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INTRODUCTION TO CONTRACT LAW

INTRODUCTION TO CONTRACT LAW. Am I lumbered with a dodgy contract?. Table of Contents. 1. Vocabulary P158 2. Contract Law Intention ( 订约意图) agreement ( 协议) (3) consideration ( 对价) (4)capacity ( 订约能力) (5)consent ( 意思表示真实) (6)legality ( 订约目的合法) (7)form ( 合同形式合法).

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INTRODUCTION TO CONTRACT LAW

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  1. INTRODUCTION TO CONTRACT LAW Am I lumbered with a dodgy contract?

  2. Table of Contents • 1. Vocabulary P158 • 2. Contract Law • Intention (订约意图) • agreement (协议) (3) consideration (对价) (4)capacity (订约能力) (5)consent (意思表示真实) (6)legality (订约目的合法) (7)form (合同形式合法)

  3. Exceptio Non Adimpleti Contractus: Latin: exception of a non-performed contract • “Exceptio non adimpleti contractus ... the right to refuse to perform one’s obligations under a reciprocal contract unless or until the other party dos so. • “No performance is due to one who has not himself performed.”

  4. Clausula rebus sic stantibus (Latin): “things thus standing.” • It is a legal doctrine in public international law which allows treaties to become inapplicable because of a fundamental change of circumstances. This is an exception to the general rule of pacta sunt servanda (promises must be kept). • Clausula rebus sic stantibus does not apply if the parties to a contract had contemplated for the occurrence of the changed circumstance. It only relates to the changed circumstances that were never contemplated by the parties.

  5. Contract law- Introduction 3.1.1 Definition of Contract (p68) An agreement made between two or more persons, with the intention of creating certain legal rights and duties, which is enforceable at law.

  6. Contract law- Introduction Contract (合同 ) & agreement (协议)to be distinguished -strictly speaking, contract is a combination of agreements and other compulsory requirements by contract law. -not every agreement leads to a legal contract, but a contract must contain a legally enforceable agreement.

  7. Contract law- Introduction Formation of Contracts

  8. 3.1.2. Sources of Commercial Contract Law • 3.1.2.1 Domestic • 3.1.2.2 International convention • 3.1.2.3 International practice about contracts P71 • 3.1.4 General Principles of Int’l Commercial Contracts P72

  9. Contract law- Introduction Contracts Under Seal - also known as Deeds,must be completed in a particular way (form) in order to be valid , i.e in writing; signed by both parties; Witnessed; Sealed. 2014/9/3 9

  10. Chapter 6 -Contract law- Introduction • Simple Contracts (简式合同) • Not required to be in any particular form but are required to have consideration(对价). • simple contract could be made either expressly • or impliedly, orally or writing form. • There are statutes which require some simple contracts to be in writing, eg. contract of real estates or evidenced in writing • eg. bill of lading(提单). 2014/9/3 10

  11. Contract law- Introduction Avoidable contract/ Unenforceable contract/ Void contract/ Illegal contract Avoidable contract(可撤销合同): -remains valid until repudiated by a party Unenforceable contract(不可强制执行的合同): -valid on its face but no legal action can be brought on it . eg. Contract needs to be evidenced in writing,but no evidence could be presented. 2014/9/3 11

  12. Contract law- Introduction Void contract(无效合同): -no legal rights and duties . - Void contract is of civil nature relating to extreme unfairness Illegal contract(非法合同): - it contravenes a statute and then treated as being void so there are no legal rights and duties. - Illegal contract is of criminal nature such as robbing a bank with a friend. 2014/9/3 12

  13. Contract law- Introduction Express Contract and Implied Contract Express Contract(明示合同) Terms of the contract expressly agreed upon in writing, orally or combination of both. Implied Contract(默示合同) contract reached through acts or conducts of both parties , not through writing or words. 2014/9/3 13

  14. Essential elements of a valid contract In order to create a valid simple contract, certain essential elements must be present: Intention to create legal relations.(订约意图) Offer and Acceptance - an agreement.(协议) Consideration.(合同须有对价) Capacity of the parties.(合同当事人须有订约能力) Genuine consent by the parties or Certainty of terms.(当事人订约意图真实 或合同条款真实 ) Legality of object(purpose).( 合同标的或目的合法) 2014/9/3 14

  15. Contract law- Intention (step 1) 2014/9/3 15

  16. Intention of the parties to create legal relations • The parties must have intended to enter into a legally binding agreement. • 2 types of agreements • - Family/ domestic or social agreements. • - Business or commercial agreements. 2014/9/3 16

  17. Intention of the parties to create legal relations Two presumptions(推定)about legal intention: Presumption one: it is presumed that parties to an agreement of a family/domestic or social do not intend to be legally bound eg: Cohen v Cohen (1929) 2014/9/3 17

