Speaker : Barry Chin (錢志庸 )

Solicitor (HK, UK), Engineer (HK, Canada, UK)

B.Sc., MBA, LL.B.(Hons), PCLL C.Eng, P.Eng, RPE, MIEE, MIMechE, MHKIE, MAPEO

Mobile: 8100 1300 Fax: 8100 2600 Address: GPO Box 6050 Hong Kong

E-mail: barry@lawyerchin.com http://www.lawyerchin.com

What the Law of Contract Does?

A contract is a legally binding agreement. An agreement which "the state (China) or

region (HKSAR)" will not recognize is not a contract.

The law of contract in Hong Kong is based on and similar to English law but it is not identical.

Most of Hong Kong's contract law is found not in legislation but in the reported decisions of the courts in Hong Kong and other common law jurisdictions.

The first question is "Is there a contract?" That is a question of law (Common Law, Case Law), which depends on the intentions of the parties as decided by the Court, on the evidence (on the balance of probability).

The Court must be satisfied that the parties manifested a willingness to be bound together by the contract.

Agreement usually arises from negotiation.

Negotiation can usually be0 divided into invitations, offers, counter offers, rejections and acceptances.

How are contracts made ? Intention Commercial agreements are presumed to be

intended to be contracts.

Family and social agreements are presumed to be intended not to be contracts.

Whether the parties have agreed is first a question of fact - of evidence - then of law - of construction -- that is interpretation of the meaning of the facts.

A contract is created only when both parties have

shown a willingness to be bound by contract on terms agreed between them.

Agreement is usually proved by showing acceptance of

an offer.

Offer

The proposal of a contract is called an offer, which is the offeror's manifestation of willingness to be bound to the offeree in contract, in the terms of the offer. An offer gives the offeree power to make a contract by accepting those terms.

An offer may be in writing, by spoken words, by conduct, or by any mixture of those methods.

An offer may be withdrawn at any time before acceptance, unless it is an option.

An invitation to treat differs from an offer because it does not give the offeree power to create a contract. It is an invitation to make offers. Similarly, the supply of information is not an offer. Whether a stage in negotiations is an offer or not depends on the intention of the person initiating it.

An offer may be made to one or more individuals, a class, or the whole world.

An offer may be terminated by the offeree (acceptance, rejection, counter-offer), Offeror may (revocation, or lapse by time or by a trigger event).

An offer may be withdrawn at any time before acceptance, unless it is an option (offeror give to the offeree 3 months time).

Acceptance

Acceptance is the manifestation by an offeree of willingness to be bound by a contract in the terms of the offer.

Acceptance may be by written or spoken words, or by conduct, or by any mixture of those methods.

The offeror may stipulate the method of acceptance.

Upon acceptance of the offer, the contract comes into existence on the agreed terms.

Acceptance is effective when communicated or signified in the way stipulated, expressly or impliedly, by the offeror.

If the offeror has signified a willingness to take acceptance by letter or telegram, acceptance will be effective when the letter is posted or the telegram dispatched.

Telexes, fax messages and telephoned acceptances take effect according to the general rule, i.e., when communicated.

Communication of acceptance is valid only if authorized (agreed by the offeror).

Agreement may be evidenced without offer and acceptance.

The parties may agree all the terms but postpone the making of the contract. The words "subject to contract" will usually, but not necessarily, have that effect.

Consideration

Those who want the court to enforce a promise must show they have paid a price for it.

A promise unsupported by consideration cannot make a contract. It is not binding unless incorporated in a deed.

Past consideration is no consideration.

Consideration may be executed or executory. Executory consideration is a return promise in the future. Executed consideration is an act for which the promise was given.

If the consideration is a promise to pay an unfixed sum, a later promise to pay a fixed amount is supported by consideration

A promise to perform an obligation already owed to a third party is good consideration.

A promise to perform a public duty is good consideration unless it would be against public policy to enforce it.

A promise to perform a duty already owed in contract to the same promisee may be good consideration provided there is no unfair pressure amounting to economic duress.

Formality

No formalities are usually required, but for the sale or other disposition of interests in land. (Note & Explaint "deeds" and "contracts")

An unenforceable contract is one which the court may recognize but will not enforce.

Effect of Stamp Duty

The basis of contract in the common law of Hong Kong is bargain not promise.

The party wishing to enforce an agreement must show consideration has been given for the others promise.

No consideration is required if the promise is in the form of a "DEED". The terms of the contract may be express or implied.

Express terms displace implied terms which conflict With them. Terms are promises, to be distinguished from misrepresentations (not a real promise).

Privity of Contract

A contract may suffer from different kinds of flaws, providing different remedies: fraud, misrepresentation (innocent or negligent), duress, undue influence, mistake, illegality. or incapacity of a party.

Only a party to a contract can sue on it.

The holder of a negotiable instrument may be able to sue on it though not originally a party to it.

Remedies Some contractual rights can be assigned.

Contractual obligations cannot.

If a contract is broken, a disappointed party may do nothing, negotiate, use self-help, seek arbitration or mediation, or sue.

Remedies provided by the court include actions in debt, for the price, for damages, for injunction and for specific performance.

Every breach of contract gives a right to damages. Equitable remedies are discretionary.