contract law

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Transcript of contract law

2. CONTRACT LAW2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 Introduction Making a contract Capacity of parties Terms of the contract Exemption/exclusion clauses Vitiating factors Discharge of contract Remedies

2.1 IntroductionModel: 2 parties : may be extended to 3 partiesetc. Relationship of the parties: rights & duties Context : different needs & environment requires different adaptation of the model Enforcement of rights Negotiation different stages

2.1 Introduction




2.1 Introduction




2.1 IntroductionNegotiationno



2.1 IntroductionDefinition of contract: A contract is an agreement between 2 or more parties which is enforceable at law.

2.1 IntroductionFormat: May be in writing, by word of mouth (orally) by conduct, or by any combination of such.

2.1 IntroductionContract law = foundation of all commercial activities

Wide range of contracts: e.g. simple consumer contracts to construction contracts, sale and purchase agreements in conveyancing transactions

2.1 IntroductionGeneral principle: Freedom of contract everyone is free to enter into any contract

2.1 IntroductionExceptions: (1) Those against public morality (2) Those against national security (3) Those against public interests (4) Those regulated by statutes for protection of consumers (e.g. Sale of Goods Ordinance, Control of Exemption Clauses Ordinance) and employees (e.g. Employment Ordinance)

2.1 Introduction(5) Those provide for regulating certain relationships Landlord and Tenants (Consolidation) Ordinance Those require specific formalities - Conveyancing transactions (e.g. Conveyancing and Properties Ordinance) (6) Domestic agreements with no intention to create legal relationships e.g. pre-marital arrangements, separation agreements

2.2 Making a Contract2.2.1Unilateral and Bilateral Contracts 2.2.2Essential elements of a contract


Unilateral and Bilateral Contracts

Unilateral contract the performance remains outstanding on 1 party only (i.e. the offeror), while the other party (i.e. the offeree/acceptor) having already performed what is required of it.


Unilateral and Bilateral Contracts

Example: Ad Anyone who found my puppy, Buggie which has a name tag on its collar and return it to me shall be rewarded HK$100. Mr A Mr B found the puppy and returned it to Mr A. Mr A refused to pay Mr B HK$100 but only agreeing to pay him HK$50. Can B sue A ? If so, for how much ?


Unilateral and Bilateral Contracts

Anyone who found my puppy, Buggie which has a name tag on its collar and return it to me shall be rewarded. Mr A Mr B found the puppy and returned it to Mr A. Mr A is only willing to pay $1 to Mr B. Can Mr B sue him ? If so, for how much ?


Unilateral and Bilateral Contracts

Anyone who found my puppy, Buggie which has a name tag on its collar, please return him to me. Mr A Mr B found the puppy and returned it to Mr A. Mr A thanked Mr B but refusing to pay him a single cent. Can Mr B sue him ? If so, for how much ?


Unilateral and Bilateral Contracts

Anyone who jumps into Victoria Harbour off Queens Pier and swims to Tsimshatsui Ferry Pier shall be rewarded with HK$100,000. Mr A Mr Tung did so. Mr A refused to pay. Can Mr Tung sue Mr A ? If so, for how much ? Would it make any difference if Mr Tung did not reach Tsimshatsui Ferry Pier ?


Unilateral and Bilateral Contracts

Jump into Victoria Harbour. I will give you HK$100. Jump into Victoria Harbour and I will give you HK$100.

Is there any difference between the 2 ads ?

2.2.2 Essential1. 2. 3. 4. 5.

elements of a contract

Offer Acceptance Consideration Privity Intention to create legal relationship

When a definite offer made by 1 party is unconditionally accepted by another party, an agreement comes into existence.

Offer (def)An offer a definite promise or proposal made by the offeror to the offeree (NB: not necessarily the performer) with the intention to be bound by such promise or proposal without further negotiation. e.g. I give you $100 for [your] doing some work. e.g. I give you $100 for [your] not suing me. e.g. I will not sue you if you repay me $100.

Offer (def)Offer must be distinguish from invitation to offer/invitation to treat Starting point: Is there a contract/agreement ? (check the definition of a contact/agreement) - Ask: Is there any acceptance (check the definition of acceptance) - The step before acceptance is an offer. - The step before an offer is invitation to offer.

Acceptance (def)Acceptance comes into existence after the offeree unconditionally accepts the offer. When 1 party introduces variations/conditions to the terms of the latest proposal, there is no acceptance (i.e. conditional acceptance is not acceptance). Such variations/conditions amount to a counter-proposal/offer. No agreement.

