Debts, contracts, and verbal promises: what newcomers should watch
In Australia, a contract does not have to be in writing to be legally valid — a spoken agreement can also be legally binding. This raises a few important points of caution for newcomers, especially anyone not yet familiar with how contracts work here.
This article is general information. When signing a major contract or facing a debt dispute, seek specific legal advice from a community legal centre or a lawyer.
Verbal promises: they can be legally binding
One thing many newcomers do not realise: a verbal contract can be legally valid in Australia if it has the right elements: an offer, an acceptance, and something of value exchanged (consideration).
This means:
- Agreeing to hire someone to do work and promising to pay them — that is a contract.
- Agreeing to buy goods and the seller agreeing to deliver — that is also a contract.
- A verbal agreement to share costs with a housemate — this can be a legal agreement.
The problem with verbal promises is that they are hard to prove when there is a dispute. So the best practice is to confirm every important agreement in writing — at the very least, by email or text message.
Before signing a written contract
Many people sign contracts without reading them carefully — because they are long, because the English is hard, or because of pressure. This is a risky habit.
Things you should check:
- Term: How long, and what happens when it ends?
- Obligations of both sides: Who has to do what, and by when?
- Termination clauses: Can you pull out, and what does it cost?
- Penalties: Is there a penalty clause if you breach it?
- Price increases: Is there a clause that raises the price automatically?
- Automatic renewal: Does the contract renew automatically, and how much notice do you need to give to cancel?
Do not be afraid to ask questions or to request more time. Reputable suppliers usually give you time to read it carefully or to get advice before signing.
For major contracts (buying a home, commercial agreements, large loans): it is wise to have a lawyer read it first.
Cooling-off periods
Some types of contract in Australia have a cooling-off period — a window in which you can cancel without penalty after signing. This often applies to certain unsolicited sales contracts, some financial transactions, and contracts to buy a home.
Not every contract has a cooling-off period. Check the specifics for your type of contract and your state.
Borrowing and debt
Borrowing from a regulated financial institution: Banks and licensed credit providers in Australia must follow Responsible Lending Obligations — they cannot lend beyond your ability to repay. If they fail to meet this assessment obligation, you may have grounds to complain.
Debt does not disappear: In Australia, an unpaid debt can be passed to a debt collector and affect your credit score — which can affect your ability to rent, to borrow, and some kinds of employment.
Your rights when being chased for a debt: A debt collector must follow rules on how and how often they contact you — they cannot chase you endlessly, and they cannot threaten or harass you. If you are in financial hardship, contact the National Debt Helpline (1800 007 007) — free and confidential.
Disputed debt: If you do not agree with a debt being claimed (wrong amount, not your debt, time-barred), you can dispute it or ask for written confirmation.
Contract scams
Newcomers are a common target for certain contract-related scams:
- Unnecessary service contracts: Rushing into a service contract (internet, insurance, energy) with unfavourable terms or that you do not really need.
- Pressure to sign now: “The deal is only today” — a warning sign.
- Impersonating government agencies: Phone calls demanding an “unpaid” fine — government agencies usually do not demand money in unexpected phone calls.
If you are not sure: do not sign on the spot, ask more questions, or contact Scamwatch (scamwatch.gov.au) to check.
See also the related guide on buying goods and services in Australia and your basic consumer rights.