Question:
Discuss About The Contract Law Hong Kong Introductory Guide?
A contract is best defined as a legally binding promise made under an agreement. Under a contract, one party promises that they would do the act mentioned under the contract and the other party promises that they would pay the requisite compensation amount as is stated under the contract (Blum, 2007). It can be formed in an oral and in a written way. In the first management, the contract terms are spoken orally and in the latter, the contract terms are put down in writing on a document, which the parties to that particular contract sign (Mau, 2010). For creating any contract, there is a need of some specified components to be present. These components include the offer, the acceptance, consideration, capacity, clarity and intention (Miller & Cross, 2015).
Amongst the key points with regards to these components is offer and invitation to treat. An offer is the initiation point of the contract whereby one party offers certain terms to another party. An invitation to treat, on the other hand, shows that the parties are ready to negotiate upon the possible contract (McKendrick & Liu, 2015). Hence, invitation to treat takes place before the offer is made; though, is not obligatory to be present in every case. The advertisements in the newspaper are an example of invitation to treat. The goods which are kept on the shelf of the shop, for display, are another example of invitation to treat. And in such cases, the individual is not bound to sell such product as per Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401 (Latimer, 2012).
The other elements of contract include the acceptance of this offer. So, once an offer has been made, it needs to be accepted. There is a need for the contract to have valid consideration in order for the contract to be valid. As per this requirement, the consideration needs to have an economic value (Stone and Devenney, 2017). There is also a need for parties to have the capacity of entering into the contract. In this regard, the parties need to be of legal age and also need to be of sound mind to be able to make rationale decisions for them. The parties need to be clear about the terms of the contract as this gives the parties the rights and liabilities under the contract. And lastly, there is a need for the contracting parties to have the intention of creating legal relations. When the terms covered under the contract are not fulfilled, the aggrieved party can apply for monetary compensation or equitable remedies (Andrews, 2015).
At times, under the contract a clause known as exclusion clause is found, which has the power of restricting or limiting the liabilities which are raised due to the contract. The exclusion clauses are relied on to extinguish the liability of the contracting party. In order for an exclusion clause to be valid, it has to fulfil some requirements (Clarke & Clarke, 2016). Firstly, the exclusion clause has to be inserted in to the contract in a proper manner. Secondly, the exclusion clause needs to be brought to the attention of the party against whom it is being inserted. The exclusion clauses can only restrict the liability under the contract and not such which are born out of a statutory law or common law (Ayres & Klass, 2012).
In order for the exclusion clause to be valid, it has to be inserted in the contract financial_accounting it is signed by the parties. Olley v Marlborough Court Ltd (1949) 1 KB 532 saw the exclusion clause being invalid as the exclusion clause had been inserted after the main contract had been formed. The exclusion clause is also invalid if it is referred at another place and is not brought to the attention of the parties. In Thornton v Shoe Lane Parking Ltd (1971) 2 WLR 585, the exclusion clause was stated at the backside of the ticket and was not brought to the notice of the parties, thus invalidating the exclusion clause (Marson & Ferris, 2015).
A crucial point with regards to exclusion clause is that it would be valid, where it was inserted in a contract and the contract was signed later. In L’Estrange v Graucob [1934] 2 KB 394 case, the exclusion clause was held as valid even though the parties had not read the exclusion clause (Gibson & Fraser, 2014). However, such exclusion clause would be invalid, even after it has been inserted in the contract and the same is signed by the parties, where an element of misrepresentation was present (Mulcahy, 2008). In Curtis v Chemical Cleaning Co [1951] 1 KB 805, the cleaner was stopped from escaping the liability for the damages caused to the material of dress, by making reliance over the exemption clause, due to the misrepresentation of the scope of the exclusion clause by the assistant of the defendant (Poole, 2016).
Misrepresentation is one of the five vitiating factors which make the contract voidable at the option of the aggrieved party. Misrepresentation refers to a false statement of fact being made by one party, so as to induce the other party into the contract (Lambiris & Griffin, 2016). In Bisset v Wilkins [1927] AC 177, it was held that the statement has to be of fact and not of opinion. And it also has to be shown that reliance was made on such misrepresentation for a case of misrepresentation to stand, as was seen in Horsfall v Thomas [1862] 1 H&C 90 (McKendrick, 2014).