Consideration (def) Something of value in the eyes of the law (need not be of market value). Hence, the saying :Consideration must be sufficient but not adequate. Price to be paid for the promise May consists of money, goods, promise, suffering some detriment (e.g. forbearance to sue) Consideration must flow from the proposee in respect of any promise.

Privity (def)General rule: A person who is not a party to a contract cannot sue upon it (i.e. right) or be sued upon it (i.e.duty). Exceptions: 1. Statutory exceptions: Married Person Status Ordinance Cap 182 2. Contract made by an agent for his principal 3. Rights/Benefits assigned/transferred (e.g. Deed of Mutual Covenants)

Intention to create legal relationship (def)Both parties must intend that the agreement is to be binding on them (i.e. they have agreed to bear the duties under the contract). Objective test : reasonable mans test

Offer (details)Invitation to treat/offer - The proposal before the actual offer e.g. goods catalogue, mail order catalogue, advertisements in newspaper, display of goods in the shelves of a supermarket Fisher v Bell [1961] 1 QB 394 : Restriction of Offensive Weapons Act 1959 (UK) offer for sale offensive weapons is illegal self-service window displaying a flick knife with a price tag an invitation to treat

Offer (details)Fisher v Bell was followed in HKSAR v Wan Hon Sik [2001] 3 HKLRD 283 display of pirated videos discs was an invitation to treat Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401 Display of drugs invitation

Offer (details)Tenders: Invitation for tenders = invitation to treat A bidder = an offeror See City Polytechnic v Blue Cross [1995] 2 HKLR 103 CP through an insurance broker invited tenders from insurance companies to cover its employees medical & life insurance

Offer (details)An advertisement may sometimes be an offer and sometimes be an invitation to treat the crucial point definite intention to be bound Carlill v Carbolic Smoke Ball [1893] 1 QB 256 Partridge v Crittenden [1968] 2 All ER 421

Offer (details)Auction sales ads to sell goods by auctions = invitation to offer bidder = offeror A person incurring expenses in going to the place of auction cannot sue the auctioneer if the auction were not held because auctioneer is not bound to hold the auction (Harris v Nickerson (1872-73) LR 8 QB 286)

Offer (details)Offer must be communicated. See R v Clarke ( 1927) 40 CLR 227 Western Australian government offered a reward for capturing some murderers Clarke was an accomplice, saw the ad but never addressed his mind to it and informed the government held: no reward to Clark

Offer (details)Termination of offer 1. By acceptance 2. By rejection a counter-offer is a rejection ; a request for information is not a rejection 3. By revocation 4. By lapse of reasonable time 5. By death of the offeror ? Of the offeree ? After termination, the offer is no longer a valid offer and cannot be accepted.

Offer (details)Revocation of offer General Rule: an offer can be revoked at any time before acceptance (Routledge v Grant (1828) 130 ER 920) Exception: when the offeror undertakes a contractual obligation or the offeror receives consideration to keep the offer open

Offer (details)Revocation of offer General Rule: Revocation of an offer becomes binding only when it has come to the knowledge of the offeree Exceptions: (1) Letter of revocation sent to a commercial organisation (Eaglebill Ltd v J Needham Builders Ltd [1973] AC 992, 1011 (2) Offer to the public revocation takes place when the offeror had taken reasonable steps to bring it to the notice of the public

Offer (details)Knowledge of revocation may be actual or implied Dickinson v Dodds (1875-76) LR 2 Ch D 463: Date 1: D gave P a written offer to sell the house and that the offer will open until 9:00 am on Date 3. Date 2: D sold the house to a 3/p and a 4/p informed P of the sale. Date 3: P wrote to P accepting his offer before 9:00 am. Held: 1. Ps acceptance was too late he knew the property had been sold. 2. D had effectively withdrawn his offer

Offer (details)Lapse of offer An offer lapses if it is not accepted within: (1) A stipulated time; or (2) Reasonable time a question of fact depending on the circumstances of the case (see S.90)

Offer (details)Death of a party (1) Death of the offeror : when the offeree accepts the offer unaware of the offerors death, and the deceaseds contractual obligations can still be performed by his estate, a valid contract exists. If the offeree knows of the offerors death, the offer cannot be accepted. (2) Death of the offeree: depends on the intention of the