Question 1 In common law, a simple contract must have four elements, namely offer, acceptance, consideration, and intention

to create legal relationship. An offer

is generally defined as a clear expression or manifestation by an offeror to an offeree in which the former is willing to be bound to the latter under certain specific conditions. However, if an offeror intends to invite customers to offer It is because the offeror retains the power Advertisements and

to buy, it is an invitation to treat.

to accept or not the offer without further negotiation. notices are in general regarded as invitations to treat.

An acceptance is generally defined as a clear manifestation by which the offeree is willing to take the offer unconditionally. In the case of invitation

to treat, if the offeror intends to unconditionally accept the offer to buy made by the offeree without further negotiation, then it is also an acceptance. Silence, however, does not normally constitute an acceptance (Felthouse v Bindley).1 Consideration is the value that a contracting party pays in return for the other's contractual promise.2 Consideration must be moved from a promisee. It

needs not be adequate but must be sufficient. Finally, the parties should have the intention to create legal relation. Intention is to be evidenced objectively and not subjectively. In other words, if there is any dispute, a plaintiff who

wants to bring an action in contract has to take on the burden of proof.3 Example: Car park with and without barrier gates We may use a car park as an example. Some car parks have barrier gates,
1 2

[1862] 6 L.T. 157 The standard definition of consideration adopted is in Currie v Misa [1875] LR 10 Ex 153, 162 per Lush J. 3 Chui, C and Roebuck, D, Hong Kong Contracts (Hong Kong University Press, 2002, 2 nd edition) at p. 17

while some others have none, in particular the temporary ones.

Of course the

purposes of a barrier gate include security as well as parking fee collection. However, it also has implications on the formation of a contract. If a car park

has a barrier gate at the entrance, then the car park owner/ operator only invites other persons to make offer at the entrance of car park by pressing the button on the ticket machine for a car park ticket. The car park owner/ operator keeps to himself the power to choose whether to accept that offer or not, though most of the time car park owners/ operators do not exercise such power. an invitation to treat. It is therefore

When a driver press the button on the ticket machine,

the driver make an offer. If the offer is accpeted, a car park ticket will be issued and the barrier gate lifted. As both the car park owner/ operator and the driver have the intention to create legal relationship, a contract is formed. It is an executory consideration and the driver agrees to pay the parking fee when bring his car away from the car park.

One the other hand, some temporary car parks do not any barrier gate at the entrance. Such car park owners/ operators express their willingness to be

bound by any customers under certain specific conditions. Any offerees who are willing to take the unilateral offer unconditionally may simply drive their cars into the car park. It is therefore an offer.

Main terms of the contract A term is the content of a contract by which the parties are bound. A typical

terms of using a car park contain conditions and exemption clauses, such as: The users enter and use this car park at their own risk;

No responsibility is taken for loss damage or injury howsoever caused;4 If the users bring their vehicles into this car park they agree to pay the parking fee as set by the car park owner/ operator from time to time; For a hourly-rate car park, a parking fee is payable each time a vehicle enters the car park.

Such terms are usually contained in the car park ticket and/ or printed on a notice at the car park entrance. Question 2 Mr Lee's letter Mr Lee's letter is likely to be an offer to contract. It is an unequivocal manifestation of intention by stating that he wished to rent all of the 3 football fields in the Victoria Park on 1st May 2008 from 7:00 pm to 9:00 pm, and he agreed to be bound upon acceptance by paying any prescribed fee.

Letter of reply The brief letter of reply to Mr Lee is follows: Thank you for your letter dated XXX in which you state that your wish to rent the 3 football fields in Victoria Park on 1st May 2008 from 7:00 pm to 9:00 pm. I would like to inform you that all application for use of sports ground should be submitted using the standard application for our consideration. the application form is attached. In the form, apart from filling in the details, you have to undertake to observe the conditions of use of the sport grounds, and to indemnify to the department in respect of any death, injury, loss or damage by any person resulting from any
4

A copy of

ibid, at p. 133

cause arising from the hire or use of the sports ground during the period of hire. When the department receive your duly completed application form, we will then consider your request on the first come first serve basis.

