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Questions and Answers
Why couldn't B sue A for failing to replace the screen cover of the mobile phone?
Why couldn't B sue A for failing to replace the screen cover of the mobile phone?
In the case of Roscorla v Thomas, what was the main reason R's lawsuit for breach of contract was unsuccessful?
In the case of Roscorla v Thomas, what was the main reason R's lawsuit for breach of contract was unsuccessful?
Which of the following is an exception that would allow B to sue A on the promise to replace the screen cover?
Which of the following is an exception that would allow B to sue A on the promise to replace the screen cover?
What legal principle can be drawn from the outcomes of the cases mentioned?
What legal principle can be drawn from the outcomes of the cases mentioned?
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What does the property of 'consideration' refer to in the context of contract law?
What does the property of 'consideration' refer to in the context of contract law?
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Does B have the right to sue after accepting 700 from A?
Does B have the right to sue after accepting 700 from A?
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What is required for an agreement to accept a lesser amount to be binding?
What is required for an agreement to accept a lesser amount to be binding?
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In which scenario is the presumption of a binding contract not applicable?
In which scenario is the presumption of a binding contract not applicable?
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What does the phrase 'subject to [contract]' imply?
What does the phrase 'subject to [contract]' imply?
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How are commercial agreements generally treated concerning legal binding intention?
How are commercial agreements generally treated concerning legal binding intention?
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Which category does not automatically presume a legal binding contract?
Which category does not automatically presume a legal binding contract?
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What happens if parties act inconsistently with their 'subject to [contract]' agreement?
What happens if parties act inconsistently with their 'subject to [contract]' agreement?
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What constitutes fresh consideration in a contract?
What constitutes fresh consideration in a contract?
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Why might B not have the right to sue A after receiving 700?
Why might B not have the right to sue A after receiving 700?
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What is the main factor determining the intention to create a legally binding contract?
What is the main factor determining the intention to create a legally binding contract?
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What is required for an offer to result in a legally binding contract?
What is required for an offer to result in a legally binding contract?
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Which of the following best describes 'executed consideration'?
Which of the following best describes 'executed consideration'?
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Which statement about past consideration is true?
Which statement about past consideration is true?
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What distinguishes a deed from other contracts?
What distinguishes a deed from other contracts?
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Which condition must be met for consideration in a contract?
Which condition must be met for consideration in a contract?
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What happens when one party tries to change a previously agreed contract?
What happens when one party tries to change a previously agreed contract?
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In the context of consideration, what does 'sufficient but need not be adequate' mean?
In the context of consideration, what does 'sufficient but need not be adequate' mean?
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Which of the following is an example of executory consideration?
Which of the following is an example of executory consideration?
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What is a primary characteristic of consideration in contract law?
What is a primary characteristic of consideration in contract law?
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What is the term used for the concept where each party must promise some benefit to each other?
What is the term used for the concept where each party must promise some benefit to each other?
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What is required for a contract to have legal effect concerning the promisee?
What is required for a contract to have legal effect concerning the promisee?
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What is the privity contract rule about?
What is the privity contract rule about?
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Why might a third party not enforce a contract?
Why might a third party not enforce a contract?
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In the case of Foakes v Beer, why could B still claim interest from F?
In the case of Foakes v Beer, why could B still claim interest from F?
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What happens when a promise is made that involves illegal consideration?
What happens when a promise is made that involves illegal consideration?
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How can a third party enforce a term of a contract under the Contracts (Rights of Third Parties) Ordinance?
How can a third party enforce a term of a contract under the Contracts (Rights of Third Parties) Ordinance?
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What must consideration be in a valid contract?
What must consideration be in a valid contract?
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If A owes B $1000 and B accepts $700 as full payment, what is the outcome regarding B's right to sue?
If A owes B $1000 and B accepts $700 as full payment, what is the outcome regarding B's right to sue?
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Which of the following is NOT a valid form of consideration?
Which of the following is NOT a valid form of consideration?
