Law

Law of Contract
of Contract

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 Law of Contract

Definition:
An agreement between two parties
for an exchange of promises,
actions or forbearances. 寬容

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 Law of Contract - Format
A simple contract may be :
made orally
made in writing
implied by conduct (performance)
行為

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 Essential elements 必要元素

 Offer
 Acceptance
 Intention to create legal relationship
 Consideration - value of exchange, bargain
 Capacity - position of offeror and offeree
 Genuine 真正 consent - duly signed
 Legality - under seal 蓋上印章

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 Offer
An offer is an expression of willingness to
enter into a contract on certain terms.(i.e.
considerations)
 Offeror
 Offeree

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 How to make an offer
An offer can be
 made orally
 Implied 暗示 by conduct
 made in writing

Which one is the best ?

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 How to make an offer
 May be made to a definite person, or to the
whole world (e.g. any customer)
 It must be communicated to the offeree 受約
人 before it can be accepted (the offeree

must know that there is such an offer)

 Must be clear and certain (there is no such
requirement that the word “offer” should
appear)
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 Invitation to treat 發出邀請

Example: the display of a pack of beer in a

supermarket.
Invitation to treat means an invitation to
make offers. It only acts to show
how nice the goods are, if any
body has interest, he/she can
make an offer to buy them.

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 Quotation
Example: an advice of price (quote a
value ) for the supply of equipment for a
project. e.g. a quotation of computer repairing
A quotation is not necessarily an offer.
The wordings should be studied carefully
before any decision be made. It may
result to an invitation to treat.

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 Auction 拍賣

 Putting up something for sale by auction

is invitation to treat
 The person who bids 出價 is making offer
(e.g. bidding for lands by developers)
 Auctioneer 拍賣人 is free to accept
 Higher bid overrides 替代 lower bids
 Note how acceptance is signified and paid

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 Tender 投標

 It is an offer, it is clearly stated so in the relevant

documents (because certain terms are firmly stated in the
tender)
 Each submitted tender constitutes to an offer.
 Once accepted and signed, it constitutes to a valid
有效 contract. e.g. form of tender

 Contract will be awarded to the one who submits

the lowest bid (morale contract)
 May create problems to clients …….e.g. poor qualit
y, inferior materials (lowest price may not be the best in
quality?)
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 lowest bid
Client is not bound 必然 to
accept the lowest or any
tender received
Why ? Any other reasons?
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 Termination of an offer
An offer terminates 終止

 on the death of either the offeror or the offeree

before acceptance
 on the lapse time 時間過去 e.g. delay in signing contract
 May be specified in the offer
 Period of reasonable time if not specified e.g.
7 days

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 Termination of an offer
Revoked 撤銷 (by the offeror) before acceptance
 Revocation must reach offeree before it is
effective
 Through normal communication
channels e.g. formal termination letter
 Awareness of non-existence of the offer
e.g. the supplied equipment/material is
out of market
 Offer can be revoked even if it is
promised to be kept for a period of time
(sometimes 1-3 months specified in the form of
tender)
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 Termination of an offer
When rejected by the offeree
 Refusal
 Counter-offer e.g. lower price
 Be careful of “request for further
information” i.e. not bound to accept but o
nly request more details of offer (e.g. ask for the
financial statements of contractor during tender period)

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 Acceptance
Can be made
 Orally (it needs evidence)
 In writing (more reliable than oral)
 Implied by conduct, or by symbol used as
custom 規矩
 Falling of hammer in auction
 Mistakenly sending you a beer that you have
not ordered. However, you accepted the beer

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 Acceptance (methods)
Acceptance subject to contract terms
 Until formal agreement is made, no binding 約束力
contract is formed
Note (example of construction contract)
 Intention 意向 behind (e.g. Letter of intent)
 Behavior behind (e.g. possess 佔據 of site)
There may be formal contract once the agreement of ‘subject to
contract” is made. Normally, possess of site is carried out 7 days
after signing of letter of intent offered by the developer.
Commencement date is began
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Intention to create legal relationship
 Intention
The parties must demonstrate that they have
some due, if any of the parties does not
honour the agreement 履行協議 , assistance
from the court will be sought: legal
consequences
 Domestic agreement 家庭協議 is an
example of not having legal
consequences (e.g. mutual agreement made by a
lawyer but most likely possessed by Arbitration 仲裁 )

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 Consideration 考慮 / 代價

 Rights, money, benefits, detriment 損害 / 不利

responsibility…..
 Consideration is price of the bargain 討價還價
 All valid simple contracts must have
consideration except contracts under seal.
 If I promise to give you HK$100 for nothing,
if I then change my mind, then…..what can
you do?? Is it genuine ?
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 Rules of Consideration

Must be genuine 真誠

 Must demonstrate benefits and

detriments 利弊 i.e. give and take
 Sham 虛假 and / or vague 模糊
promise will have no effect
e.g. false document, wrong information

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 Rules of Consideration
 Must have something to demonstrate existence of
value or benefit
 Need not be adequate, e.g. HK$10.00 to buy a car
will be OK ?
 Everyone is free to make any bargain, and the
court will not interfere
How about if you have made a wrong bargain,
can you sue for more??
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 Rules of Consideration
Must be legal
 Every thing in a contract must be legal e.g. unethical
transaction is illegal

Must be possible
 Can be performed under human capacity, e.g. going to
space to catch a star…..is impossible
 In the industry : to construct something by using a
material that is already obsolete 淘汰的 is impossible to
do
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 Rules of Consideration
Must not be past
 If an act is performed before the agreement
is made – no consideration
e.g. money was paid before the contract to be signed

