Transcript Document

INTRODUCTION TO
CONTRACT LAW
Am I lumbered with
a dodgy contract?
2015/7/20
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Table of Contents
•
•
1. Vocabulary P158
2. Contract Law
(1) Intention (订约意图)
(2) 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)
• 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.”
• 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.
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.
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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.
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Contract law- Introduction
Formation of Contracts
type of
contract
contract elements
apparent simple
contract
(1) Intention (订约意图)
(2) agreement (协议)
(相当于合同的成立) (3) consideration (对价)
Type of
contract
Valid simple
contract
(相当于
合同的生效)
(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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• 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
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.
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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).
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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.
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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.
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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.
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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)
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Contract law- Intention (step 1)
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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.
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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)
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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
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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.
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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”)
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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.
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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
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[1923] 2 KB 261
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.
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Intention of the parties to create legal relations
Summary
• 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.
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Contract law- Introduction
Contract law- Intention (step 1)
-END2015/7/20
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OFFER- DEFINITION
• An offer（要约） is a definite proposal, 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）)
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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?
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Contract law- agreement (step 2)
Offer rules
8.3 Rules relating to offer
(1) 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)
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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.
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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.
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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)
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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.
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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）
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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.
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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.”
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• 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.
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)
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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
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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.
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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）
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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.
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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
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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)
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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.
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Short summary of offer and ITT
An offer is a party’s
intention to enter into
a contract with the
other party.
Eg
An ITT is a party’s
intention to invite the
other party to make an
offer.
Eg
(1) reward (悬赏广告)
(2) automatic selling
machine(自动售货机)
(3) bidding in auction
(1)ordinary advertisement
(2) goods on display
(一般货物陈列)
(3) announcement for auction
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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?
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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?
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Contract law- agreement (step 2)
-end2015/7/20
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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.
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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
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of acceptance
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Agreement – Acceptance-Rules
Communication
Communication [refer to rule (4)]
 Point
1:
 communication of the acceptance could be
expressed by writing/words/conduct.
 Point 2:
 Generally, the “acceptance”, is ineffective until it
has been received by the offeror.
 Eg. silence is not acceptance
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
See next slide: Felthouse v Bindley [1862]
STEP 2: AGREEMENT BETWEEN THE PARTIES
Acceptance - communication
• Felthouse v. Bindley(1862) - Felthouse
wrote to nephew offering to buy a horse. In
the letter Felthouse told his nephew that if
he did not get a response he would consider
the offer accepted.
• Court held: nephew’s acceptance had not
been communicated, therefore horse did not
belong to Felthouse.
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STEP 2: AGREEMENT BETWEEN THE PARTIES
communicationThe Postal Rule
Point 3:
Exceptionally, Acceptance by post (投邮)(letter
/telegram) becomes effective once the acceptance is
posted, regardless of whether the acceptance is
delayed or lost in the postal system. (This is for
common-law countries. What is the rule in civil-law
countries?
see next slide: Adams v Lindsell [1818]
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Acceptance - Postal rule
• Adams v. Lindsell (1818) - Defendant sent a letter
to plaintiffs offering to sell wool and required a
response by post. The offer was delayed in the
mail but eventually received. Plaintiffs posted an
acceptance but defendants had already sold the
wool to someone else before he received the
acceptance.
• Court held: acceptance took place at the exact
moment when the letter of acceptance was posted
and the defendants were liable.
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The Postal Rule
acceptance
Fax/email/telep Reception rule(到达规
hone
则) The mail of
acceptance is not valid
until it has reached to
destination
Letter
telegram
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offer
Reception
rule
Postal rule （投邮规则）Reception
Once letter/telegram
rule
posted ,agreement is
formed.
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Agreement - Acceptance
Rules of Acceptance
(3) Acceptance must be in response to and in
reliance of an offer. [refer to rule(3)]
See :R v Clarke [1972] 40CLR227
Clarke had been arrested on a murder charge. He
gave information to police which led to a
conviction of the actual offenders and then tried to
claim a reward to the public (悬赏广告)
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Acceptance - in reliance of offer
• Court held :
• Clarke was not entitled to claim reward
because his acceptance was not based on
the reward to the public but on the desire
to clear himself of the charge.
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Agreement – Acceptance-rules
Rules of Acceptance
(4) Acceptance must be made strictly in
accordance with the terms of the offer
counter- offer(反要约)
mode of acceptance (承诺方式)
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Agreement – Acceptance
counter-offer
Acceptance must be unqualified.(接受必须无条件)
Counter offer （反要约）
 Occurs when a new term is introduced into the
original offer.
 putting forward an alternative new offer plays a
role to reject the original offer and then to make a
new offer.
see next slide: Hyde v Wrench [1840] 3 Beav.334
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Counter offer Hyde v Wrench(1840)
• Wrench offered to sell property to Hyde for $1000;
Hyde made an offer for $950 (counter offer -Hyde
now became offeror);
Wrench refused this new offer (he now became the
offeree);
Hyde tried to accept the original offer of $1000.
• Court held - no contract, because counter offer
cancels original offer, and then makes a new offer.
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Agreement – Acceptance-rules
Rules of Acceptance
(4) Acceptance must be made strictly in
accordance with the terms of the offer
offer may prescribe the mode of acceptance ,for
instance, “please reply by mail (by fax / by
email)”
see: mode
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of acceptance (承诺方式)
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Agreement – Acceptance-Mode



If an offeror prescribes a mode of acceptance as the only
mode of acceptance then it must be followed. Eg. “Please
reply by letter.”
If an offeror prescribes a mode of acceptance but does not
specify it as the only mode then acceptance can be made by
any other mode if it proves to be quicker or equally as quick
as the mode requested. Eg. “please reply by any quickest
way in addition to letter”.
If no mode of acceptance is prescribed, it may be
communicated the same way as the offer was made. Eg.
“Please reply as soon as possible.”
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Agreement – Acceptance-rules
(5) Acceptance must be made within the time
specified or, if not specified, within a
reasonable time
(6) Acceptance must be clear and certain.
