Introduction LAW EUT440

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  • 1. Introduction to LawIntroduction to LawContract 1Contract 1What is a contract?What is a contract?
  • 2. 22Learning ObjectivesLearning Objectives Quick ReviewQuick Review Definition of a ContractDefinition of a Contract Simple Contracts and WrittenSimple Contracts and WrittenContractsContracts Legal Effect of ContractsLegal Effect of Contracts Why we have a Law of ContractWhy we have a Law of Contract
  • 3. 33Important DefinitionsImportant Definitions Legally bindingLegally binding Legally enforceableLegally enforceable RemediesRemedies Parol (simple) contractsParol (simple) contracts DeedDeed Conveyances of landConveyances of land Bill of exchangeBill of exchange Valid, void, voidable and unenforceableValid, void, voidable and unenforceablecontractscontracts
  • 4. 44Quick ReviewQuick Review In our first class, we saw that youIn our first class, we saw that youcan divide law into differentcan divide law into differentcategoriescategories Some of those categories wereSome of those categories were• private law v. public lawprivate law v. public law• civil law v. criminal lawcivil law v. criminal law
  • 5. 55Quick Review (cont.)Quick Review (cont.) Private LawPrivate Law deals with thedeals with therelationships between ordinaryrelationships between ordinarypeople in everyday transactionspeople in everyday transactions That includes you and me, as wellThat includes you and me, as wellas businesses and companiesas businesses and companies Private Law includes the law ofPrivate Law includes the law ofcontract and the law of tortcontract and the law of tort
  • 6. 66Quick Review (cont.)Quick Review (cont.) In this category,In this category, civil lawcivil law dealsdealswith the relationships betweenwith the relationships betweenindividual citizensindividual citizens Its purpose is to settle argumentsIts purpose is to settle argumentsbetween individualsbetween individuals It helps people to find remediesIt helps people to find remedies• it doesn’t really punish peopleit doesn’t really punish people Civil Law includes all Private LawCivil Law includes all Private Lawso it includes the Law of Contractso it includes the Law of Contract
  • 7. 77What is a contract? ExamplesWhat is a contract? Examples I promise to bring chocolates to the wholeI promise to bring chocolates to the wholeclass. Is there a contract?class. Is there a contract? I promise to give you 100 yuan if ride yourI promise to give you 100 yuan if ride yourbike to Tiananmen Square and back to ICBbike to Tiananmen Square and back to ICBin less than 2 hours. Is there a contract?in less than 2 hours. Is there a contract? I give you 2 yuan for your Coca-Cola. IsI give you 2 yuan for your Coca-Cola. Isthere a contract?there a contract? I promise to give you a new bicycle if youI promise to give you a new bicycle if youagree not to eat Chinese food for oneagree not to eat Chinese food for oneyear. Is there a contract?year. Is there a contract?
  • 8. 88Definition of a contractDefinition of a contract A legally binding agreementA legally binding agreement that means there must be some kind ofthat means there must be some kind ofagreement between two partiesagreement between two parties However, not all agreements are contractsHowever, not all agreements are contractsbecause not all agreements are legallybecause not all agreements are legallyenforceableenforceable legally enforceablelegally enforceable means that a court willmeans that a court willsay that an agreement is a contractsay that an agreement is a contract See first sentence, p. 253,See first sentence, p. 253, English LawEnglish Law, for, forcomplete definitioncomplete definition
  • 9. 99Definition of a contract (cont.)Definition of a contract (cont.) To decide if an agreement isTo decide if an agreement islegally enforceable as a contract, alegally enforceable as a contract, acourt will apply the rules andcourt will apply the rules andprinciples of the law of contractprinciples of the law of contract Therefore, knowing a little aboutTherefore, knowing a little aboutthese rules can helpthese rules can helpbusinesspeople to create validbusinesspeople to create validcontractscontracts
  • 10. 1010Simple ContractsSimple Contracts There isThere is nono general rule in English lawgeneral rule in English lawthat a contract must be in writingthat a contract must be in writing In fact, as we saw from our examples atIn fact, as we saw from our examples atthe beginning of the class, in manythe beginning of the class, in manysituations people do not realise thatsituations people do not realise thatthey are making a contractthey are making a contract Some contract can be made verbally orSome contract can be made verbally orby actionsby actions These are known asThese are known as parolparol oror simplesimplecontractscontracts
