Contracts between private individuals 


I had a verbal agreement with a friend to buy their lawn mower but I’ve changed my mind – is the agreement legally enforceable?

Your agreement is a contract if something of value is to be exchanged and it meets the four main criteria for a legally binding contract, namely:

  • Both parties intended to enter into the contract 
  • Both parties agree on what’s in the contract
  • The contract is not to buy or sell something that is illegal
  • Both parties to the contract must be “legally capable” (for example minors or people of unsound mind are not legally capable.

A contract doesn’t have to be written down; it can just be a verbal agreement. In the case of an agreement to buy a lawnmower then something of value is being exchanged (in this case money for a lawnmower) so it might be a contract. 

One key factor in determining whether something is a contract is whether both sides intended it to be a legal relationship or not (i.e. they intended to enter a contract), which is one reason verbal contracts can be so hard to enforce (see our question below about enforcing a private contract).

A verbal contract which meets the above criteria is legally binding but it is best to have it in writing and signed by all parties involved, in case there is any dispute over it later.

Note that some types of agreements (e.g. about relationship property, to buy or sell real estate) have additional legal requirements. Also, contracts between a consumer and a trader (someone in the business of providing the relevant goods or services) are covered by consumer law.

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What should be in a written contract?

The contract should state:
  • who the parties to the contract are
  • what goods or services will be sold or provided 
  • what the price is and how and when payment will be made
  • when the goods will be delivered or the service started

For example if you have agreed to lend a family member a large sum of money, you might have a written loan agreement which states the names of the lender and borrower respectively, the amount of the loan, the date the loan starts, how much interest (if any) will be charged, when and how repayments will be made etc. You might also agree to some form of security.

It might also state under what conditions the contract can be cancelled (e.g. if both parties agree to it).

Depending on the value of what’s being exchanged under the contract, it might be a good idea to ask a lawyer to check the contract before it is signed, to ensure the terms are fair to both parties and legally enforceable.
 
Once it has been signed by both parties, each party should have a written copy to keep.

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How do I get a written contract drawn up?

One option is to ask a lawyer to draw up a written contract, or you could draw up a contract yourself and get a lawyer to check it.

Another is to purchase and download a contract template from one of a number of online providers. Templates cost from around $20 to $60 or more, depending on the provider and the type of contract it is for. Providers include: 

If you need a flat/house sharing agreement you can download a template from the Tenancy website for free.

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How do I enforce a private contract?

Contracts for goods or services between private individuals (as opposed to those between a consumer and someone in business) aren’t covered by consumer law. However you do have some options if the other party does not fulfil their obligations under to the contract.

Your first step might be to write a letter to the other person, outlining what they agreed to and asking them to fulfil their obligations, e.g. pay any money they owe, or provide the goods they promised.

Include a deadline which gives them a reasonable time in which to do this. You might also state what action you’ll take if they don’t. If you have a record of the agreement between you and the buyer, include a copy of it.

If they respond by disagreeing with what you are saying, then you can make a claim at the Disputes Tribunal to settle the dispute. Take along any evidence you have to support your case.

Where it’s not appropriate to apply to the Disputes Tribunal (e.g. because there is a debt which is not in dispute) you might consider taking legal action to recover the amount owed to you. Start by asking your lawyer to write them a letter, as this might be enough to motivate the buyer into settling their debt.

If a lawyer’s letter does not have this effect, the next step would be to apply to the District Court to sue the buyer for breach of contract. Going to court can be an expensive and time consuming option though, so think about it carefully before you proceed. You can read more about recovering debts on our debt recovery page.

You can also read about your rights when buying or selling a privately, on our Private sales page.