This rule means: acceptance must not be
conditional
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Agreement – Acceptance-rules
conditional
Conditional Acceptance（有条件的承诺）
 A conditional acceptance is not an effective
acceptance unless the offeror agrees to the
condition.
 One example of this rule is made with
wording -“subject to some reservation ”（遵
从保留条件）
see next slide:Masters v Cameron [1954] 91
CLR 353
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Conditional Acceptance - Masters v
Cameron(1954)
• Masters agreed to buy Cameron’s farm
subject to obtaining advice from solicitors
• Masters withdrew from the agreement.
• Court held: contract was not enforceable
because it was not in its final form.
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STEP 2: AGREEMENT BETWEEN THE PARTIES
offeree’s Options to an offer
1. if offeree accepts the offer
- agreement forms.
2. if offeree requests for further information
-there will be no acceptance but an ITT.
3. If offeree rejects the offer
- the offer ends.
4. If offeree makes a counter offer (反要约)
- original offer terminated, new offer occurs
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Termination of an offer
(to be continued)
(1) Lapse
of time
(2) Death
of the offeror or offeree
(3)Withdrawal of an offer（撤回要约）
(4) Revocation of an offer（撤销要约）
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The difference between
Withdrawal and Revocation
Withdrawal (撤回) of offer must be made
before it is communicated to the offeree;
Revocation (撤销）of an offer must be made
before it is accepted. The revocation of
offer must be communicated/ received to
the offeree.
see:Byrne & Co v Leon Van Tienhoven &
Co (1880) 5 CPD 344 (next slide)
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Byrne & Co v Leon Van Tienhoven &
Co (1880) 5 CPD 344
• Facts: on 1st Oct Van Tienhoven posted
letter offering goods for sale to Byrne.
Byrne received the letter on 11 Oct and
accepted by telegram same day. On 8 Oct
Van Tienhoven posted letter cancelling the
offer which reached Byrne on 20 Oct.
• Issue: Was revocation of offer effective?
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Byrne & Co v Leon Van Tienhoven &
Co (1880) 5 CPD 344
• Held: no, because contract had already been
concluded on 11 October when Byrne accepted
the letter dated on 1 Oct by sending telegram on
11 Oct. (post rule)
• Once acceptance has been communicated , it can
not be revoked without agreement from both
parties since apparent simple contract has been
formed.
• The revocation of offer is not effective until it has
reached to offeree.
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STEP 2: AGREEMENT BETWEEN THE PARTIES
Termination of an offer
(5) Rejection or counter offer see Hyde v
Wrench (1840) 2 Beav.334
(6) Non-occurrence of a condition (eg.subject
to finance -finance falls through)
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Summary-rules of acceptance
(1)Only the offeree or its authorized agent can accept
the offer.
(2) Acceptance must be communicated.
(3) Acceptance must be in response to and in reliance
of an offer.
(4) Acceptance must be made strictly in accordance
with the terms of the offer.
(5) Acceptance must be made within the time
specified or, if not specified, within a reasonable
time.
(6) Acceptance must be clear and certain.
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Summary- Termination of an offer
Lapse of time
(2) Death of the offeror or offeree
(3) Withdrawal of an offer（撤回要约）
(4) Revocation of an offer（撤销要约)
(5) Rejection or counter offer
(6) Non-occurrence of a condition
(1)
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Contract law- agreement (step 2)
-end2015/7/20
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Contract law- consideration (step 3)
Consideration P86
3.2.3.1 What is consideration? (对价)
the price given by the promisee（受允诺方） to
pay for the promissor's promise.
What could be used as consideration ?
any right, interest, or benefit offered to the promisor,
or forbearance（克制）,detriment（伤害）, loss or
responsibilities suffered by the promisee.
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Contract law- consideration (step 3)
consideration
3.2.3.2 Why is consideration needed ?
Consideration is needed to pursue fairness to
promisor by drawing a distinction between
onerous promise (负有义务的认真做出的承诺) and
gratuitous promise(无根据的随意做出的承诺)。
If a promise is supported by consideration made
by promisee, the promise must be legally kept
valid, if not supported by consideration,
promisor need not to keep his promise.
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Contract law- consideration (step 3)
consideration
3.2.3.2 legal requirement for consideration
for a simple contract to be regarded as
valid it must be supported by consideration;
while for a formal contract, consideration
is not required because its special form has
sufficiently demonstrated parties’ legal
intention in entering into a contract .
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Contract law- consideration (step 3)
consideration -rules
Rules relating to consideration:
1.Consideration must come from promisee
Eg.1
Seller promises to sell sth to buyer
(promisor)
(promisee)
consideration from promisee:
either immediate payment (present consideration) or
promise to pay (future consideration)
Eg.2 Buyer promises to buy sth from seller
(promisor)
(promisee)
consideration from promisee:
either act of delivering goods or promise to deliver the goods
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Contract law- consideration (step 3)
consideration -rules
2. Consideration must consist of something of value
in the eyes of law ( 对价不必等价)
as long as consideration exists the court is not
concerned as to the equal amount in value
eg.
a car can be quite legally sold for $2
- the $2 is of “some” value in the eyes of the law
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Contract law- consideration (step 3)
Consideration -rules
3. Consideration must have legally recognized
value.( i.e. consideration must be sufficient)
duties imposed by law or contract is not sufficient
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Consideration -exercise
• case. a witness may be notified formally to
appear in court by prosecution and
promised $1000 by police for doing so. if
police do not fulfill promise
• Can they be sued for breach of contract?.
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Consideration -exercise
• Held: No, because the witness is imposed
by law to appear in the court, so witness’s
appearing in the court can not constitute
consideration.
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Consideration - insufficient?
• Stilk v. Myrick (1809)- a ship was in danger
because its machine broke down and two sailors
deserted the ship. The rest of sailors were
promised extra wages during the voyage if they
worked harder in returning the ship safely back to
London ,but the sailors were not paid,so they sued
for the extra pay.
• Court held: Bringing the ship back safely was
part of the seamen’s existing contractual duty.
