Contracts come in all shapes and sizes. Some are verbal, some written. Some are formal, some informal. They all have three features in common:

• you make someone an offer
• they accept it
• and you promise to give something - usually money - in return for what you're getting. The legal term for this promise is "consideration".

Signer beware

Never sign a contract unless you're sure you understand it. Generally, you won't be able to get out of it later. If you didn't read the fine print, that's your problem.

Never click 'I accept' on a website without reading what you are accepting. If you click, that is the same as signing and you're taken to have and read and understood whatever you have accepted. You might like to also look at our advice on accepting End User Licence Agreements (EULA).

If the fine print is genuinely too small to read, ask for it to be enlarged.

And if there are any terms you don't understand, get legal advice. Most Community Law Centres will advise for free - they're listed in the phone book.

Never sign up to buy real estate without getting legal advice.

Verbal and written contracts

Generally, contracts don't have to be in writing. A verbal agreement is binding, but you can save yourself a lot of hassle by writing it down: if things go wrong, how do you prove the terms of a verbal contract?

Putting the contract in writing also makes sure you both understand exactly what's being promised before you agree.

Watch out for marketing people who phone you. We know of cases where people have had their power supply or phone switched over to a new company, and they didn't realise they'd agreed. If the company can't provide a recording proving you did agree to switch, you can demand to be switched back.

Some contracts have to be in writing, including credit contracts, insurance contracts, agreements to buy and sell real estate, and agreements to buy cars from registered dealers.

What does my contract mean?

When you enter a contract, you're bound by everything you've specifically agreed with the other person or company.

You might also be covered by terms and conditions that weren't specifically mentioned but are, nevertheless, assumed under the law to be part of the contract.

For example, if you go to an appliance store and buy a new TV that turns out to be faulty, you're entitled to take it back. You don't need to have a specific agreement from the store that it will work. The Consumer Guarantees Act requires that goods and services should be fit for the purpose they're sold for, and that promise is assumed to be part of the contract you made when you bought the TV.

Another example is where you buy a phone card. The card directs you to a website for the full terms and conditions. If the supplier can show that the terms and conditions were available before you bought the phone card, then you are bound by them. However, if you couldn't read the terms and conditions until after you bought the card, then in our opinion they're not valid.

Standard form contracts

Standard form contracts are commonly used by businesses that provide services to large numbers of customers. Your dealings with your electricity company, your insurer, your bank and so on are governed by this type of contract. They are offered on a "take it or leave it" basis - you won't be given the opportunity to quibble over details you're not happy with.

Commonly, these contracts include a clause giving the company the right to alter the terms and conditions as they see fit. This is why your electricity company can put up its prices and your cable TV company can change the channels available on your plan, even though you haven't "agreed" to it.