Australian contract law is extremely complex. Just because a document doesn’t have a signature doesn’t mean it’s not a contract – just think terms and conditions where you agree to be bound by the contract by clicking ‘I Accept’. It is possible to accept different types of contracts through a variety of different means. Here’s a quick guide to how initialling a document can amount to accepting a contract.
Is the document a contract?
Before you start worrying about whether your initials are binding, the contract needs to exist. A document won’t become a contract under the law without being certain and complete. What this means is that, when forming the contract, there is:
- Some agreement made from an offer and acceptance.
- An exchange of promises (known as consideration).
- Both parties intend to be legally bound.
- Both parties have a legal capacity to enter the contract (meaning they aren’t a minor, drunk or mentally disabled).
- There is genuine consent. This means you can’t trick someone into signing a contract.
- The contract has some legal purpose.
Each factor has countless amounts of legal precedent and legislation dictating their validity.
Likewise, understanding what terms and conditions exist within the contract are extremely important prior to completion.
The different forms of contracts
Whether initialling is sufficient will depend on the form of the contract. At law, acceptance of a contract requires an intention to accept. This means that where a dispute arises, the court will first look to whether the parties expressed intention. How this is expressed, depends on the form of the contract.
Simple contracts
Simple contracts have no set form. They can be verbal or written. They only require you to express acceptance in some form. This may be verbally or even implied by conduct. Within these, the threshold for agreement is much lower.
Hence, initialling a simple contract with the intention of accepting it will bind you to its terms.
The only time that initials may not be considered appropriate acceptance is where the manner of acceptance is specified with the contract.
For example, if you were purchasing a car off a neighbour and you may write up your own informal contract for just you two. If the contract states that the only way to accept the was to sign it, then that is what the law requires for it to be binding.
Nevertheless, in Australia, it may still be considered binding if an equally effective method of acceptance is used.
Whether the court considers it equally effective will rely on how the nature of the contract as a whole. In particular, whether the acceptance of the contract was to the benefit offeror (person who first offered the contract) and the reasonability of the alternative form of acceptance. For example, an initial would likely be a reasonable alternative to a printed name.
Formal contracts
Where it becomes more confusing is within formal contracts. Formal contracts are expressly identified within legislation.
For example, in New South Wales Section 38 of the Conveyancing Act 1919 (NSW) governs the formalities required in deeds. For a deed to be binding, the act requires it to contain:
- Signatures
- Names of the parties
- The date
- A witness
- An expression of interest to be sealed
While the term signature appears here, the form it takes is interpreted broadly. The appearance of it is less important than the intent it represents. The courts will look for evidence that the signing party acknowledged that the agreement was complete and was legally binding.
So, for example, if you intended to sign a contract and initialled it, but then forgot to sign it, it is likely the court will find this binding.
Alternatively, without intent, a signature does not bind you to a contract.
For example, when drafting wills and lasts testaments it is common to use initials to acknowledge changes. However, while an initial may indicate approval of changes it does not indicate approval of the entire document. Hence, it is important to consider the context.
Conclusion
Ultimately, contracts rely on intent. As such, the meaning you intend to display through initialling a document will dictate whether it binds you to its contents.
Where disputes arise over this, the courts will examine the circumstances around them to decide. Hence, if you are unsure of any documents it is best to first contact a lawyer to review them.