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Consideration - Sufficient?
• Glasbrook Bros Ltd. v. Glamorgan City Council
[1925] - Police offered a mobile patrol during an
industrial dispute but mine owners insisted that
police stay on the premises of the mine offering to
pay for the service. After the dispute the miners
did not pay.
• Court held: police worked above and beyond
their duty - this was sufficient consideration.
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Chapter 9 -Contract law- consideration (step 3)
consideration -rules
4. Past consideration is not a valid consideration .
Consideration can be present or future, but not past
.
see:
Anderson v Glass [1869]
Roscorla v Thomas [1842]
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Past consideration is not valid
• Anderson v.Glass (1869) - Glass promised extra
money to an employee for work he had previously
completed. Glass later refused to honour the
promise.
• Court held : promise to pay extra money
for work already done was not binding
because past consideration is not legally
valid consideration ,which could be used to
buy promise.
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Contract law- consideration (step 3)
Consideration -rules
The difference between present or future
consideration and past consideration
1.
Seller
offers to sell
buyer
(promisor)
(promisee)
buyer’s act of payment- present consideration
buyer’s promise to pay - future consideration
both present or future consideration are made after
promisor’s promise, but past consideration is made
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before promisor’s promise.
Contract law- consideration (step 3)
Consideration -rules
• past consideration is not a valid consideration,
why?
• Would you like to pay the already rendered service
which you had thought free of change ?
• If you have to pay the disagreed service as requested
by the law, think what sort of consequences it would
bring to this world?
• Terrible!
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Contract law- consideration (step 3)
Consideration -rules
5. consideration to be given by promisee
must be possible of performance
• eg.
• If consideration requests promisee to walk from
• Shanghai to Beijing within 24 hours in exchange
for the promisor’s promise.
•
•
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Contract law- agreement (step 3)
consideration
•
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-END-
90
Contract law- (step 4)
capacity of the parties
• To form a valid simple contract the parties
must have contractual capacity to enter into
the contract.
• Contractual capacity(合同的订约能力) means the
ability of parties to contract in fully
understanding the rights & duties that they
have stipulated in the contract.
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Contract law- (step 4)
capacity of the parties
• common law and statute law recognise
certain sorts of people who may be
restricted in making contracts for various
reasons:
• - minors/infants
– mentally ill
need to be protected
– intoxicated persons
– bankrupts
society needs protection
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Contract law- (step 4)
capacity of the parties
• Minors/infants （未成年人）: means persons under
legal age.
• The effectiveness of the contracts made by the
minors could be classified into contracts according
to their understanding of the contract being entered
into.
• -valid contract (有效合同): enforceable on both parties.
• -voidable contract（可撤销合同）:valid until minor
terminates it.
• -void contract（无效合同）: no legal effect.
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Contract law- (step 4)
capacity of the parties
• Valid contracts made by minors:
• 1) contract for necessaries
• (购买生活必需品的合同)
• 2) contract of service beneficial to the
minors（对未成年人有益的劳动合同）
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Contract law- (step 4)
capacity of the parties
1) Contract for necessaries
• “necessaries”:
• are not only confined to articles necessary to support
• daily life but also include articles and services fit
• to maintain a particular person in a particular
• situation he is in. eg. wheel-chair may be a necessary
for the cripple
• minor but not for normal minor.
• tests for determining “necessaries”
– Is it capable of being a necessary ?
– Is it a necessary under the circumstances?
95
• 2015/7/20
See case next slides
Contract law- (step 4)
capacity of the parties
Scarborough v Sturzaker (1905)
• D ,a minor , had to go to study on an old
bike. He bought a new bike from P who
took the old one as part payment. D failed
to complete payment arguing the bike was
not a necessary.
• Court held - in the circumstances bike was
a necessary because old bike had been used
as a study tool. So D loses the case.
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Contract law- (step 4)
capacity of the parties
• 2) contracts of service are valid if they are
beneficial to the minors.
• Eg.
• contract of apprenticeship (学徒合同 ), that is in
favour of the minor.
• see : case ( next slide)
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Contract law- (step 4)
capacity of the parties
De Fancesco v Barnum (1890)
• A 14- year- old minor entered 7- year
apprenticeship contract with De Francesco to
learn stage dancing .The contract included a
term not allowing the minor to dance for any
other professional engagement. In defiance
of the term ,the minor signed to dance for a
dancing group.
• De Francesco sued for injunction & damages.
• Successful ?
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Contract law- (step 4)
capacity of the parties
• Court held: The term of the contract was
unreasonable and unenforceable. Normally
• a contract by which a minor binds himself to
learn an art or trade is valid and binding but
• minor should not be bound to unreasonable
terms.
• This term of the contract is too harsh on the
minor so it is not valid.
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Contract law- (step 4)
capacity of the parties
• voidable contracts made by minors:
• If subject matter is of permanent and continuous
nature ,these contracts are avoidable contracts.
• Voidable contract (可撤销合同) is a valid contract
unless it is terminated by the minor unilaterally .
e.g.
purchase and lease of land,shares in a company and
partnership.
•
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Contract law- (step 4)
capacity of the parties
• Void Contracts made by minors:
• The contracts ,which minors do not have
• capacity to enter into , are void so they have
• no binding force upon the minors.
• Eg: contracts for repayment of loan
• Eg: contracts for goods other than necessaries.
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Contract law- (step 4)
capacity of the parties
• A loan agreement made by minor is a void
contract.
• A minor is not liable to repay the interests
• of a loan even the the loan involves purchase
of necessaries for the minor’s daily life.
• see :
• Mercantile Union Guarantee Corp Ltd
• v Ball (1937)2K. B498 (next slides)
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Mercantile Union Guarantee
Corp Ltd v Ball (1937)
• Facts: D. was a minor carrying on a
business as a moving contractor, entered a
hire-purchase loan agreement to buy a truck.
He fell into arrears(欠款) and was sued
• Held: D was not liable for the interests,
however the money borrowed should be
returned to the lender since the loan
agreement is void.
