Contract (continued)

Charlie enters a music store in a shopping centre. Brian, who owns and operates the store, has placed the following sign in the store window:

Special Offer The Beatles – Abby Road Only $10 each Charlie, who operates a competing music store in another

shopping centre, realises that he easily can sell this great CD for $20 in his store. Charlie collects all the copies of the relevant CD and brings them to the cash register. Brian knows that Charlie is a competitor and refuses to sell the CDs to Charlie. However, having been told by Charlie that there is a binding contract since he has accepted Brian’s offer, Brian gives up and sells the CDs to Charlie.

Two hours later Mick enters the shop saying that he accepts the offer and that he wants a CD. When Brian explains that he has no more copies of the CD, Mick argues there is already a binding contract, since he has accepted Brian’s offer.

(a) In your opinion, was Charlie correct in claiming a right to buy the CDs?

(b) Does Mick now have a right to sue Brian for breach of contract?

(c) Do you think it would make any difference, in relation to Charlie’s situation, if there was no sign at all, but the CDs’ price tag stated the price of $10?

(d) Do you think it would make any difference if the sign outside the shop said:

Special Offer The Beatles – Abby Road $10 each, 100 CDs in stock Until stock is cleared

Case 2

A invites B to submit a written offer of the terms on which B is prepared to construct a building. On 15 August, B presents a detailed offer containing the statement “Price and other conditions are not good after 1 September”. Later on 16 August, B sends a notice to A saying that: “We hereby revoke the offer sent yesterday.” Is the revocation effective?

Case 3

A, an antique dealer, asks B to restore ten paintings on condition that the work is completed within three months and that the price does not exceed a specific amount. B informs A that, so as to know whether or not to accept the offer, B finds it necessary to begin work on one painting and will then give a definite answer within five days. A agrees, and B, relying on A’s offer, begins work immediately. Later on the third day, A revokes the offer. Is the revocation effective?

Acceptance An acceptance is the offeree’s manifestation of intenti

on to enter into a binding agreement on the terms stated in the offer.

Requirements of acceptance1. an acceptance must be made by the offeree2. an acceptance must be communicated to the offeror3. An acceptance must be made by the specific method

prescribed in the offer. 4. An acceptance must be made within the period of vali

dity5. An acceptance should not materially alter the term in t

he offer

Billy offered to sell his car to Jimmy for $5000 and stated that he would assume that Jimmy had accepted his offer unless he informed Billy to the contrary within 10 days. Jimmy did not reply to Billy within 10 days but he has contacted his bank manager and agreed a loan to purchase the car. Was there a contract existed between Billy and Jimmy?

Mere silence and inactivity cannot be construed as acceptance.

An acceptance must be made within the period of validity

1. Fixed time 2. Reasonable time 3. Oral offer – accept immediately

Battle of the form Traditionally: The mirror image rule Reform: Under the UCC 2-207(1) – a definite expression of

acceptance or a written confirmation of an informal agreement may constitute a valid acceptance even if it states terms additional to or different from the offer or informal agreement. The additional or different terms are treated as proposals for addition into the contract under UCC 2-207(2), such as between merchants, such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer, (b) material alteration of the contract results. (c) Notification of objection to the additional/different terms are given in a reasonable time after notice of them is received.

Material Alternation:

A change in the subject matter, quantity, quality, price or remuneration, time ,place and method of performance, liabilities for breach of contract or method of dispute resolution is a material change to the terms of the offer.

E 是一家英国的航空公司，一日， E 公司为售出某台及其而向荷兰 H 空中服务公司发出要约：售 X 机器一台， 请汇 5000 英镑。 H 公司立即回电：接受你方要约，已汇 5000 英镑至你方银行账户，在交货前该笔款项将由银行代为你放保管，请立即交货。合同是否成立？

Effective of acceptance Common law - mail-box rules Exceptions: Billy offered to sell his golf clubs to Jimmy. Jimmy

immediately replied by letter accepting Billy’s offer but, the acceptance never reached Billy.

Was there a contract existed between Billy and Jimmy under Postal rule?

What if Billy wrongly addressed the letter due to his carelessness? Would your answer to a) be different?

Exceptions to mail-box rules

Billy offered to sell his golf clubs to Jimmy. Jimmy immediately replied by letter accepting Billy’s offer but, the acceptance never reached Billy. Was there a contract existed between Billy

and Jimmy under Postal rule? What if Billy wrongly addressed the letter due

to his carelessness? Would your answer to a) be different?

Was there a contract existed between Billy and Jimmy under Receipt Rule?

