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1he L|ements of Contract Law

Leung Chun |n ke|v|n S1M109 November 2010
Introduct|on
ln shorL Lhe conLracL ls a legally blndlng agreemenL (agreemenL)
Legal conLracLs lnclude noL only wrlLLen ln black and whlLe agreemenL
(wrlLLen agreemenL) also lncludes verbal (oral) and behavlor (by
conducL) of Lhe agreemenL
WhaL agreemenL has Lhe force of law? AL common law Lhe force of law
musL have Lhree baslc elemenLs (a) Lwo or more of Lhe CusLomer and
parLy Lo an agreemenL (known as Lhe proposed offer offer) and Lhe
oLher Lo accepL Lhe deal (known as Lhe accepLed commlLmenLs abouL
accepLance) (b) 1he CusLomer shall pay Lhe value (also known abouL Lhe
pay due conslderaLlon) (c) Lhe CusLomer has enLered lnLo a legally
blndlng agreemenL of lnLenL (Lhe legal lnLenLlon)
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1ypes of contract
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Slmple conLracLs and speclalLy conLracLs

A slmple conLracL ls effecLlve because of Lhe operaLlon of law le
conLracL law A slmple conLracL can be made by wrlLlng by conducL or
made orally A speclalLy conLracL ls creaLed by deed A deed ls made by
wrlLlng and has Lo be slgned sealed and dellvered

WrlLLen conLracLs and unwrlLLen conLracLs

WrlLLen conLracLs are wrlLLen slmple conLracLs speclalLy conLracLs A
wrlLLen conLracL ls a conLracL ln wrlLLen form A conLracL evldenced ln
wrlLlng" refers Lo land LransacLlons as sLlpulaLed by s 3(1) of Lhe
Conveyanclng and roperLy Crdlnance

unwrlLLen conLracLs are oral slmple conLracLs and slmple conLracLs
by conducL


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3parLy conLracL
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ln Pong kong Lhe common 3parL conLracL ls Lhe provlslonal sale
and purchase agreemenL slgned aL a real esLaLe agenL's offlce 1he Lhree
parLles are Lhe buyer Lhe seller and Lhe esLaLe agenL 1he Lerm Speclflc
erformance"
4
ln such an agreemenL ls noL Lhe equlLable remedy of
speclflc performance granLed by Lhe courL

u|es of contracts
S

Cffer and accepLance
lnLenLlon Lo creaLe legal relaLlonshlp
CapaclLy Lo make a conLracL
LegallLy
ConslderaLlon lf under seal no need for conslderaLlon under seal
means a deed A deed ls a wrlLLen documenL slgned sealed (usually
by red seallng wax) and dellvered

Powever deeds can be slgned wlLh conslderaLlon ln oLher words a
deed le a speclalLy conLracL ls effecLlve wlLh or wlLhouL conslderaLlon
Whlle a slmple conLracL musL have conslderaLlon

ffer and acceptance
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Consensus ad ldem

ln Lhe formaLlon of a conLracL one parLy offers and Lhe oLher parLy
musL accepL on Lhe same Lerms le an uncondlLlonal accepLance of Lhe
offer 1hls ls called ln LaLln consensus ad ldem" meanlng agreemenL Lo
Lhe same Lhlng or ad ldem" meanlng Lo Lhe same Lhlng lf Lhe parLles
agree on Lhe same Lerms lL ls sald LhaL Lhere ls a meeLlng of Lhe mlnds"
or a concurrence of wllls Should Lhere be no meeLlng of Lhe mlnds Lhe
conLracL may be seL aslde by Lhe courL





