Chapter 8 Contract law. 1 Concept Concept 2 Contract Law unifies and modernizes tripod contract...

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Transcript of Chapter 8 Contract law. 1 Concept Concept 2 Contract Law unifies and modernizes tripod contract...

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  • Chapter 8 Contract law
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  • 1 Concept Concept 2 Contract Law unifies and modernizes tripod contract statutes Contract Law unifies and modernizes tripod contract statutesContract Law unifies and modernizes tripod contract statutes 3 Classification Classification 4 Formation Formation 5 Validity Validity 6 Terms Terms 7 Modification and assignment Modification and assignmentModification and assignment 8 Performance Performance 9 Discharge Discharge 10 Breach and remedies for breach Breach and remedies for breachBreach and remedies for breach
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  • 1 Concept Contract and tort ContractTort Liability is voluntarily undertakenLiability is imposed by Courts Liability is strictLiability is based on fault in principle Put the injured as if contract had been performed Put injured as if tort had never been committed
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  • 2 Contract Law unifies and modernizes tripod contract statutes 428-article Contract Law: general provisions and specific provisions (15 specific contract ) By far longest and one of the most detailed commercial laws of China
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  • 2.1 Fragmentary and outdated contract legislations ECL: 1981, 1993 FECL: 1985 TCL: 1987 GPCL: 1986 2.1.1 Over-regulation Brake rather than facilitator Planned contracts Minimal terms Administrative approval process Invalidation of contracts Obsolescence
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  • 2.1.2 Discriminatory treatment 2.1.3 Complexity 2.1.4 Numerous legal vacuums 2.1.5 Obstacles to progress
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  • 2.2 Major breakthroughs in Contract Law 2.2.1 National treatment 2.2.2 Minimize regulation Minimizing planned contract Reducing government approvals Reducing the scope of invalid contracts 2.2.3 Promoting freedom of contract 2.2.4 Legitimizing business ethics Honest and good faith Recognizing trade practices Trade secrets
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  • 3 Classification
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  • 3.1 Oral and written contracts 3.1.1 Oral contracts 3.1.2 Written contracts 3.2 Express and implied contracts 3.2.1 Express contracts 3.2.2 Implied contracts 3.3 Informal and formal contracts 3.4 Entire and divisible contracts 3.4.1 Entire contracts 3.4.2 Divisible contracts 3.5 Planned and non-planned contracts
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  • 4 Formation
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  • 4.1 Offer 4.1.1 Concept Offer and invitation to treat (1) Mass media advertisements (2) Price lists, catalogues, public announcement for auction, public call for tender and prospectus
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  • Illustration: Mrs. Wang enters a supermarket, picks up one of the wire baskets provided by the market and fills it with groceries from the shelves. She then remembers that she has left her money at home and begins to return the goods to the shelves. The manager of the supermarket stops her and says that Mrs. Wang has bought the goods and must pay for them. The Supermarket manager is wrong. Mrs. Wang is entitled to return the goods she has selected from the shelves. The display of goods on the shelf is merely invitation to treat, thus Mrs. Wang's selection of goods is only an offer. Before acceptance, there is no contract between Mrs. Wang and the shop. Mr. Li sees in a shop window a fur coat marked "Sale price RMB 200". He tries on the coat and agrees to buy it, but is then told by the shop assistant that there has been a mistake, and the coat is priced at RMB 2000. If Mr. Li still desires to buy that fur coat, he shall pay RMB 2000 for it. Why? There is no contract between Mr. Li and the shop, before the price of RMB 200 is accepted.
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  • 4.1.2 What constitute an offer Specific person or class of persons Certainty of terms 4.1.3 Communication Methods of communication 4.1.3. 2 Cross offer Offeree cannot accept an offer until first learning of it.
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  • Illustration: If A wrote to B offering to sell his apartment for RMB 100000 and B at the same time has written a letter crossing A's letter in the mail offering to buy A's apartment for RMB 100000, there is no contract here. B was unaware of A's offer when he wrote, and B's letter could not be an acceptance. A was unaware of B's offer, so A's letter could not be acceptance. Unless A or B sends a follow-up acceptance, no contract is formed. Mr. Wang finds a gold watch in the street. He recognizes it as one belonging to his neighbor, Mr. Zhang, and so he returns it to Mr. Zhang, who thanks him profusely. On returning home Mr. Wang opens his newspaper and sees an advertisement describing the watch and giving Mr. Zhang's name and address, and offering a reward of RMB 500 for the return of the watch. Mr. Wang is not entitled to that reward because he did not act in response to the offer. At the time he returned the watch, he did not know the offer of reward.