Exceptions to mail-box rules

1. If the offeree knows or has reason to know that the letter of acceptance never reached the offeror.

2. The offeror failed to receive the acceptance because of the negligence of offeree

3. The rule does not apply to instaneous forms of communications.

- Civil Law – Receipt rule China Contract Law - a notice of acceptan

ce becomes effective once it reaches the offeror.

PICC, CISG – Receipt Rule

Late Acceptance

A indicates 31 March as the deadline for acceptance of its offer. B’s acceptance reaches A on 3 April.

1) Is this acceptance effective? 2) A, who is still interested in the contract, intends to “accept”

B’s late acceptance, and immediately informs B of its intention. Is the acceptance effective?

3) If B knowing that the normal time for transmission of letters by mail to A is three days,B sends its letter of acceptance on 25 March. Owing to a strike of the postal service in A’s country the letter, which shows the date of its mailing on the envelope, only arrives on 3 April. Is B’s acceptance effective? What if A objects without undue delay?

Late Acceptance

(1) A late acceptance is nevertheless effective as an acceptance if without undue delay the offeror so informs the offeree or gives notice to that effect.

(2) If a communication containing a late acceptance shows that it has been sent in such circumstances that if its transmission had been normal it would have reached the offeror in due time, the late acceptance is effective as an acceptance unless, without undue delay, the offeror informs the offeree that it considers the offer as having lapsed.

Consideration and cause – something in value1. Consideration must be given for pursuin

g the enforceability of a promise 2. Consideration must be referable to the pr

omise3. Consideration must be sufficient, but nee

d not be adequate4. Consideration could be a promise or an

activity.

William E. Story and his nephew, William E. Story II, agreed that the uncle would pay his nephew $5000 if the nephew would refrain from drinking, using tobacco, swearing, and playing cards and billiards for money until he turned 21. The nephew accepted it and did so until his 21 years old. When the nephew turned 21, his uncle sent him a letter indicated that the nephew had earned the $5000. The uncle died later without having transferred the funds to his nephew. The nephew brought suit against the executor of the uncle’s estate, Franklin Sidway.

Question: Is there a sufficient consideration to create a valid and enforceable contract in this case?

Nature of consideration Does something (an act) or promise to

do something he or she is not legally bound to do.

Refrains (from an act) or promises to refrain from doing something she or he has a legal right to do.

Requirements of consideration

1. Consideration must be present or future and cannot be past

2. Performance of an existing contractual duty to the promisor is not consideration

3. Performance of a public law duty is not good consideration

Exception to Consideration

- Promissory estoppel: Central London Property Trust Ltd v High Trees House Ltd[194

7]KB130. 原告于 1937 年将伦敦的一套公寓楼出租给被告租期为 99 年从 1

937 年 9 月起算租金为每年 2500 镑。由于第一次世界大战爆发很多人离开伦敦因此租住公寓的人很少被告无力支付房租所以双方于 1940 年 11 月协商同意将租金减半征收但当时没有说明期限。到 1945 战争结束时公寓又重新客满于是原告写信给被告要求被告支付全额租金。被告主张 1940 年的协议应该持续到整个租赁协议期满 ; 换句话说由于原告没有在 1945 年 9 月前要求支付超出的 1250 镑这就表明他放弃了要求支付超出金额的权利。

【判词】原告胜诉但在答应减租的那段期间这一协议是由约束力的尽管它没有对价的支持。Ｌｏｒｄ　ｄｅｎｎｉｎｇ－　债权人曾表示接受部分债务的履行以清偿全部债务，债务人已如约履行，　在这种情况下，　应禁止债权人违反其诺言。　

Promissory Estoppel requires:

1. a promise or a representation as to future conduct which is intended to affect the legal relations between the parties and which indicates that the promisor will not insist on his strict legal rights against the promisee.

2. A clear and unequivocal promise by words or conduct.

3. Evidence that there is a change in position of the promise as a result of the promise (reliance but not necessarily to their detriment)

4. Inequity if the promisor were to go back on the promise.

France - Cause China, German, PICC- Nether

consideration not cause required

Legality

violate compulsory law contravene to the public interest contravene to the public policy

- Void contract

Validity of Contract

Genuine contractual intention- at the time of entering into a contract - How to determine whether people has a

genuine intention when entering into a contract?

- words or actions of the parties

Misrepresentation Fraud Mistake Duress Undue influence Unconscionability

Misrepresentation

a false statement of fact made by one party to another which induces another party to contract.