  18. Intention of the parties to create legal relations domestic agreement -example Cohen v Cohen (1929) -husband promised to wife dress allowance before the marriage,but after marriage, payments fell into arrears and when couple separated Mrs Cohen sued for that sum. court held: this was an ordinary domestic agreement - no intention; plaintiff was unsuccessful in her claim for breach of contract 2014/9/3 18

  19. Intention of the parties to create legal relations • Two presumptions about legal intention: • Presumption two: • it is presumed that parties to an agreement concerning commerce or business intend to be legally bound. 2014/9/3 19

  20. Intention of the parties to create legal relations - Rebuttal(推翻推定) Either of the presumptions can be rebutted (changed) when something happens. Eg:Todd v Nicol (1957) Eg: Rose & Frank Co. v J. R. Crompton & Bros Ltd [1923] 2 KB 261 (“Honor Clauses”) 2014/9/3 20

  21. Todd v Nicol[1957] - a rebuttal to the presumption that family agreements are not contracts. • Facts: plaintiffs were promised a house by the defendant if they left Scotland to join her in Adelaide. The defendant broke her promise after the plaintiffs went to great expense. • Court held: the presumption could be rebutted in the circumstances due to the serious nature of the financial consequences involved. 2014/9/3 21

  22. Honor Clauses a rebuttal to the presumption that business agreements are intended to be binding the meaning of“Honor Clauses” are clauses that demonstrate the parties to the contract do not have intention to be legally bound in their contract made. example of honor clause: “this agreement is not entered into … as a formal or legal agreement … but it is only a definite record of the purpose and intention of the parties … to which they each honorably pledge themselves …that will be carried through …with mutual loyalty and friendly cooperation.” Rose & Frank Co. v J. R. Crompton & Bros Ltd [1923] 2 KB 261 2014/9/3 22

  23. Honor Clauses the legal effect(法律后果)of honor clause: Contract containing an “honor clause” is not legally effective . The contract is actually regarded as honorable agreement , which has no any legal binding force upon the parties, although the contract functions to promote both parties to carry it out morally. Therefore, “honor clause ” in contract rebuts the presumption that agreements of a business nature are intended to be binding. 2014/9/3 23

  24. Intention of the parties to create legal relationsSummary Presumption one: an agreement of a family/domestic or social does not intend to be legally bound, it is not a contract . Rebuttal: when serious financial consequences were involved in it, it is a contract. Presumption two: an agreement concerning commerce or business intends to be legally bound, it is a contract. Rebuttal: when a business agreement contained “honor clauses”, it is not a contract. 2014/9/3 24

  25. Contract law- Introduction Contract law- Intention (step 1) -END- 2014/9/3 25

  26. OFFER- DEFINITION • An offer(要约) is a definiteproposal, made with the intention that it will become BINDING on the person making it, as soon as it is accepted. • OFFEROR(要约人) = person making the offer • OFFEREE(受要约人) = person to whom the offer is made (if the offeree accepts the offer he will become accepter(承诺人))

  27. A statement for sale • We would like to place an order with you for this type of steel, totaling 100 tons at today’s market price of London Metal Exchange, other terms as per our agreement made before. This offer is subject to your acceptance by fax, reaching us before April 10th. • Question: Is this an offer?

  28. Contract law- agreement (step 2) Offer rules 8.3 Rules relating to offer The offer must be communicated to the offeree. (2) An offer may be made to an individual, a group of people, or the world at large. See Carlill v Carbolic Smoke Ball Co. [1893] (next slides)

  29. Carlill v Carbolic Smoke Ball Co.(1893) • The defendants (Carbolic) advertised their smoke ball suggesting that anyone who became ill with influenza after using it would be rewarded with 100 pounds. They claimed in the advertisement that the promotion was genuine since they had placed 1000 pounds in the bank to pay anyone out if necessary. Mrs Carlill used the smoke ball, became ill and sued for the reward.

  30. Carlill v Carbolic Smoke Ball Co [1893] • Court held : the offer was made to the world at large (general public) and any person reading the advertisement would have taken it as a firm offer, binding if accepted.

  31. Contract law- agreement (step 2)Offer - rules (3) The terms of the offer must be clear and definite. (4) an offer can be kept open to give an offeree a period of time to consider it. (5) request/supply of information is not an offer see:Harvey v Facey [1893](next slides)

  32. Contract law- agreement (step 2)Offer - request for further information • Harvey v. Facey [1893]- plaintiffs asked defendants how much they would like for their property, the defendants replied describing lowest possible price. Plaintiffs took this to be an offer and sued when defendants said they did not want to sell • Court held: Defendants’ reply was merely a supply of information not an offer.