The government department's letter of reply made in response to Mr Lee's letter can be argued as a rejection of the latter's offer. Such a reply terminates the original offer by Mr Lee. The letter of reply also inform Mr Lee the conditions of making an offer, including the mode of application by an application form. It is not a request for further particulars, otherwise the offer The letter is a manifestation by the

is still capable of being accepted.5

government department which invites Mr Lee to make an offer. The nature of a blank application form The nature of a blank application form is likely to be an invitation to treat. The government department has merely invited Mr Lee to make an offer, as in Gibson v Manchester City Council.6

The nature of a completed and delivered application form A completed and delivered application form from Mr Lee is more likely to be a clear express or manifestation by an offeror to the offeree (the government department) in which the offeror is willing to be bound to the latter under the specific conditions as stated in the application form. The application form is not likely to be a counter-offer. A counter-offer is an offer to contract made by one party in response to a prior offer by the other party. 7 As the

5 6

Stevenson, Jacques & Co. v McLean [1880] 5 QBD [1979] 1 W.L.R. 294. It was held that the council had not made an offer to the plaintiff when it had requested him to fill in an order form. 7 op cit, note X, at p. 46

government department's letter of reply to Mr Lee is a rejection of offer, there is no offer prior to the application form.

Question 3 When Mary ordered the Combo no. 4 after considering the menu at the McDonald's, it was likely to be a clear expression that she was willing to be bound to an agreement with McDonald's, the offeree. When she was given

the food, such conduct was a clear manifestation by which McDonald's was willing to take the offer unconditionally. The consideration was the price of

HK$25.6 that the promisee Mary paid the promisor McDonald's in return for the latter's contractual promise of a Combo no. 4. As such agreement concerned a commercial transaction, there is a rebuttable presumption that there was intention to create legal relationship. be a contract in common law. The transaction is deemed to

A representation is a statement made to lure a person on into making a contract.8 The description of food on the menu of McDonald's was a After considering the description on the

statement serving such a purpose.

menu, Mary ordered the Combo no. 4 as stated in the menu. It was apparently Mary's intention to put in an offer to buy according to the description of the menu (then became the terms of the contract). If the staff

member accepted the offer unconditionally (in the case it was), an agreement was form and the description was part of the terms. Even if the description of a hamburger in the menu did not correspond with the hamburger sold to Mary, it was unlikely to be misrepresentation. It was a breach of contract.
8

op cit, note X, at p. 46

Moreover, an actionable misrepresentation is a false statement of existing fact (Edgington v Fitzmaurice).9 However, when the statement was made (that is,

the description of the hamburger in the menu), the hamburger for Mary had not been produced and so the fact was not exist yet. Even some hamburgers

had been produced, the staff member of McDonald's just picked one of the hamburgers from the stock. The staff member did not know which hamburger would be sold to Mary.

The transaction between Mary and McDonald's was a consumer transaction. As Mary relied on the description of food on menu to make her decision of purchase, it is a contract for the sale of goods by description. Under Sale of Goods Ordinance,11 where there is a contract for the sale of goods by

10

description, there is an implied condition that the goods shall correspond with the description. This applies to all cases where the purchaser has not seen the goods but is relying on the description alone.12 Such description is a condition of the contract. Even if there was actually a statement on the menu that the description of food on the menu was for reference only, such exemption clause might not serve its purpose if such a clause had not been brought to May's attention as in Thornton v Shoe Lane Parking.13 Moreover, the liability for breach cannot be excluded

or restricted by reference to the said exemption clause in accordance with the

[1885] All E.R. Rep. 59 It fulfils the test of dealing as consumer set out in Section 2A of Sale of Goods Ordinance (Cap 26) 11 Section 15(1) of Sale of Goods Ordinance (Cap 26) 12 Butterworths Hong Kong Contract Law Handbook (LexisNexis, 2006, 2nd edition), at p. 168 13 [1971] 2 W.L.R. 585
10

Control of Exemption Clauses Ordinance.14

While it is certain that the

hamburger supplied fulfilled the implied condition under the contract that it is reasonably fit for the purpose of food,15 Mary could argue that the hamburger supplied under the contract is not of merchantable quality, hence a breach of the implied condition.16 The definition of merchantable quality includes the appearance of the good and finish.17 In other words, if the hamburger was so

bad looking as to advsersely affect its merchantable quality, it is not unlikely a breach of condition.

However, Mary was given the food and then she was asked to pay HK$25.6. In other words, Mary was given the opportunity to check the hamburger before she pay. There was reasonable possibility of intermediate examination for She had accepted the hamburger by paying the

May, but she had not done so.

price, even if there was any breach of condition to be fulfilled by the seller, it could only be treated as a breach of warranty, though Mary could argue that the bad looking hamburger amounted to a breach of condition.18 Mary might

claim damages for the breach of warranty, and not as a ground for treating the contract as repudiated.