Four elements:a) It must be a statement of existing or past factb) there is a mistaken impression about an material

fact or facts concerning the subject of the contract

c) the victimized party was reasonably relied on this fact

d) the victimized party entered into a contract based on this misrepresentation

Fraud

a false representation of a past or existing fact – whether by words or by conduct, or by concealment of what should have been disclosed

Fraud vs. Misrepresentation

1. Fraud includes fraudulent misrepresentation

2. Fraud can be a statement and conduct, ie: forge a document or certificate

3. Fraud may constitute a criminal offence

Five elements

a) A false statement or act should be material fact

b) The defendant must know that the fact is untrue.

c) Intent on the part of the defendant to deceive the alleged victim.

d) The victim’s reliance on the false statement must be reasonable.

e) The false statement cause the victim entering into a contract

Whether mere silence could constitute fraud?Depends on whether the defendant has the

duty to disclose certain fact.

Mistake - a misunderstanding about a material fact by

the parties a) Common mistake Party A thinks that X is Y, Party B thinks that X is Y,

and they entered into a contract based on the fact that X is Y. But actually X is Z.

only if the mistake of the subject-matter was sufficiently fundamental to render its identity different from what was contracted, making the performance of the contract impossible. (Bell v Lever Brothers Ltd)

b) Mutual mistake

A think X is Y, but B think X is Z, A and B enter into a contract for selling X without knowing each other’s misunderstanding

Raffles (P) contracted to sell 125 bales of Surat cotton to Wichelhaus (D). The goods were to be shipped from Bombay to Liverpool, England on the ship “Peerless”. Neither party was aware that there were two ships names “Peerless” carrying cotton from Bombay to Liverpool, one arriving in October and the other in December.

Wichelhaus thought he had purchased the cotton arriving on the October ship, but Raffles sent his cotton on December ship. Wichelhaus refused to accept delivery of the cotton arriving on the December ship and Raffles brought this lawsuit for breach of contract.

Issues If a latent ambiguity arises that shows that there had been n

o meeting of the minds, have the parties given mutual assent to contract?

c) Unilateral mistake Part A think X is Y, Party B think X is Z, the fact

is X is Z not Y, This contract is entered into based on Party A’s unilateral mistake.

Generally, unilateral mistake can not be a

ground to rescind a contract, unless it is unconscionable to enforce the contract the mistake is leaded by the fault or carelessness of

another party

China contract law – ARTICLE 54 – a party may petition the People’s Court or an arbitration institution for amendment or cancellation of a contract if the contract was concluded as a result of serious misunderstanding.

According to interpretations by the Supreme Court of the People’s Republic of China, serious misunderstanding refers to

• misunderstanding to the nature of contract• misunderstanding to the other party• misunderstanding to the quality of the contracted object• misunderstanding to the assortment of the contracted object• misunderstanding to the price and expense.

PICC- ARTICLE 3.5(Relevant mistake)(1) A party may only avoid the contract for mistake if, when the contract was co

ncluded, the mistake was of such importance that a reasonable person in the same situation as the party in error would only have concluded the contract on materially different terms or would not have concluded it at all if the true state of affairs had been known, and

(a) the other party made the same mistake, or caused the mistake, or knew or ought to have known of the mistake and it was contraryto reasonable commercial standards of fair dealing to leave the mistaken party in error; or

(b) the other party had not at the time of avoidance reasonably acted in reliance on the contract.

(2) However, a party may not avoid the contract if(a) it was grossly negligent in committing the mistake; or(b) the mistake relates to a matter in regard to which the risk of mistake was as

sumed or, having regard to the circumstances, should be borne by the mistaken party.

PICC - ARTICLE 3.6 (Error in expression or transmission) An error occurring in the expression or

transmission of a declaration is considered to be a mistake of the person from whom the declaration emanated.

Duress

a threat of harm made to compel a person to do something against his or her will or judgment

1. There must be a threat. a) physical duress b) economic duress 2. The threat should be impropriate 3. The threat should be enough to deprive the party’s will – objective test – depends on the situation of the victim4. The victimized party enter into a contract under such threat

Undue Influence

a person uses a position of influence to persuade someone to enter a contract that provides the stronger person with a direct or indirect benefit.

1. Presumed undue influence 1) parent and children 2) trustee and beneficiary

3)doctor and patient 4)solicitor and client 5) guardian and ward 6) religious adviser and devotee

2. Actual undue influence

Unconscionability

Procedural unconscionability - unconsicionability in negotiation

- overwhelming bargaining position due to their knowledge, experience, status, information, financial situation

Substantial unconscionability

- unfaire contract terms in the contract