 It must have a bargain, that is negotiation

without any pressure from the other side
 打死狗講價 e.g. the price was fixed in contract but wish to
change the price back to the original offer
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 Capacity 能力

Both parties must

 have the minds to distinguish the rights or
wrongs in the contract, and
 be able to execute the contract. The followings are
invalid (void) ;-
 Minors 未成年 e.g. below 18 in Hong Kong
 Drunk
 Be careful of necessities in contracting with
minors (counter-signed by parents)
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 Legality
Every thing in the contract must not
contravene a statute 違反機構﹑組織章程 or the
common law. 普通法 (Common law that is derived from custom
and judicial precedent rather than statutes)

 Making a contract for breaking into a house to

steal something is a criminal offence and thus the
contract is void. 無效
 International laws should be observed (e.g.
restraint of trade e.g. WTO, World Trade Organization 世界貿易
組織

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Discharge (the end) of contract 解除合同（結束 )

 Every contractual obligation gives rise to a

corresponding contractual right.
 when obligation of one party is discharged
(contract terms were fully executed), corresponding
right of the other party is extinguished.
(disappeared)
 Where all obligations under a contract are
discharged, all rights are thus extinguished
 contract is said to be discharged. (i.e. all rights and
obligation under contact terms are fulfilled.)

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A contract may be discharged by:

 Performance
 Agreement
 Breach of contract 違約

But compensation will be assessed by the court

 Frustration of contract 合同落空

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 Performance

A contract obligation is discharged by a complete

performance of the undertaking. For example you
paid ten dollars to the hawker and the hawker gave
you three oranges.

i.e. follow all the obligations and completed in

accordance with contract conditions

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 Agreement

Upon agreement of the contractual parties, a

contractual obligation can be discharged.
Two ways by agreement:
 Subsequent a binding contract. 約束力的合同

 Operation on one of the terms in the

contract itself. e.g. agreed to terminate the
contract by both parties in which conditions of
termination were stated in the contract

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 Breach of contract 違反合約

 Repudiate 拒絕 before performance is due

 Victim 受害者 may claim for breach of contract
immediately, rather than wait until time is due.
 Fails to perform duties under the contract by due
time i.e. deadline e.g. delay of construction period
 When breach of contract occurs, no need to perform
the remaining duties, victim may start legal action
then.
For example, if a developer failed to make payment to
the contractor, it will constitute breach of contract.
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 Frustration 合同落空

When the contract is impossible to perform

subsequently, the agreement is said to be frustrated.
Frustration signifies a certain set of circumstances arising after the formation of the
contract, the occurrence of which is due to no fault of either party and which
render performance of the contract by one or both parties physically and
commercially impossible. e.g. either parties is dead or the product or service is no
longer existed in market.

Important:
 The court will not grant relief 給予減免 on the ground of frustration merely
(only) if the contract has become more difficult or more costly to carry out
or less likely to yield 產生 profit than was foreseen. Therefore,
compensation should be paid to the victim

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 Effects of breach of contract
Action for damages
 Compensation 賠償金 is the objective
 Arising naturally, i.e. according to usual
course of things (normally stated in contract e.g. any
common event such as serious delay)
 Supposed the amount to have when the
contract is completed in the usual way
e.g. the value of the products

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 Remedies for breach of contract
Not only limited to monetary ways, include:
 un-liquidated damages e.g. no designated amount for the loss

 liquidated damages (LD) 違約賠償 e.g. estimated penalty per day for delay
which excludes other damages such as sub-standards of works
 quantum meruit 合理金额 e.g. judged by the court for all losses

 specific performance e.g. compensated for the loss by other way

 reasonable price for goods where the price is not agreed beforehand
e.g. pay market prices
 Injunction 禁制令 e.g. stop entry of site by the contractor who breaches the contract

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 Un-liquidated damages
Compensation, is the object
 Where a plaintiff 原告 claims damages for
breach of contract, it is the function of
the court to assess the money value of
the loss suffered, and to award this sum
as damages.
 Plaintiff must prove of course.(evidence or
document supporting)

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 Liquidated Damages (LD) 違約賠償
Pre-assessment of loss stated in contract
 Genuine pre-assessment of the loss. (HK$/day)
 The sum is fixed, no more can be claimed
 No action of unliquidated damages is allowed if
LD is applied
 Any intention of punishment/penalties will be
disordered 混亂的
 Unreasonable big amount (which may
out of the contractor’ expectation)
 Smaller sum is secured by larger sum
 Single sum pay for occurrence of many
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 Quantum meruit 合理金额
(as much as you can earn)
It is a claim for reasonable remuneration 酬金

When a plaintiff sues to recover a sum by way

of payment for services rendered, he is said to
claim on a quantum meruit. Arises:
 Works performed or accepted under a void
contract, or,
 One party abandons 背棄 or refuses to perform
 Disallowed under an entire contract ( anything
not specified in contract e.g. reasonable profit) 36
 Recovery of a reasonable price for goods

 If the buyer wrongfully neglects or refuses to

pay for the goods according to the terms of the
contract, the seller may maintain an action
against him for the price of the goods.
 The court will consider what is reasonable to
pay ( e.g. all lose of profit arising from the contract)

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 Specific performance

Specific performance is available only where

the payment of a sum of money would not be
an adequate remedy. Therefore, specific performance
is required.

 it is an appropriate remedy in cases for the sale

or lease of land, or for the sale of something
which is not frequently available on the market,
 e.g. any asset is sold to compensate the loss

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 Injunction 禁制令

Breach of a negative term under contract

 The court has a discretionary power to grant

an injunction to restrain 抑止 the breach of a
negative term of a contract even though the
positive part of the contract is not specifically
enforceable, e.g. in the case of a contract of
personal service such as a housemaid to be
terminated without valid reason

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