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Short summary-The effectiveness of the
contracts made by the minors
Valid
contract
Situations
Legal effect
(1)Contracts for necessaries;
enforceable on
both parties.
(2)Contracts of service
beneficial to the minor
Voidable purchase and lease of land and minor has right
contract shares
to terminate
Void
contract
(1)contracts for repayment of
loan;(2) contracts for goods
no effect
other than necessaries
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Contract law- (step 4)
capacity of the parties
Mentally unsound/intoxicated persons （神志不清者）
• Mentally unsound/intoxicated person is legally bound
by the contract he has made unless he can prove that at
the time of contracting ,
• 1) he was suffering from such a degree of mental
instability /drunkenness that he was incapable of
understanding the contract ; and at the same time
• 2) his state of mind was known or ought to have been
known by the other party.
– See two cases next slides
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Blomley v Ryan (1956)
• Facts: D. was a grazing property owner ,who
had acquired habit of indulging in extended
bouts of drinking (沉溺于无休止的喝酒). During
one bout, P’s father approached to D and offered
to buy his property on generous terms of
substantial undervaluation. When sober D tried
to rescind the contract, successful?
• Held: contract was set aside（不生效） because
at the time of contracting P was aware that D
was incapable of forming rational judgment and
took advantage of his drunkenness.
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O’Connor v Hart (1985)
• A farmer entered into a contract to sell a piece
of land at low price. After the farmer died, his
family members tried to have contract set
aside arguing that when contract being made
the farmer suffered from mental unsoundness .
But the defendant alleged that he had not been
aware of the mental unsoundness.
• Should the contract be set aside?
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O’Connor v Hart (1985)
• Court held: mental unsoundness must be
established together with the fact that the
other party was/should have been aware of
this,and then taking advantage of it.The
Plaintiffs was unable to demonstrate the
awareness of defendant , so they failed in
the lawsuit.
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Contract law- (step 4)
capacity of the parties
The bankrupts (破产者) contractual capacity is limited,
i.e.
If the bankrupt wish to obtain goods or service in
excess of certain amount of money (say $3,100
according to Australian law) ，he must prove his legal
status to the provider of the goods or service in view of
protecting the creditor in public.
In China the bankrupts are prohibited from consuming
goods or services of high level According to 《禁止高消
费令》
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short summary of contractual capacity
validity
Minor/
infant
valid
voidable
void
Necessaries
Beneficial
service
(effective)
Purchase /leaseland /house
(valid unless ends)
Loan
Not necessaries
(not effective at
beginning)
Mentally
unsound/
Intoxicated
Person
1 Plaintiff suffers from mental instability /drunkenness so
incapable of understanding the contract being negotiated;
and at the same time
2 defendant knew or ought to have been aware of the state and
then took the advantage of it.
bankrupt
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Declares if contractual amount exceeds legal limit
110
Contract law- (step 4)
capacity of the parties
•
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STEP 5: GENUINE CONSENT
• This part will be concerned with the
following issues:
• Mistake（错误）
• Misrepresentation（误述）
• Duress（胁迫）
• Undue Influence（不当影响）
•2015/7/20
Unconscionability（非良知行为）
112
STEP 5: GENUINE CONSENT
• The contract is made by offer and acceptance.The
offeror and offeree ,when negotiating the contract,
make various kinds of statements , some are
legally valid, some are made without genuine
consent as follows:
• Mistaken statements ( mistake)
• untrue statement of fact (Misrepresentation)
• statement under duress (Duress)
• statement under undue Influence (Undue Influence)
• Unconscionable conduct (Unconscionability)
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GENUINE CONSENT
• when parties enter into an agreement their
consent must be genuine
• if an agreement is reached based on a mistake,
or misrepresentation or duress or undue
influence or unconscionable conduct, the
contract may not be formed . Even if it is
formed, the injured person may be entitled to
rescind the contract.
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Genuine Consent -Mistake
• Mistakes could be divided into two categories:
• mistake of law = meaning mistake in
understanding law. If so , generally the person
making mistake will not be excused for every
body is expected to know law.
• mistake of fact = meaning mistake in
understanding relative facts, contract may be
valid or void or avoidable depending on the
situations.
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Genuine Consent -Mistake
• Sometimes the parties do not have a
meeting of the minds (consent ). Various
mistakes may be made , summarily they are
as follows :
common mistake (双方共犯一个错误)
• mutual mistake （双方各犯一个错误）
• unilateral mistake （单方犯错）
• non est factum (这不是我的真实意思 )
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Genuine Consent –common mistake
• Common mistake
– both parties make the same mistake.
– agreement made with reference to a set of facts
which parties mistakenly believed to exist
– Contract void , no damages available.
• see Prichard v Merchant’s & Tradesman’s
Mutual life Insurance Society (1858) 140
ER 885
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Prichard v Merchant’s & Tradesman’s
Mutual Life insurance Society (1858)
• A life insurance policy( insurance contract) was
made, but neither insurer（ 保险公司） nor the
applicant（投保人） knew the beneficiary (the
insured(被保险人) had been dead at time of
contracting. The applicant sought to recover
premium （保险费）paid.
• Court held : contract was void due to common
mistake - the applicant was entitled to recover
premium
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Genuine Consent –mutual mistake
• Mutual mistake
• Different from common mistake that both parties
make a same mistake, mutual mistake means
both parties make different mistakes.
• parties are at cross purposes
• Eg. Tom agrees to sell Jenny his cart but Jenny
actually believes Tom intends to sell his car. Both
Tom and Jenny have made mistakes and the
mistakes are different.
• Contract is void , no damages available.
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Genuine Consent –unilateral mistake
• Unilateral mistake:
• One party is making a mistake and the other
party knows or ought to know that the mistake
is being made but does nothing to correct it
• Contract usually void , damages are available.
• see Taylor v Johnson (1983) 151 CLR 422
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Genuine Consent –unilateral mistake
Taylor v Johnson (1983)
• Facts: parties entered into contract for sale
of 10 acres of land for total amount $15,000.