Question 4 Mr Ko Mr Ko signed the contract on 1st May 2008 and paid HK$10,000 in cash upon signing the Lease.
14 15 16 17 18

As Mr Ko had signed the contract, he would be bound to

Section 11(2) of Control of Exemption Clauses Ordinance (Cap 71) ibid, Note 6, Section 16(3) ibid, Note 6, Section 16(2) ibid, Note 6, Section 2(5) Section 13(2) in Sale of Goods Ordinance (Cap 26)

the terms of the agreement in the absence of fraud, misrepresentation, or non est factum.19 government. It was the complete agreement between Mr Ko and the

Mr Ko could agrue that the Lease does not contain the clause of payment of the initial rental deposit in cash. The verbal agreement therefore should not be accepted (that is, the parol evidence rule). The payment of the initial rental

deposit in cash is a breach of the condition of the Lease and this renders the Lease voidable. Though the clause 1 of the Lease stated that the Tenant should pay to the government a cheque of HK$10,000 as initial rental deposit upon signing of the Lease Agreement, Mr Au could argue that Mr Ko proposed to pay by cash and Mr Au verbally agreed to this mode of payment (assuming that Mr Au had the proper authority to exercise such discretion). Such extrinsic evidence is

allowed where the evidence reveals a collateral contract, the verbal agreement between Messers Ko and Au.20

On balance, it is likely that the courts would conclude that the verbal agreement is a collateral contract and that the deposit of HK$10,000 is non-rerfundable in accordance with the terms of the Lease. Mr Wong The conduct of Mr Wong (i) Late payment of rent

19 20

op cit, Note 7, at p. 61 op cit, Note 4, at p. 49

According to clause 4 of the lease, the rent is payable on the 1st day or 1st working of each month. Mr Wong paid the rents for his stall in the middle of the months of May, June, July 2008, and on 25th August 2008. Wong has breached clause 4 of the Lease. Apparently Mr

Whether the term is a condition or

a warranty depends on the intention of the parties. The intention of the parties is determined by looking at the contract and the surrounding circumstances.21

(ii) Selling flowers in a vegetable stall Mr Wong rented a vegetable stall in the market and he sometimes sold flowers in his stall. Though clause 5 of the lease states that the Tenant shall not run in the stall any business otherwise than the business prescribed by the tender and Mr Wong rented a vegetable stall, not a flower stall, it appears that the Lease has not clearly set out what vegetable is. The Cambridge Advanced

Learner's Dictionary contains the following definition of vegetable: A plant, root, seed, or pod that is used as food, particularly in savoury dishes. Some kinds of flowers can be used as food, like the rose and the jasmine. In the absence of clearly worded clause in the lease, Mr Au could argue that he had not breached the terms of the lease. (iii) Misbehaviour of Mr Wong Mr Wong made various unfounded complaints against the staff of the Housing Authority. If such unfounded complaints were calculated to injure the

reputation of the staff under complaint in the eyes of others,22 this might amount to libel or slander, as the case may be. a claim for defamation. The staff concerned may make

Misbehaviour is not one of the terms of the Lease.

21 22

Bunge Corporation v Tradax Export [1981] 1 W.L.R. 711 Parmiter v Coupland [1840] 6 M&W 105

Mr Au's conduct No matter the clause 4 of the Lease is deemed by the parties as a warranty or a condition, Mr Au had not taken any action against Mr Wong's repeated breach of clause 4. The conduct of Mr Au, the innocent party, may be deemed to have shown that he had elected not to accept the repudiation of the breach. He might only sue for damages on the beach if he wishes.

Mr Wong could argue that the silence or inaction of Mr Au may constitute a representation for an estoppel.23 Such silence or inaction lead Mr Wong to

suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance.24

If Mr Au wanted to terminate the Lease and forfeit the tenancy on the ground that Mr Wong had repeatedly breached the clause 4 of the Lease, Mr Wong could argue that clause 4 was a warranty and so the breach of the clause will just give rise to damages. If mediation or conciliation cannot help the parties to agree about the breach, Mr Au could resort to seeking the court's decision.

Action to be taken If the government really wishes to strictly enforce the punctual payment of rent by the stall owners in future, it may serve a notice to the stall owners concerned if they are found to have paid the rent later than what has prescribed in clause 4. The notice reminds them of the clause 4 of the Lease and the possible

23 24

ibid, Note 7, at p. 114 supra, at p. 113

1 0

consequence of termination of Lease because of the breach of it (in other words, it is the intention of the government to treat it as a condition). Though it is not necessary for the government to serve such notice, if the stall owners concerned do not dispute that clause 4 is a condition, then if they paid the rent later than the 1st day or 1st working day of a month, the government may forfeit the lease, retain a deposit and eject the tenant.

1 1

BIBLIOGRAPHY

Butterworths Hong Kong Contract Law Handbook (LexisNexis, 2006, 2nd edition) Chui, C and Roebuck, D, Hong Kong Contracts (Hong Kong University Press, 2002, 2nd edition)

1 2