  • 11. 1111Simple Contracts (cont.)Simple Contracts (cont.) Although there is no requirementAlthough there is no requirementfor a simple contract to be infor a simple contract to be inwriting, sometimes the partieswriting, sometimes the partiesmight record the contract inmight record the contract inwritingwriting This can be useful later if there isThis can be useful later if there isdisagreement about the contractdisagreement about the contract If the contract is important orIf the contract is important orinvolves a lot of money it might beinvolves a lot of money it might bewise to put it in writingwise to put it in writing
  • 12. 1212DeedsDeeds DeedsDeeds are kind of contract whichare kind of contract whichmust alwaysmust always be in writingbe in writing Conveyances of landConveyances of land: this is the: this is thelegal process of transferring thelegal process of transferring theownership of land from one partyownership of land from one partyto anotherto another This is different from theThis is different from theagreement to sell the landagreement to sell the land The conveyance follows theThe conveyance follows theagreement to sellagreement to sell
  • 13. 1313Contracts which must be inContracts which must be inWritingWriting Some contracts must be in writingSome contracts must be in writingbut they don’t have to be by deedbut they don’t have to be by deed Most of these requirements comeMost of these requirements comefrom Statutefrom Statute Some examplesSome examples• bills of exchangebills of exchange• contracts for the sale of landcontracts for the sale of land
  • 14. 1414Legal EffectLegal Effect As we mentioned earlier, contracts areAs we mentioned earlier, contracts areagreements, but not all agreements areagreements, but not all agreements arelegally enforceable contractslegally enforceable contracts In fact, the legal effect of agreementsIn fact, the legal effect of agreementsfall into 4 categoriesfall into 4 categories Valid contractsValid contracts Void contractsVoid contracts Voidable contractsVoidable contracts Unenforceable contractsUnenforceable contracts
  • 15. 1515Valid ContractsValid Contracts These are agreements which areThese are agreements which arecompletely binding andcompletely binding andenforceableenforceable Parties to valid contracts gainParties to valid contracts gainrights and responsibilitiesrights and responsibilities The courts will make sure that theThe courts will make sure that theparties follow these rights andparties follow these rights andresponsibilities if there is anyresponsibilities if there is anyargumentargument
  • 16. 1616Essentials of a Valid ContractEssentials of a Valid Contract Offer and acceptanceOffer and acceptance Intention to create legal relationsIntention to create legal relations Requirement of written formalities in someRequirement of written formalities in somecasescases Parties must have capacity to contractParties must have capacity to contract Actual consent by the parties to the termsActual consent by the parties to the termsof the contractof the contract Contract must not be against public policyContract must not be against public policy
  • 17. 1717Void ContractsVoid Contracts In fact, these are not contracts at allIn fact, these are not contracts at all They have no legal effectThey have no legal effect As we will see in later classes, there areAs we will see in later classes, there area number of things which can make aa number of things which can make acontract voidcontract void• eg mistake, illegalityeg mistake, illegality The important thing to remember isThe important thing to remember isthat you cannot enforce a void contractthat you cannot enforce a void contract
  • 18. 1818Void Contracts - ExampleVoid Contracts - Example Daniel gives his students soDaniel gives his students somuch homework that theymuch homework that theydecide to kill himdecide to kill him  They pay a Russian hitmanThey pay a Russian hitman5000 RMB to kill Daniel5000 RMB to kill Daniel
  • 19. 1919Void Contracts – ExampleVoid Contracts – Example(cont.)(cont.) However, the Russian simplyHowever, the Russian simplyspends all the money in bars inspends all the money in bars inSanlitun and then goes homeSanlitun and then goes home He does not kill DanielHe does not kill Daniel  The students cannot claim theirThe students cannot claim theirmoney back because it is illegal tomoney back because it is illegal tohire a hitman to kill someonehire a hitman to kill someone