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Counter offer
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A counLer offer ls re[ecLlon and LermlnaLlon of Lhe orlglnal offer An
express re[ecLlon as ln Pyde v Wrench 1840 3 8aev 334 lL was held LhaL
a counLer offer of 930 Lo Lhe orlglnal offer selllng a farm for 1000
LermlnaLed Lhe orlglnal off whlch could noL be accepLed

lnvlLaLlon Lo LreaL or lnvlLaLlon Lo make an offer

An lnvlLaLlon Lo LreaL ls noL an offer ln harmaceuLlcal SocleLy of
CreaL 8rlLaln v 8ooLs Cash ChemlsLs (SouLhern LLd 1933 1 ALL L8 482
Lhe harmaceuLlcal SocleLy broughL a case agalnsL 8ooLs for selllng
polsons wlLhouL Lhe supervlslon of a reglsLered pharmaclsL conLrary Lo
Lhe harmacy and olsons AcL 1933 1he plalnLlffs argued LhaL dlsplaylng
Lhe goods consLlLuLed an offer and a cusLomer's placlng goods ln Lhe
baskeL an accepLance 1hls reasonlng was re[ecLed by Lhe courL lL was
ruled LhaL Lhe dlsplay of goods was an lnvlLaLlon Lo LreaL noL an offer
1he offer was made by Lhe cusLomer when presenLlng Lhe goods aL Lhe
checkouL counLer and accepLed by Lhe cashler
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Cons|derat|on
9

ueflnlLlon
A deflnlLlon of conslderaLlon can be found ln Currle v Mlsa 1873 L8
10 Lxch 133 lL was deflned as 'some rlghL lnLeresL proflL beneflL Lo obe
parLy or some forbearance deLrlmenL loss responslblllLy glven suffered
by Lhe oLher'

ConslderaLlon ls ofLen referred Lo be Lhe prlce a parLy pays" for Lhe
oLher parLy's 8CMlSL A slmple conLracL can only be enforced wlLh
conslderaLlon A speclalLy conLracL le a deed can be enforced wlLh or
wlLhouL conslderaLlon 1he usual Lypes of conslderaLlon are
LxecuLed conslderaLlon Lhe conslderaLlon has been glven
LxecuLory conslderaLlon Lhe conslderaLlon wlll be glven




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Contractua| capac|ty
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Mlnors (or called lnfanLs)

Mlnors are persons under 18
ConLracL wlLh mlnors are generally voldable aL Lhe opLlon of Lhe
mlnor lf a conLracL wlLh a mlnor ls for necessary goods or servlces lL wlll
be enforceable Lhe mlnor pay reasonable prlce

MenLally lll persons

lf already been cerLlfled by Lhe MenLal PealLh Crdlnance courL wlll
seL aslde conLracLs for sale of properLy lf noL been cerLlfled may avold a
conLracL lf Lhe oLher parLy knows of Lhe menLal lllness

Llke Lhe poslLlon of selllng Lo a mlnor for necessarles sold Lo a
menLally lncapaclLaLed person or drunken person Lhe person musL pay a
reasonable prlce necessarles are goods sulLable Lo Lhe condlLlon ln llfe
of such person and Lo Lhe person's acLual requlremenL aL Lhe Llme of Lhe
sale and dellvery


1erms (or c|auses or prov|s|ons) of a contract
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A Lerm can be an express Lerm or an lmplled Lerm Cenerally mosL
Lerms of a conLracL are express Lhem

An express Lerm can be a condlLlon a warranLy or an lnnomlnaLe
Lerm An lmplled Lerm can also a condlLlons a warranLy or an
lnnomlnaLe Lerm

CondlLlons a condlLlon of a conLracL ls an lmporLanL Lerm whlch
goes Lo Lhe rooL of a conLracL lf breached Lhe ln[ured parLy can
LermlnaLe Lhe conLracL

WarranLles a warranLy of a conLracL ls a less lmporLanL Lerm lf

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breached Lhe ln[ured parLy can noL LermlnaLe Lhe conLracL buL can sue
for damages


aro| Lv|dence u|e
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arol means oral or verbal ln a wrlLLen conLracL Lhe express Lerms
are usually Lhose LhaL Lhe parLles have dlscussed and speclflcally
lnLended and are lncluded ln Lhe conLracL 1herefore Lhe conLracL ls Lhe
flnal lnLegraLed wrlLLen agreemenL