After the contract, the seller did not want to
perform the sales contract alleging she had
believed she was selling each acre at
$15,000 and the other party should have
been aware of the mistake and should not
have taken advantage of the mistake.
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Genuine Consent –unilateral mistake
Taylor v Johnson (1983)
• Held: contract was set aside(terminated)
because it was shown that the seller, when
contracting, had been obviously mistaken as
to a fundamental term of the contract and no
contract should have been expected by the
buyer.
• If the mistake is so small to be noticeable ,
then the mistake will not be excused.
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Genuine Consent –-non est factum
• People sometimes sign documents and later discover
that they have made mistake about nature of the
document,which is fundamentally different from what
they thought. In such case, they could claim that the
agreement was void because it was Non est factum
meaning “ not my doing” or “not my deed ” (不是我的
真实意思表示)
• Non est factum is also a unilateral mistake about the
nature of document and which is an excusable mistake.
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Genuine Consent –-non est factum
•
•
•
•
•
The defences（抗辩理由）are available to the party
if
1. He is with extreme disability, such as blindness,
illiteracy , etc. And at the same time,
2. He is mistaken about the essential nature of the
document; but the failure to read / understand
document was not due to carelessness
The contract of non est factum is void.
–see Petelin v Cullen 132 CLR 355 (next slides)
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Petelin v Cullen (1975)
• Petelin, who spoke little English and could not
read , was encouraged to sign a document for sale
of land by defendant , which was radically
different from what he had been led to believe.
• Court held: non est factum successfully
established - Petelin was able to show that he
signed what he thought to be a receipt for
something else not an acceptance for sale of land
• Contract void.
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Summary-genuine consent-mistake
Types of
Features
mistakes
Common Same mistake by both
mistake
parties.
Mutual
mistake
Different mistake by each
party.
Unilateral Mistake by one party .
mistake
Non est
factum
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Person signs a document
fundamentally different
from what he thought.
Legal Results
Contract void.
No damages available.
Contract void.
No damages available.
Contract usually void.
damages are available.
Contract void.
Remedy only available
to the blind or illiterate.
126
Genuine Consent
- Misrepresentation
• Definition-misrepresentation in contract
occurs when one party is induced to enter
into a contract because he relied on a false
statement by the other party.
• misrepresentation only refers to the false
statement of facts
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Genuine Consent –Types
•
•
•
•
Misrepresentation(误述) could be either
fraudulent （欺诈性误述）or
innocent （无意性误述）or
Negligent （疏忽性误述） :
• Fraudulent misrepresentation- party makes a false
statement of fact , intending to induce and actually
leading to the contract.
• - contractual remedy : the injured party may rescind
the contract & claim damages at the same time.
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Genuine Consent –type
• Innocent misrepresentation - party making
misrepresentation actually believes it to be
true
• - contractual remedy：the injured party may
rescind the contract but claims no damages .
• Eg. a second –hand computer seller innocently
believed that he was selling computers of
1998 model , actually they were not . If
seller’s claim was reasonably relied on by the
buyer , then the innocent misrepresentation
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129
was established.
Genuine Consent –type
• Negligent misrepresentation - party makes a
false statement due to carelessness as to
whether it is true.
• - tort remedy: the injured could claim
damages based on tort.
• see Shaddock & Ass. V Parramatta City
Council (1981) 150CLR 225(next slides)
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Genuine Consent
Shaddock and Associates Pty Ltd v. Parramatta City
Council (1981)
Shaddock’s solicitor contacted Parramatta City Council
and asked whether an intended property would be affected
by a road widening governmental projects. The Council
employees issued a form and made statements wrongly
indicating that the property would not be affected.
Shaddock bought the property and suffered losses when
the road was widened.
•Court held: Shaddock was entitled to $170 000
compensation for negligent misrepresentation - council
had a duty to exercise reasonable care that the information
was correct.
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Summary-genuine consent-misrepresentation
Features
Fraudulent
misrepresentation
Innocent
Negligent
misrepresentation misrepresentation
party makes a
false statement
of fact , actually
leading to the
contract.
party believes
party makes a false
statement due to
his statement
was true,actually carelessness.
wrong.
Remedies Contract voidable. Contract voidable. Tort action.
Damages available No Damages
Damages available.
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Genuine Consent -Duress
• Duress (胁迫)
• Means use of violence or illegal threat to force
• a person to enter into a contract. The contract
under duress is either void or avoidable at the
option of the injured.
• See Robertson v Robertson (1949) QWN 41
（next slides)
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Genuine Consent -Duress
Robertson v Robertson (1939) QWN 41
• Facts: Mr Robertson made threat that he would
disclose his wife’s alleged infidelities(不贞行为)
unless she agreed to transfer her real estate to her
husband permitting him to be the joint owner .
• Held: this sort of threat amounted to duress.
• contract is voidable at option of injured party.
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Genuine Consent -Undue Influence
• Undue influence（不当影响）
• Means one party uses superior position of
influence to persuade the other party to enter a
contract that provides the superior party with a
direct or indirect benefit.
• Contracts under undue influence are usually made
between persons who have special relations such
as doctor-patient, employer-employee, lawyerclient and so on.
• See Allcard v Skinner (1187)36 CH D 145（next
slides）
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Case reference undue influence
Allcard v Skinner (1887) 36 Ch D 145
• Facts: P was under a religious order(秩序), in
which D was mother superior. P took vow(发誓)
to donate all her money/ shares to D to be held in
trust for the general purposes of the religious order.
Later P defied the order and sued to recover her
gift , claiming the money / shares were transferred
under undue influence.
• Held: at the time of gift-giving , P was under
undue influence and should be entitled to recover.
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Genuine Consent -Unconscionability
• unconscionable conduct （昧良心/非良知的行为）
• Under common law it means the stronger
party takes undue advantage of the weaker’s
position to prevent the weak from making
independent decision in the contract.
• So it is is unjust, unfair, inequitable.
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Genuine Consent -unconscionability
• three requirements to make out the plea(请求)
• 1.The weaker party must have been with special
disability so that there was no real equity between
the parties
• 2.the stronger party must have been aware of that
special disability
• 3.this prevented the plaintiff from making
independent decision about the contract.
