle is a Brisbane lawyer and Partner in Holding Redlich. Doyle specialises in construction litigation, primarily in relation to disputes arising under commercial construction contracts. In this article she explores the importance of having a written contract.

Although it may be tempting to rely on a simple handshake for your next hire arrangement, this approach is high risk, and it is important to use a written contract instead.

When there is no contract, or the contract in place fails to clearly set out the rights and obligations of the parties, each party is left with their own assumptions about what the agreement is or how the other will behave in a certain situation. Those assumptions can be incorrect (at least from one party’s view) and this can result in real dispute. 

If a dispute does arise, without the assistance of a contract, each party will then be left with the difficult and frustrating task of piecing together invoices, emails, letters, conversations, and text messages to prove what the terms of the contract really were, rather than simply relying on the terms stated in a written document.  Anyone who has gone through this process will undoubtedly tell you it is not fun (even for the lawyers).

Jacqui Doyle, Partner, Holding Redlich.

A well-drafted written contract should eliminate the risk of these misunderstandings and operate to ensure that all parties to the agreement have the same expectations and a clear roadmap for how the supply or hire will work. In this regard, a well-drafted contract should address, at a minimum:

   time (hire period)

   cost (rates and how and when rates will be charged and paid)

   performance (what are the performance criteria for the equipment and what happens
when that criteria is not met)

In addition to ensuring your agreement is reflected in a written contract, you should ensure that the contract is the right contract for the hire or supply.

Parties often use inappropriate contracts simply because they are an ‘Australian Standard’.  There are, in fact, very few ‘standard contracts’ that properly cater to lift or crane hire arrangements and they often have terms that are irrelevant or not appropriate to the supply or hire arrangement such as:

   warranties about the work that you are not able to give

   liquidated damages

   inadequate description of the scope

   onerous health and safety obligations that go beyond
the hire

   inappropriate indemnities

Further, an ‘Australian Standard’ construction contract is unlikely to address the following scenarios that may arise during the course of a hire arrangement:  

Injury: What happens when someone operating the equipment hurts themselves?

Operation: What happens if the equipment does not work properly after it leaves your premises? Are you obliged to repair or provide a replacement?

Damage: What happens if the machinery being hired is stolen or damaged during the period of hire? 

Maintenance: Who is responsible for maintenance while the equipment is on hire?

If these aspects of the agreement are not certain, it is very likely that a dispute will arise. 

Obtaining legal advice can be a useful tool in avoiding the above risks. This extends to having your hire arrangements reviewed regularly to ensure they remain consistent with any changes to relevant laws.

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