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Formation Of Contracts: Comparison Between Australia And Chile

Author:Mr Cody Mcfarlane
Profession:Harris Gomez Group

The formation of contracts is both an exciting and stressful period for any construction project, and those without a legal background can often be left unsure of the formalities and statutory requirements needed to be complied with. This situation is exacerbated when the project is to take place in a foreign jurisdiction, where the terminology, language and practice may all be very different to what the party to a contract is accustomed to. It is essential that the variances between the Australian and Chilean jurisdictions are understood and appreciated, so each party is able to enforce and comply with their rights and obligations.

The most immediate difference is that Australia operates under a common law system, whereas Chile works as a civil law jurisdiction. Under Australian common law, each of the principles of contract law comes from individual cases, which means the person drafting the contract should be familiar with the cases, which give us these principles. At the most basic level, there are four essential elements needed for a contract to be valid: offer, acceptance, intention to create a legal relationship, and consideration (normally money). A contract will only be enforceable when formed with sufficient clarity and agreement has been reached on all essential terms. A contract does not have to be in writing and can in fact be oral. Of course, for a large-scale project this would not only be extremely unusual but also highly inadvisable.

In Chile, in general terms the only crucial elements required for a legally binding contract are offer and acceptance. Obviously though, construction contracts would normally be highly detailed and evidenced in written form. As a key exception to this, public work contracts have a number of specific legislative requirements that make them more complex.

Standards Australia has published a series of standard form contracts for use in Australian jurisdiction. It is also very commonplace for other public authorities and government bodies to use their own standard forms. The Chilean market has no equivalent regulating body that provides the private sector such a service, however, the terms and conditions of contracts are largely constant and disputes in this area are uncommon.

In Australia, "letters of intent" will sometimes be employed in circumstances where delaying the start date of a project until contracts have been signed isn't practical. They represent a somewhat awkward aspect of contract law, as often...

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