• see Commercial Bank of Australia Ltd v Amadio
(1983) 151 CLR 447
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Genuine Consent
–
Commercial Bank of Australia Ltd v Amadio
• Facts: Mr & Mrs. Amadios were elderly migrants
with poor business/English skills，they were induced
to enter mortgage (抵押)and to guarantee （担保）their
son’s loan in favour of the bank. At time of deal, they
believed that their son’s company was financially
solid and their liability was for only $50,000 for 6
months, but both beliefs were incorrect but it was
known by the bank. The bank kept silent and did not
disclose to Mr & Mrs. Finally Amadios son’s
company got bankrupt and bank demanded Mr & Mrs.
Amadios to pay the debts of their son.
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Genuine Consent –
Commercial Bank of Australia Ltd v Amadio
• Held: contract was set aside(终止)… court
found that the guarantee had been entered
• into as the result of the bank’s unconscionable
conduct and therefore it could not be enforced.
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Genuine Consent
–
Undue influence &Unconscionability
• The both concepts are closely related but they are
still distinctive as follows:
• Undue influence is looked at from the weaker
party to find whether the the weaker party has
given true consent ;
• Unconscionability is looked at form the stronger
party to find how the stronger party behaves
towards the weaker party and whether it is
consistent with the principles of equitability ,
conscience （良心）& fairness in which the
stronger party should be .
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Summary-genuine consent
Situations
types
Legal Results
Mistake
Common mistake
Contract void
Mutual mistake
Contract void
Unilateral mistake
Contract usually void
Non est factum
Contract void
Misrepresentation Fraudulent misrepresentation
Contract voidable
Innocent misrepresentation
Contract voidable
Negligent misrepresentation
Tort action
Duress
The use of violence or illegal
threat
Contract voidable
Undue influence
doctor-patient,
employer-employee etc.
Contract voidable
unconscionable
conduct
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Two parties cannot bargain on
an equal basis.
Contract voidable
142
Contract law- (step 6)
legality of object
• Legality of object means the intentional purposes
of parties must be lawful, if not ,the effect of the
contract will be either illegal or void.
• Illegal contract (非法合同) is a contract that
violates the compulsory legal rules. Eg. Contract to
commit a crime or a fraud against a third party.
• Void contract （无效合同）is a contract that does
not conform with the requirements of law.
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Contract law- (step 6)
legality of object
• The main differences of illegal contract and void
contract
• -illegal contracts are totally void and unenforceable
and often lead to administrative penalties(处罚)
• -void contracts do not lead to penalties and may be
valid if the void term can be separated from other
valid terms in the contract.
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Contract law- (step 6)
legality of object
• Illegal contract under common law
Eg1. Contract that promote corruption in public life
Eg2. Contract that prejudice the administration of justice such as
to block or delay criminal or bankruptcy proceedings
Eg3. Contract that defraud public authorities of taxes or revenue
Eg4. Contract to commit a crime tort or fraud against a third
party
Eg5. Contract that prejudice public safety by dealing with
foreign aliens during time of war
Eg6. Contract that promotes sexual immorality
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Contract law- (step 6)
legality of object
• Illegal contract by statute law
•
expressly prohibited
•
impliedly prohibited
•
•
illegal at formation of contract
•
illegal after formation of contract
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Contract law- (step 6)
legality of object
Illegal contract by statute law
• expressly prohibited by statute law
• -Some statutes that prohibit certain types of conduct
will impose penalties and expressly state that
contracts associated with that conduct cannot be
enforced by the parties.
•
Re Mahmoud v Ispahani (1921) (next slide)
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Contract law- (step 6)
Re Mahmoud v Ispahani (1921)
(illegal contract)
• A law provided that no one could buy, sell/ deal in
linseed oil （亚麻籽油） without licence. S
falsely told B that he had licence and entered into
agreement to supply linseed oil. B refused to take
delivery and then was sued by S for nonperformance of the contract
• Court Held: contract was made without legal
license , which was expressly prohibited by
statute therefore the contract was illegal and then
unenforceable.
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Contract law- (step 6)
legality of object
Illegal contract by statute law
• impliedly prohibited by statute law
• -Many statutes impose penalties for specific conduct
without indicating whether a contract associated with that
conduct should be unenforceable in all circumstances.The
court must look at the purpose of the Act and determine
whether an innocent party could enforce a contractual
rights.
• Eg. If law expressly states “ man is not allowed and
woman is not allowed” impliedly means “nobody
• is allowed including someone of neutral sex.”
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Contract law- (step 6)
legality of object
• Illegal contract by statute law
• illegal at formation of contract (合同成立时非法)
Eg. Contracts related to illegal gaming will be illegal from
the time they are made. Therefore, you cannot take
legal action to collect an illegal winning bet, or be
forced to pay a losing one.
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Contract law- (step 6)
legality of object
• Illegal contract by statute law
•
• illegal after formation of contract（合同履行时非法）
• -A contract that is legal when it is formed may
become illegal .
Anderson Ltd v Daniel (1924) (next slide)
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Contract law- (step 6)
Anderson Ltd v Daniel (1924)
Statute required that seller of artificial fertiliser had to
provide purchaser with invoice stating percentages of
certain chemicals contained in fertiliser sold - a sale was
made by plaintiffs with invoice which did not comply
with statutory requirements.
• Court held: plaintiffs could not recover agreed price as
non-compliance with statute rendered contract illegal as
performed although it was legal at the time of
formation.
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Contract law- (step 6)
legality of object
void contract
• - void contract under common law
•
eg. lack of essential elements for valid
•
simple contract
•
•
eg.contrary to public policy (社会利益)
see: Everett v Williams (1725)
- void contract by statute law
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Contract law- (step 6)
Everett v Williams (1725) 1899 1QB 816 at
826( void contract)
• Facts: robbers P and D were in contract dispute
over the proceeds (benefit and income) of a
robbery they undertook - submitted their case to a
court disguising the case as a partnership dispute
about profits.