In the given case study, Miles saw an advertisement of tractor of Farmquip. This advertisement would be deemed as an invitation to treat as on the basis of this advertisement, negotiations were carried on between Miles and Farmquip. And based on Pharmaceutical Society of Great Britain v Boots, Farmquip was not obliged to sell the truck at these terms to Miles. While the negotiations were being carried on, Angus made a false statement of fact to Miles whereby he stated that air conditioning would be inserted in the tractor. This statement was one of fact as there was no intention of inserting the air condition and based Bisset v Wilkins this would be deemed as a misrepresentation. Further, based on Horsfall v Thomas reliance was made by Miles which would make a claim of misrepresentation, against Farmquip, a success. This would allow Miles to get the contract rescinded.
An exclusion clause was also present in this case. The contract which was signed by Miles, for the sale of tractor, covered Clause 18 which was an exclusion clause. As this contract was signed by Miles, irrespective of the fact that he read it or not, it would be valid, based on L’Estrange v Graucob. However, a misrepresentation had been made in this case, which as per the case of Curtis v Chemical Cleaning Co would make this exclusion clause invalid even when the contract had been signed by Miles. There was another exclusion clause which was present in this case, which was stated on the wall for customers behind the sales counter. However, based on Thornton v Shoe Lane Parking Ltd, this was not brought to the attention of the parties. Also, one could only come across this exclusion clause when they went to the sales counter and not before that. Hence, this exclusion clause would also be invalid due to it not being brought to the attention of the parties.
Miles can due Farmquip for the breach of contract as the terms of the contract had not been upheld. He was promised a good conditioned and well repaired tractor but had been instead given a bad unrepaired tractor which was bad in shape. So, Miles can claim compensation for breach of contract, which would include not only the cost of the tractor but also damages for mental distress. Miles also has the option of getting the contract rescinded owing to the misrepresentation. As the exclusion clause is invalid, it would not be able to protect Farmquip. And based on Curtis v Chemical Cleaning Co Farmquip would be liable for the wordings of its employee/ representative, i.e., Angus.
Conclusion
Hence, in this case, Miles can bring legal action against Farmquip for misrepresentation, thus getting the contract rescinded, or better yet, could claim damages for breach of contract, and claim compensation.
References
Andrews, N. (2015). Contract Law (2nd ed.). UK: Cambridge University Press
Ayres, I., & Klass, G. (2012). Studies in Contract Law (8th ed.). New York: Foundation Press
Blum, B.A. (2007). Contracts: Examples & Explanations (4th ed.). New York: Aspen Publishers.
Clarke, P., & Clarke, J (2016). Contract Law: Commentaries, Cases and Perspectives (3rd ed.). South Melbourne: Oxford University Press.
Gibson, A., & Fraser, D. (2014). Business Law 2014 (8th ed.). Melbourne: Pearson Education Australia.
Lambiris, M., & Griffin, L. (2016). First Principles of Business Law 2016. Sydney: CCH.
Latimer, P. (2012). Australian Business Law 2012 (31st ed.). Sydney, NSW: CCH Australia Limited.
Marson, J., & Ferris, K. (2015). Business Law (4th ed.). Oxford: Oxford University Press.
Mau, S.D. (2010). Contract Law in Hong Kong: An Introductory Guide. Hong Kong: economics University Press.
McKendrick, E. (2014). Contract Law: Text, Cases, and Materials (6th ed.). Oxford: Oxford University Press.
McKendrick, E., & Liu, Q. (2015). Contract Law: Australian Edition. London: Palgrave.
Miller, R.L. & Cross, F.B. (2015). The Legal Environment Today (8th ed.). Stanford, CT: Cengage Learning.
Mulcahy, L. (2008). Contract Law in Perspective (5th ed.). Oxon: Routledge.
Poole, J. (2016). Textbook on Contract Law (13th ed.). Oxford: Oxford University Press.
Stone, R., & Devenney, J. (2017). The Modern Law of Contract (12th ed.). Oxon: Routledge.
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