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What determines whether an offer or an invitation to treat has been made?
What determines whether an offer or an invitation to treat has been made?
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In the example of NZSC vs Satterthwaite & Co, why was S able to rely on the waiver promise?
In the example of NZSC vs Satterthwaite & Co, why was S able to rely on the waiver promise?
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Which of the following statements is true regarding consideration?
Which of the following statements is true regarding consideration?
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What is considered to be 'forbearance to sue'?
What is considered to be 'forbearance to sue'?
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Under which circumstance may consideration not be enforceable?
Under which circumstance may consideration not be enforceable?
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What does the term 'subject to contract' imply in a negotiation?
What does the term 'subject to contract' imply in a negotiation?
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Which of the following statements best describes social agreements?
Which of the following statements best describes social agreements?
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In which situation can a minor's contract be legally enforceable?
In which situation can a minor's contract be legally enforceable?
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What is a common limitation on a minor's ability to enter contracts?
What is a common limitation on a minor's ability to enter contracts?
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What happens if a person suffers from a mental disability at the time of signing a contract?
What happens if a person suffers from a mental disability at the time of signing a contract?
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In the case of sales puffs, how do courts typically view the statements made?
In the case of sales puffs, how do courts typically view the statements made?
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In a property transaction, when is a provisional agreement considered a valid binding contract?
In a property transaction, when is a provisional agreement considered a valid binding contract?
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Which of the following correctly describes the effects of misrepresentation in a contract?
Which of the following correctly describes the effects of misrepresentation in a contract?
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What was the court's finding regarding the loan agreement in the case of Treasure Spot Finance Co Ltd v Li Chik Ming?
What was the court's finding regarding the loan agreement in the case of Treasure Spot Finance Co Ltd v Li Chik Ming?
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What does 'legal capacity' refer to in contract law?
What does 'legal capacity' refer to in contract law?
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Which of the following is true regarding agreements between family members?
Which of the following is true regarding agreements between family members?
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When can a minor be sued for not paying for necessary goods?
When can a minor be sued for not paying for necessary goods?
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What is the significance of the phrase 'on or before a certain future date' in a preliminary agreement?
What is the significance of the phrase 'on or before a certain future date' in a preliminary agreement?
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Study Notes
Consideration
- Consideration is essential for a legally binding contract, representing a "bargain" between parties.
- Both parties must promise mutual benefits; without an exchange, promises are not enforceable.
- Example: A sells B bottled water for $10, where A's benefit is money and B's benefit is water.
Types of Consideration
- Executed Consideration: Both parties fulfill their promises concurrently (e.g., A delivers water, B pays $10).
- Executory Consideration: Promises are to be fulfilled in the future (e.g., A will deliver water in three days, B pays upon delivery).
Key Rules About Consideration
- Consideration can be present (executed) or future (executory) but never past.
- It must originate from the promisor, be legal, and must hold value, though the exact value is not strictly evaluated by courts.
- Past consideration is not valid; promises made after actions are not enforceable.
Situations Lacking Consideration
- An act performed voluntarily before a promise is made does not validate a contract.
- Any modifications made to an existing contract require new consideration to be enforceable.
Privity of Contract
- Only parties involved (privy) in a contract can sue or be sued on it, preventing third parties from enforcing agreements.
- Exceptions occur if a third party is specifically named or if a new promise contains consideration.
Contracts (Rights of Third Parties) Ordinance
- Effective from January 1, 2016, allows third parties to enforce contract terms if identified and beneficial.
- Third parties can obtain remedies like parties to the contract, even without direct consideration.
Legal Consideration
- Consideration must be lawful; agreements for illegal actions, like robbery, are not upheld.
Value of Consideration
- The value of promises must exist, but disproportionate values do not affect their enforceability.
- Example: Selling an item significantly below market value is permissible as long as value exists.
Forbearance to Sue
- Agreeing not to sue counts as sufficient consideration, even if difficult to quantify.
- Signing an agreement to drop a lawsuit can legally bind the parties involved.