• Held: action was dismissed, contract of how to
allocate proceeds of robbery was void and then
unenforceable.
P and D were hanged
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Contract law- (step 6)
legality of objects
• Case: Everett v Williams (1725) - void contract
• My comment on the difference between illegal contract
and void contract:
• The robbery contract between P and D is illegal contract
because the the object harmed in the contract is public
society or public interest
• The contract between P and D to allocate
• assets of robbery is void contract , because the object
harmed is the grieved party, one of the two robbers, not
public society .
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Contract law- (step 7)
form
• The form of contract must be in conformity
with statutory procedural requirement.
• It should be kept in mind that the great
majority of simple contract will not be subject
to any statutory requirement to make them
enforceable.They may be reduced to writing
but this will be done for business convenience.
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Terms of contract-
The basic concept of terms
• The basic concept of terms(条款)
• The contents of a contract are called terms,
they contain the following for the parties
concerned :
• rights(权利)
• duties（义务）and
• obligations（责任) if the duties not performed.
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-Terms and
(statement) representations
Terms of contract
• The terms representations (statements)
• （表述）
• sometimes there may be a need to determine
whether a statement or representation is in
fact a term.
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-Terms and
(statement) representations
Terms of contract
• law draws distinctions between “mere
representations” and terms – the distinction
depends on individual circumstances.Usually
speaking, mere representation will not form a
term until it is agreed by both parties.
• damages are awarded for breach of terms but not
breach of “ mere representations”
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Terms of contract
• Offer and acceptance , either in the form of
promise (language or verbal),or in the form of
act, constitute various of “terms” according to
the contents in the offer and acceptance .
• Offers or acceptances themselves are not
terms until they are agreed by both parties.
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–
The types of terms
Terms of contract
• The types of terms
• Type 1: express terms and implied terms
• Since terms are the combinations of offer and
acceptance, and since offer and acceptance could be
made expressly and impliedly , so terms could be either
express terms or implied terms.
– Express terms = verbal/written
– Implied terms = suggested by conduct/action
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–
Implied terms
Terms of contract
• 1. implied Terms inferred by courts based on
the contractual intention of parties - i.e the
implied term is so obvious in a particular
situation that it goes without saying, based on the
principle of fairness and equity
• 2.Implied terms inferred by custom - agreed
practice/behaviour in a trade
• see Hutton v Warren (1853)
• Oscar Chess Ltd v Williams (1957)
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–
Implied terms
Terms of contract
• 3. implied Terms imposed by law
• some statutes impose specific implied terms into
certain contracts.
• eg. TPA(Trade Practice Act ) implies that in all
contracts for the sale of goods, the seller’s
statements of the goods must be reasonably relied
on unless the buyer does not rely on it.
• See Dick Bentley Productions v Harold Smith
Motors (1965)
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Terms of contract –
Dick Bentley Productions Ltd v Harold
Smith (Motors)Ltd (1956) 2 All ER 65
• Facts: during negotiations for purchase of Bentley
(vehicle) ,seller told buyer that car had new engine
and gearbox…driven only 20 ,000 kms. The
Statement was untrue (car had in fact travelled
161,000 kms ). buyer sued for breach of contract
• Held: seller’ s statement about distance travelled
constitutes a implied term because seller’s
statement and special skill has been reasonably
relied upon by the buyer. So seller breached the
implied terms of the contract.
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Types of Terms
Terms of contract
• Type 2: Conditions and warranties
• conditions = major (essential) terms of contract breach of a condition = entitled to rescind
(terminate) contract and claim damages
• warranty = minor (non essential) terms of contract,
breach of warranty = entitled only to damages
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Types of Terms
Terms of contract
• whether term is condition or warranty depends on
facts of each case
• Test of essentiality: does it go to the heart of the
contract ? If yes, it is a term of condition.
• see Poussard v Spiers & Pond (1876) 1QBD 410
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Terms of contract
• Poussard v Spiers & Bond (1876)
• Facts: Poussard was engaged to play a leading
part in an opera from the start. She fell ill and was
unable to take part until later in the season. The
organiser then refused her services
• Issue: was Poussard’s failure to attend constituting
a condition which entitled organiser to repudiate
contract?
• Decision: yes- because this stipulation = to heart
of contract- if breached it entitled organisers to
cancel
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Terms of contract –
Express term /implied
term/Conditions/warranties
• Express terms = could be either condition or
warranty depending on their importance
• implied terms also could be either
conditions or warranties
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Termination of contract
• Basically there are five situations where the
contracts could be terminated
• 1. by express agreement（明示约定终止）
• 2. by operation of law（依法终止）
• 3. by performance of contract（因履约终止）
• 4. by breach of contract（违约终止）
• 5. by frustration (合同受挫)
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Termination
by agreement
Termination of contract-
• 1. contract terminated by express agreement
• There are three situations under this heading:
• A. terminated by a provision in the original contract;
•
condition precedent 使合同生效的先决条件
•
condition subsequent 使合同失效的后决条件
• B. terminated by a new agreement for the original one(新合
同代替旧合同)
• C. terminated by the creditor giving up his rights or
interest owned by debtor
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Termination
by operation of law
Termination of contract-
• 2. Terminated by operation of law
• Under common law, a contract can not be
discharged with one party wishing to terminate it.
The operation of the law brings the contract
discharged on the occurrence of certain events.
• Eg
• death of either party in a contract for personal service will
discharge the contract.
• lapse of time bar (时效) will discharge the contract.
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Termination of contract –
Termination by performance of contract
• 3. terminated by performance of contract
• A contract is discharged when all the
obligations under the contract have been
performed.
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Termination
breach of contract
Termination of contract-
• 4. terminated by breach of contract
• A. anticipatory breach (一方预期违约)
•
repudiation by one of the parties, the innocent
party is given two choices:either to accept the breach
and then to exercise the option to rescind the contract;
• or to try to keep the contract alive by continuing to
expect the performance.
