Topic 2 Elements of Contract Law

Topic 2 Elements of Contract Law - TOPIC 2: ELEMENTS OF...

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TOPIC 2: ELEMENTS OF CONTRACT LAW Readings : Arjunan & Majid, Business Law in Hong Kong , chaps. 13-14. General rule of the marketplace: caveat emptor = let the buyer beware The elements of a legally binding contract are: 1. Offer and Acceptance (which together make up an “agreement”) 2. Consideration 3. The Intention to create a legal relationship 4. Capacity to contract 5. Formalities (if any) Where all these elements are present, a legally binding contract comes into being. If any of these elements is missing, there is no legally binding contract. Definition - A contract is an agreement between two or more parties which is legally enforceable by one party against the other or others - concepts of "agreement" (offer and acceptance = agreement) and "contract" - wholly oral or partly oral, partly written 2. ELEMENTS OF A CONTRACT Offer and Acceptance = agreement offeror offeree promisor - promisee representor - representee payor - payee (a) Offer : What is an offer? - It is an act (spoken words or writing or an electronic transmission or a mixture of two or more these) by which the person making the offer (called “the offeror”) confers on the person to whom the offer is made (called the “offeree”) the power to make a legally binding agreement between the two of them by doing a further act amounting to acceptance . An offer is thus an expression of a willingness to be bound in contract upon an unqualified assent to the terms of the offer. - hence, the contract is complete and binding once the offeree accepts the offer Rules re garding an offer - an offer must be communicated to offeree 20
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- a person other than the offeree cannot accept the offer - offer and acceptance must correspond - consensus ad idem or a meeting of minds, an agreement to do the same thing - offer may be made to the world at large - Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Facts: The defendant company was the manufacturers and suppliers of an anti-cold and influenza preparation, the “carbolic smoke ball”. They advertised the carbolic smoke ball. In the advertisement, the defendant offered to pay 100 pounds to anyone who contracted influenza, a cold or any other disease caused by cold after having used one of their smoke balls in the prescribed manner for a stipulated period. The advertisement went on to state that as evidence of the company’s sincerity, it the company had deposited the sum of 1,000 pounds with the Alliance Bank. In reliance on the advertisement, Mrs Carlill purchased and used the smoke ball as directed but still caught influenza. She claimed the 100 pounds. The company refused to pay. Mrs Carlill sued. The defendant company raised a number of defences, two of which are relevant for present purposes. The first was that an offer had to be made to a specific person or a specific class or classes of person and not just to anyone who might happen to read an advertisement. In short, that an offer could not be made to the world at large. The second was the argument that the advertisement was not an
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Topic 2 Elements of Contract Law - TOPIC 2: ELEMENTS OF...

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