General Rules on Lesser Amounts
- Agreements to accept a reduced payment are generally not binding unless fresh consideration is provided.
Intention to Create a Legally Binding Contract
- The intent to form a binding agreement is assessed objectively, distinguishing between commercial and social/family agreements.
- Commercial agreements typically assume intent unless explicitly stated otherwise (e.g., using the phrase "subject to contract").
- Acting inconsistently with the agreement may negate withdrawal rights, even under non-binding clauses.### Inconsistent Behavior and Agreements
- Parties may withdraw from agreements if their actions do not align with the agreement's terms, even if "subject to contract" is included.
- In the case of Attorney-General (HK) v Humphrey's Estate (1987), negotiations occurred between the Hong Kong government and HKL for asset exchange, legally binding only upon formal contract signing.
- The government’s actions—renovating apartments and permitting demolition—indicate belief in the contract’s effect.
- HKL retained the right to withdraw until a formal contract was signed due to the agreement's "subject to contract" status, allowing HKL to terminate use of the apartments.
- The court ruled that the government's actions did not negate HKL’s right to withdraw, emphasizing that "subject to contract" implies no legal responsibilities until a formal agreement.
Provisional or Preliminary Agreement
- "Subject to contract" differs from provisional or preliminary agreements, commonly used in property transactions.
- If the full agreement terms are outlined, they constitute valid binding contracts.
- These agreements typically mention a formal contract will be finalized by a specific date.
- Formal contracts replace provisional agreements, and both are legally binding.
Social Agreements
- Agreements made socially (between friends or relatives) are generally not legally binding unless intent for legal obligation is clear.
- Such arrangements are presumed non-binding, despite the intent to fulfill them.
- This presumption can be rebutted if circumstances show a clear intention to establish a legal agreement.
Case Study: Sun Er-jo v Lo Ching (1996)
- In this case, Mrs. Sun’s arrangement with her son LK involved her life savings to manage and partially fund an apartment purchase.
- After four years, Mrs. Sun requested repayment of her capital, which LK complied with, but she sought interest and compensation for expenses.
- The court ruled that parental costs are not valid claims, and familial arrangements do not establish legal obligations unless explicitly intended.
- LK acted honorably, leading to a dismissal of Mrs. Sun’s claim, signaling that familial arrangements typically lack legal enforceability.
Capacity to Enter into a Contract
- Legal capacity to contract may be restricted for certain groups, mainly minors and those mentally incapacitated.
- Individuals under 18 (minors) can enter enforceable contracts regarding necessary goods, which are appropriate for their needs.
- Adults cannot enforce contracts against minors, but minors may be held liable to pay a reasonable price for necessaries.
- Contracts with minors are enforceable only for necessary items, delineated by their social and financial contexts.
Mental Disability
- Individuals suffering from mental disabilities have the right to void contracts if they can prove lack of understanding during agreement formation.
- The other party must also have knowledge of the individual’s mental condition.
Case Study: Treasure Spot Finance Co Ltd v Li Chik Ming (2007)
- The case focused on whether Li Chik Ming had the mental capacity to understand a loan agreement.
- Despite Li's claims of mental incapacity, the court found he was capable of understanding the documents, thereby validating his ability to consent.
- However, the loan agreement was rendered illegal due to violations of the Moneylenders Ordinance, leading to its unenforceability.
Terms of a Contract
- Not all statements made during contract negotiations become terms of the contract.
- Sales puffs are exaggerated claims in advertising not legally enforceable; courts assess context to determine their legal impact.
- Representations are factual statements influencing contract decisions, and misrepresentations can affect validity if proven false.
- Terms can be articulated in writing, spoken words, or inferred from actions and previous dealings.
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Description
Explore the fundamentals of contract law in Week 3, focusing on key concepts such as consideration, intention, capacity, and the essential terms of a legally binding contract. Understand the requirements that form the basis of contractual agreements and how they establish a legal obligation between parties.