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Termination
breach of contract
Termination of contract-
B. impossibility of performance of the contract created by one
party; (一方无力履约)eg. A contracted singer is too weak to sing
for performing his service contract.
C. failure of performance of one party;(一方未能如约履约)
D. delay in performance by one party (一方延迟履约)
this situation occurs where “time has become essence” ,
meaning that both parties have specifically agreed that
performance must occur by a specific date.
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Termination
by frustration
Termination of contract-
• 5. Frustration of the contract (合同落空)
• Concept of frustration
• Frustration is used when there is a fundamental change to the
bases of the contract after the formation of the contract whereby
the contract is rendered impossible to fulfill.
• The main requirements are that the event
• 1. Was not anticipated by the contracting parties when the
contract was made;
• 2. significantly changed the rights and duties under the contract;
• 3. was not directly caused by the either party of the contract;
• 4.it would be unjust to insist on the parties to continuously
perform the contract.
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Termination of contract-
Termination by frustration
•When does frustration occur
•A. the subject matter of the contract is destroyed. A contract
that depends on the existence of a particular object would be
frustrated if that object was destroyed.
•Taylor v. Caldwell (1863)
A hall had been hired to stage a concert. It was destroyed by fire
before the date of the concert. there was no any provisions in the
contract to indicate how the contracting parties would be affected
by such a event.
The English court held that neither party could enforce their
rights,as the contract was frustrated by the destruction of the
subject matter of the contract. The contract is terminated.
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Termination of contract-
Termination by frustration
• B. an event, on which the contract was based, does
not occur.
• Krell v Henry (1903)
• A person contracted to rent premises to view the
coronation procession(加冕游行)but the procession
was postponed.The landlord sought to collect his
unpaid rent.
• Held: the substantial purpose of the contract was to
view the procession . Since the event did not occur
the contract was discharged through frustration and
the landlord had no rights to the rent.
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Termination of contract-
Termination by frustration
• C. A substantial change in circumstances
• Means: the performance will be fundamentally different from the
performances agreed to under the original contract.
• The Codelfa case (1982)
• Codelfa Co. Ltd contracted to build part of the Sydney suburbs
railway line for a specific price within 136 weeks. Both parties
knew Codelfa could not achieve its end unless it worked 24
hours a day, 7 days per week. The company failed to complete
the project by the deadline because local residents had obtained
injunction restricting working during night and imposed noise
restrictions on construction equipment
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Termination of contract-
Termination by frustration
• Codelfa claimed that the contract was frustrated by the
injunctions. Therefore ,the contract was discharged and
Codelfa had the right to discharge its contractual duty and
at same time was entitled to the payment under quantum
meruitan , for the work that had been done.
• Held: the contract has been frustrated because there had
been a fundamental or radical change in the surrounding
circumstances and in the significance of the obligations
undertaken. Codelfa was entitled to be paid on the basis of
quantum meruit.
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Termination of contract-
Termination by frustration
• D. frustration through illegality . A contract that
becomes illegal because of change of statute can
not be performed.
• Example:
• Suppose you contracted to supply bush hats made
from animal skin. To satisfy the environmental
conservation and animal welfare,the government
passes legislation to prohibit the sale of the like
products. Your contract to provide bush hats
would be frustrated because the performance has
become illegal.
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Termination of contract-
Termination by frustration
• E. personal service are unavailable. Contract for
personal service will be frustrated if the performer dies,or
is too ill to perform, or is made to serve in the army or is
imprisoned.
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Termination of contract-
Termination by frustration
• Summary of occurrences of frustration
• A. the subject matter of the contract is
destroyed;
• B. an event, on which the contract was based,
does not occur;
• C. A substantial change in circumstances;
• D. frustration through illegality;
• E. personal service are unavailable.
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Termination of contract-
Termination by frustration
• The effect of frustration on contracts
• Frustration would cause the contract either
void or performance of the contract delayed.
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Remedies for breach of contract
• The concept of remedy（救济）
• Remedies are the legal assistance given by
the court to one party( innocent party守约方
or aggrieved party受害方 ) in the situation
where the contract is breached by other
party (breaching party or party in breach 违
约方)
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Remedies for breach of contract
•
•
•
•
•
Types of remedies:
1. Damages；（损害赔偿）
2.specific performance;（依约实际履行合同）
3.injunction;（不得做某事的禁令）
4. Rescission（撤约）
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Remedies for breach of contract
1. Damages
A. nature of damages ;
B. remoteness of damages（损害赔偿的直接性）;
C. rules calculating the amount of damages：
Natural loss by breach of contract;
The losses within reasonable contemplation of breaching
party;
Causation between the breach of contract and losses;
Mitigation by the innocent party（减轻义务所造成的损失）
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Remedies for breach of contract
D. quantum meruit (按合理价格计酬)
- concept: reasonable pay for reasonable service or work
- the likely situations of applying this rule
a. where there is a “gentleman’s agreement” or where
there is no express contract for payment;
b. the contract may have provided for a fixed payment,
however if specific events have happened or not
happened, so it would be hard to calculate the fixed
payment for partial performance provided.
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Remedies for breach of contract
• 2.specific performance (依约实际履行合同)
• -concept: is an equitable award ordered by the court
to force the party in breach to perform his obligation
in strict accordance with the contract,rather than
other remedies.
• （1）.Specific performance will not be ordered
where damages would adequately compensate the
injured party.
• （2）.court will refuse to order specific
performance of a contract obtained by unfair
means ,or where it would cause severe hardship to
the defendant ,or it requires constant supervision.
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Remedies for breach of contract
• 3.injunction
• - concept：an injunction is an order of the
court to restrain a party from committing a
breach of contract or from doing something.
In a short,injunction is an order not to do
something.
- Mareva injunction(防止转移财产的禁令)
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Remedies for breach of contract
4. Rescission
A . The condition where this remedy could be
awarded.－breach of condition terms
• B. the effect of this remedy if applied.
•
-void.
•
- Recovery of money /property to be returned
•
- the right of rescission may be lost if the
innocent party choose to continue with the
contract or wait too long before seeking rescission.
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