  33. Contract law- agreement (step 2) Invitations to Treat(ITT) (6)An offer must be distinguished from an invitation to treat • An invitation to treat (ITT)is a statement to others inviting them to make an offer. • Examples of invitations to treat • eg: announcement for auction(拍卖公告) • (notice: bidding in auction 拍卖叫价) • eg: notice of tender(招标公告)

  34. Contract law- agreement (step 2) Invitations to Treat(ITT) eg: Goods on display (陈列在货架上的商品) price attached to goods is not an offer - it is an inducement to customers to consider buying the product.

  35. Contract law- agreement (step 2)Invitations to Treat (ITT)Gold Blend(麦氏咖啡) “How perfect, My three favourite things.” “Which are?” “Soft candlelight.” “It’s more romantic.” “Gold blend.” “The only coffee to serve.” “And last…” “…last?” “Your undivided attention.”

  36. eg: advertisements (商业广告) Generally speaking, advertisements are ITT, they are not the firm offer, they just want to induce the customers to make an offer to them.

  37. Contract law- agreement (step 2)Invitations to Treat(ITT) • The presumptions regarding situations which are generally considered to be ITTs can be rebutted by using an objective test (looking at the facts of an individual case)

  38. Contract law- agreement (step 2)ITT-REBUTTAL-TEST TEST of Determining an invitation to treat Whether a reasonable and impartial bystander would consider, in all the external circumstances, is that the maker of the statement intended to be bound by the terms of his statement if it were accepted or that whether he would say that it was merely made as an inducement to the entry into negotiations on the matter. see Carlill v Carbolic Smoke Ball Co. [1893] 1QB256

  39. Carlill v Carbolic Smoke Ball Co.(1893) a rebuttal to the presumption that advertisement is an ITT • The defendants (Carbolic) advertised their smoke ball suggesting that anyone who became ill with influenza after using it would be rewarded with 100 pounds. They claimed in the advertisement that the promotion was genuine since they had placed 1000 pounds in the bank to pay anyone out if necessary. Mrs Carlill used the smoke ball, became ill and sued for the reward.

  40. Carlill v Carbolic Smoke Ball Co [1893] • Court held : the offer was made to the world at large (general public) and any person reading the advertisement would have taken it as a firm offer, binding if accepted • This case leads to the classification of ordinary advertisement and reward for the public(悬赏广告)

  41. Reward for the public (悬赏广告) • When an advertisement offers a reward for information that might lead to the arrest of a criminal or for the return of a lost article, it is regarded as general offer to the public at large. • Acceptance of a public offer by anyone, as indicated by the performance of the act, results in an enforceable contract.

  42. An example of reward for the public My book, “international business law”, was lost two days ago. Anyone who found it could get RMB 50 as a reward if he(she) returned it to me. Please contact me by 13813256799. Mary April 4th,2011

  43. Contract law- agreement (step 2)ITT - REBUTTAL • The presumptions regarding situations which are generally considered to be ITTs (announcement for auction/ notice of tender/ goods on display / advertisements) can be rebutted by using an objective test (looking at the facts of an individual case)

  44. Contract law- agreement (step 2)ITT-REBUTTAL-TEST • Automatic selling machine is a rebuttal to the presumption that the goods on display are ITT • Automatic selling machine makes the offer by presenting their goods on display to the potential buyer. When the buyer accepts the offer by putting money into the machine, contract is completed when goods rolls out.

  45. Short summary of offer and ITT An ITT is a party’s intention to invite the other party to make an offer. Eg (1)ordinary advertisement (2) goods on display (一般货物陈列) (3) announcement for auction An offer is a party’s intention to enter into a contract with the other party. Eg (1) reward (悬赏广告) (2) automatic selling machine(自动售货机) (3) bidding in auction

  46. Reconsideration of the example of a statement for sale • “ we would like to place an order with you for this type of steel, totaling 1000 tons at today’s price of London Metal Exchange , other terms as per our agreement made before. This order is open for your acceptance by fax, reaching us before May 10th our time.” • Question: is this an offer ? Why?

  47. consideration of the changed example of a statement for sale • “ we would like to place an order with you for this type of steel, totaling 1000 tons at today’s price of London Metal Exchange , other terms as per our agreement made before. This order is open for your acceptance by fax, reaching us before May 10th our time. Your acceptance is subject to our final confirmation.” • Question: is this an offer ? Why?

  48. Contract law- agreement (step 2) -end-

  49. STEP 2: AGREEMENT BETWEEN THE PARTIES Agreement – Acceptance P80 • ACCEPTANCE- DEFINITION • Acceptance is a final expression of assent to the terms of an offer. • Acceptance converts a promise by an offeror into an agreement.

  50. STEP 2: AGREEMENT BETWEEN THE PARTIES Agreement - Acceptance Rules of Acceptance (1) Only the offeree or its authorized agent can accept the offer. (2) Acceptance must be communicated see: communication of acceptance

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