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  • 4.1.4 Termination of an offer Lapse Illustration: If X offers to subscribe for 100 shares in Y Company offering shares to the public, X makes his offer in June. He does not receive a letter of allotment (acceptance) from Y Company until the following November. Must X pay for the shares? No, X shall not pay for the shares because his offer has lapsed within a reasonable time. Mr. Li, an attorney working late every night in an attempt to build up his practice, decides to buy some red roses for his wife. It is winter and only one florist has such flower. Mr. Li asks their price and is offered two for RMB 20. He does nothing. He returns two weeks later and says that he accepts the offer. In view of the perishable nature of flowers, the offer has lapsed within the fortnight.
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  • Revocation Illustration: Chen in a letter posted 15 January offered to sell his business to Zhang for RMB 700,000, received by Zhang on 17 January. On 19 January Zhang posted her letter of acceptance, which did not reach Chen until the 21 st January. On 18 January Chen had decided to revoke his offer and posted a letter to Zhang revoking it. This letter did not reach Zhang until 20 January. Is there a binding Contract between Chen and Zhang? Yes. The notice of revocation reached Zhang too late and the acceptance has become effective on 19 January. Thus there is a contract. Rejection and counter offer Acceptance
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  • 4.2 Acceptance 4.2.1 Concept 4.2.2 What constitute an acceptance? Awareness of the offer Correct offeree Unconditional Correct manner Within time limit fixed by offeror Communication 4.2.3 Time and place of acceptance Acceptance takes effect as soon as it reaches the offeror. Place where acceptance takes effect is the place of contract formation. In E-commerce, recipient's main place of business is the place of formation of the contract.
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  • 4.2.4 Withdrawal of acceptance Withdraw the acceptance only before it is communicated Effective time of communication TransmissionReceipt Offer Withdrawal of offer Revocation of offer Acceptance Withdrawal of acceptance 4.3 Proper form 4.3.1 Oral form, written form and other forms 4.3.2 Government approval
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  • 5 Validity
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  • 5.1 Conditions of validity 5.1.1 Competent parties Minors and mentally ill persons Illustration: Wu, aged 16, takes a seven-year lease at RMB 3000/month. This contract is void since it is not suitable for Wu's age and intelligence. Legal persons Illustration: Unqualified importer In April 1984, A company based in Shenzhen executed a contract on import of steel and cement from HK with X, a HK based company. X delivered all steels and cements to Shenzhen as per stipulation of contract. A entrusted the Shenzhen Railway Construction Company to handle procedures of import and make payment to X. Afterwards Shenzhen Railway Construction Company stopped payment on behalf of A. Thus A owed HK$13000 to X. X sued A for the foregoing amount in September 1987. The court held that A did not have the permit to engage in import and export business, thus the contract was nullified. The court also held that A should be liable for the nullity of the contract, and ordered A to pay the balance and its interest to X.
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  • 5.1.2 Intention to create legal relationship It is generally presumed that family, social or domestic agreements lack intention It is generally presumed that the parties intend to be legally bound under business background. Illustration: (1) A invited his close friend B to a dinner at 7:00 pm at Garden Hotel. A made a reservation and ordered foods for the dinner. However B did not show up. It resulted in considerable trouble and expenses for A. Can A sue B for breach of contract and claim damages? No, since there is no real intention to create legal relation here. (2) Liu is a practicing attorney. He encouraged his son to study hard and said: "If you can obtain LL.M, I will make you a partner in my law firm". The son eventually obtained the LL.M but he has a girlfriend his father dislikes. His father refused to give him a partnership. Can the son sue Liu? No, he cannot. (3) Adams saved Bodnar from drowning. Afterwards Bodnar promised to pay Adams $ 100 out of gratitude. Bodnars promise was made for past consideration, therefore unenforceable.
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  • 5.1.3 Voluntariness Fraud Illustration: Mr. Zhaos un-conceived milk cow On 6 October 1986, Ma bought a milk cow o