1he parol evldence rule ls a prlnclple LhaL ensures Lhe lnLegrlLy of
wrlLLen conLracLs 1he rule denoLes LhaL parLles Lo a wrlLLen conLracL wlll
noL be allowed by Lhe courL Lo lnLroduce oral evldence Lo conLradlcL or
change Lhe Lerms of Lhe wrlLLen conLracL 8uL Lhere are excepLlons Lo
Lhls rule 1hese lnclude Lyplng errors and evldence showlng Lhe exlsLence
of a collaLeral conLracL beLween Lhe parLles le a conLracL whlch ls
separaLe and subsldlary Lo Lhe conLracL LhaL ls already enLered lnLo



Contra proferentum ru|e
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ln Lhe lnLerpreLaLlon of an exempLlon clause Lhe courL may apply
Lhe conLra proferenLum rule 1he LaLln expresslon of conLra proferenLem
means agalnsL (conLra) Lhe one brlnglng forLh (Lhe proferens)" ln
prlnclple Lerms of a conLracL should be conclse and unamblguous 8uL ln
reallLy Lhe courL may face unclear conLracL Lerms lf Lhere are any
unclear polnLs or dlfferenL meanlngs abouL an exempLlon clause Lhe rule
ls LhaL lL may be lnLerpreLed by Lhe courL agalnsL Lhe person who drafLs
and relles on lL






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I|t|a|ng factors of a contract
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I|t|at|ng factor m|srepresentat|on

1he deflnlLlon of mlsrepresenLaLlon ls LhaL lL ls a false sLaLemenL of
facL made by one parLy (le Lhe represenLor) before Lhe concluslon of a
conLracL and lnduclng Lhe oLher parLy (le Lhe represenLee) Lo enLer lnLo
a conLracL A mlsrepresenLaLlon can be ln wrlLlng made by conducL or
orally lurLhermore sllence (nondlsclosure) may amounL Lo
mlsrepresenLaLlon

1he e|ements of m|srepresentat|on

lalslLy unLrue represenLaLlon relaLlng Lo a maLerlal facL negllgenL
mlssLaLemenL ln Pedley 8yrne Co LLd v Peller arnLers LLd 1964
AC463 Lhe courL held LhaL as Lhere was a speclal relaLlonshlp Lhe
plalnLlff relled on Lhe sLaLemenL whlch was found Lo be negllgenLly glven

Sllence ln lnsurance conLracLs sllence (nondlsclosure) can be
regarded as mlsrepresenLaLlon

When a Lhlrd parLy geLs an lnLeresL before resclsslon a conLracL
lnduced by a mlsrepresenLaLlon ls voldable by Lhe represenLee 8uL Lhe
equlLable remedy of resclsslon of Lhe conLracL ls a dlscreLlon of Lhe courL
As Lhe conLracL ls voldable noL vold lf mlsrepresenLaLlon lnvolves goods
and Lhe goods are sold Lo an honesL Lhlrd parLy for value before
avoldance by Lhe mlsrepresenLaLlon Lhe honesL Lhlrd parLy geLs a good
LlLle Lo Lhe goods ln Lhls lnsLance resclsslon cannoL be done










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1he |aw of rest|tut|on
1S


8esLlLuLlon ls baslcally a case law sub[ecL lL ls relaLed Lo Lhe clvll law
(prlvaLe law) of obllgaLlons (conLracL equlLy LorL) A plalnLlff (clalmanL)
sues for Lhe reLurn of Lhe defendanL's un[usL enrlchmenL (un[usL galn)

1he clvll law dlscusses Lhe acLlonablllLy of un[usL losses wheLher
Lhese are caused by a breach of conLracL or breach of LrusL or a LorL 1he
law of resLlLuLlon covers Lhe acLlonablllLy of un[usL galns (or un[usL
enrlchmenLs) 1here are varlous Lypes of mosLly commerclal galnbased
clalms and prlnclples whereby Lhese may be recovered When a courL
orders resLlLuLlon Lhe defendanL ls requlred Lo reLurn Lhe un[usL galns Lo
Lhe plalnLlff (clalmanL)

