Formation of the employment contract

By Sue Johnstone
Updating author: Lilia Dangi

Understand how employment contracts are formed, from making a valid job offer to identifying binding contract terms. This guide explains the legal principles employers need to know when creating, agreeing, and documenting employment contracts.

• Job offers can be in writing, be oral or made by conduct.
• The person making the offer should have authority to do so.
• Offers that are subject to conditions are incomplete until the condition is satisfied.
• Acceptance must be by a positive act.
• Promises made during an interview may be legally binding.
• Each party must get something from the contract – this is “consideration”.
• If the parties intend that the contract shall not be legally binding it cannot be enforced in the courts.
• Mistakes, misrepresentation and illegality all affect the extent to which the contract can be enforced.
• The terms of the contract are fixed when the contract is made.
• Contract terms should be put in writing.

In this guide, learn about:

• The offer
• Conditional offers and references
• Acceptance and counter offers
• Collateral contracts
• Consideration
• The contract as a compromise but with flexibility
• Intention to create legal relations
• Mistakes
• Misrepresentation
• Illegality
• Identifying the contract terms
• The importance of written terms
• Future developments

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