1here are dlfferenL klnds of un[usL galns eg recelvlng a paymenL by
mlsLake paymenLs lnduced by llleglLlmaLe commerclal pressure or
personal lnfluence goods and servlces recelved because of lncompleLe
unenforceable or vold conLracLs money galned ln breach or LrusL and
money obLalned afLer launderlng as parL of a commerclal fraud


n||ne Contact|ng
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1ypes of onllne conLracLs (for agreemenLs)

Shrlnkwrap agreemenL by openlng Lhe shrlnkwrapped plasLlc
package of a sofLware Lhe user wlll ablde by Lhe Lerms of such an
agreemenL

Cllckwrap agreemenL by cllcklng on Lhe lcon Lhe user agrees Lo
Lhe Lerms of Lhe agreemenL or agrees Lo buy someLhlng

8rowsewrap agreemenL slmllar Lo cllckwrap excepL Lhe user does
noL have Lo agree Lo Lhe Lerms eg downloadlng sofLware wlLhouL
agreelng ln advance any Lerms

Cnllne conLracLs appllcable laws

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LlecLronlc 1ransacLlons Crdlnance (L1C)
ConLracL law baslcally a case law area
Sale of Coods Crdlnance (SCCC)
1rade uescrlpLlons Crdlnance
CerLaln rules of prlvaLe lnLernaLlonal law lf Lhe conLracLlng parLles
are from dlfferenL counLrles or reglons or [urlsdlcLlons

Cnllne conLracLs wrlLlng of an onllne conLracL

ln conLracLlng Lhere are maLLers concernlng wrlLlng and slgnaLure
SecLlon 3 LlecLronlc 1ransacLlons Crdlnance (L1C) sLaLes LhaL
ecommerce LransacLed vld Lhe lnLerneL has Lhe same legal valldlLy as
commerce conducLed by paper



Conc|us|on

1o conclude l Lhlnk Lhls asslgnmenL can help me Lo know more
abouL Lhe meanlng and Lhe Lypes of conLracL law because LhaL ls a noL
easy Lo know conLracL deLalls so Lhls asslgnmenL have help more
experlences


ther Informat|on from book of contract |aw
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lnLenLlon Lo CreaLe Legal 8elaLlon

An lnLenLlon Lo creaLe legal relaLlons ls an essenLlal elemenL ln Lhe
formaLlon of a conLracL ln a purely domesLlc or soclal LransacLlon Lhere
ls a presumpLlon LhaL Lhere ls no lnLenLlon Lo creaLe legal relaLlons 1hls
lf a faLher falls Lo pay hls son a weekly allowance as promlsed Lhe son
cannoL sue Lhe faLher Slmllarly lf A and 8 agree Lo lunch LogeLher A
promlslng Lo pay for Lhe food and 8 promlslng Lo pay for Lhe drlnk Lhere
ls an agreemenL and conslderaLlon buL no legal obllgaLlons are creaLed
ln 8alfour v 8alfour a husband was employed ln a governmenL posL ln
Ceylon Pe reLurned wlLh hls wlfe Lo Lngland on leave buL she was

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General principles of Hong Kong law / Clement Shum Page 50
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unable Lo go back Lo Ceylon wlLh hlm for allowance of 30penny a monLh
unLll she re[olned hlm Pe falled Lo make Lhls paymenL and she sued hlm
lL was held LhaL Lhe parLles had no lnLenLlon Lo conLracL Powever Lhe
clrcumsLances may be such as Lo lead a courL Lo hold LhaL legal relaLlons
are lnLended ln MerrlLL v MerrlLL Lhe husband had lefL Lhe wlfe and was
llvlng wlLh anoLher woman Pe agreed Lo pay Lhe wlfe 40penny a monLh
and Lo Lransfer Lhe maLrlmonlal house Lo her sole ownershlp lf she would
pay off Lhe morLgage lL was held LhaL Lhe agreemenL was lnLended Lo be
blndlng 1he quesLlon of wheLher or noL Lhere ls a blndlng conLracL
depends on Lhe lnLenLlon of Lhe parLles Lo be lnferred from Lhe language
Lhey use and from Lhe clrcumsLances ln whlch Lhey use lL 1he same
quesLlon may arlse ln respecL of soclal agreemenLs and beLween parLles
who are noL relaLlves