  • 20. 2020Voidable ContractsVoidable Contracts This kind of contract is valid unlessThis kind of contract is valid unlessone of the parties has it set asideone of the parties has it set aside(ie declared void)(ie declared void) This could happen where one partyThis could happen where one partyis tricked into entering a contractis tricked into entering a contractby the other partyby the other party
  • 21. 2121Voidable Contracts - ExampleVoidable Contracts - Example Daniel pays for a holiday in TibetDaniel pays for a holiday in Tibetbecause the travel service shows himbecause the travel service shows himpictures of a lovely 5 star hotel inpictures of a lovely 5 star hotel inLlahsaLlahsa However, when he arrives, Daniel findsHowever, when he arrives, Daniel findsthat the hotel is still being constructed.that the hotel is still being constructed. There is a room where he can stay, butThere is a room where he can stay, butnot all the facilities are available andnot all the facilities are available andthe hotel certainly doesn’t look like thethe hotel certainly doesn’t look like thepicturespictures
  • 22. 2222Voidable Contracts – ExampleVoidable Contracts – Example(cont.)(cont.) Assuming that the travel company knewAssuming that the travel company knewabout the hotel, then they have made aabout the hotel, then they have made amisrepresentation to Daniel which mademisrepresentation to Daniel which madehim enter into the contract for thehim enter into the contract for theholidayholiday Daniel could now choose to set asideDaniel could now choose to set asidethe contractthe contract However, he could decide that thingsHowever, he could decide that thingsare not to bad and that he can still haveare not to bad and that he can still havea good holidaya good holiday
  • 23. 2323Voidable Contracts – ExampleVoidable Contracts – Example(cont.)(cont.) So the contract is notSo the contract is notautomatically void (like with theautomatically void (like with thehitman), it is voidable at Daniel’shitman), it is voidable at Daniel’schoicechoice
  • 24. 2424Unenforceable ContractsUnenforceable Contracts These are agreements which areThese are agreements which arelegal but which cannot be enforcedlegal but which cannot be enforcedin court for some reasonin court for some reason For example, a time limit forFor example, a time limit forenforcing the contract may haveenforcing the contract may haveexpiredexpired
  • 25. 2525Why have a Law of Contract?Why have a Law of Contract? As we saw from the examples atAs we saw from the examples atthe beginning of the class,the beginning of the class,contracts arise in simple, everydaycontracts arise in simple, everydaysituationssituations Modern society operates by peopleModern society operates by peopleand companies exchanging goodsand companies exchanging goodsand servicesand services The Law of Contract helps to giveThe Law of Contract helps to givea structure to thisa structure to this
  • 26. 2626Why have a Law of Contract?Why have a Law of Contract? The Law of Contract is part of PrivateThe Law of Contract is part of PrivateLaw so it is concerned with relationshipsLaw so it is concerned with relationshipsbetween partiesbetween parties It helps us to decide what is a validIt helps us to decide what is a validcontractcontract The Law of Contract is also part of CivilThe Law of Contract is also part of CivilLaw so it is also concerned withLaw so it is also concerned withremediesremedies It helps us the other party to a contractIt helps us the other party to a contractdoes not keep to the agreementdoes not keep to the agreement
  • 27. 2727SummarySummary a contract isa contract is a legally bindinga legally bindingagreementagreement simple contractssimple contracts do not have todo not have tobe in writingbe in writing the legal effect of contracts fallthe legal effect of contracts fallinto 4 categories:into 4 categories:• Valid contractsValid contracts• Void contractsVoid contracts• Voidable contractsVoidable contracts• Unenforceable contractsUnenforceable contracts
  • 28. 2828Summary (cont.)Summary (cont.) Business is an important part ofBusiness is an important part ofmodern societymodern society The Law of Contract tells us whatThe Law of Contract tells us whatis necessary to make a validis necessary to make a validcontractcontract It also gives us remedies whereIt also gives us remedies whereanother person does not follow theanother person does not follow theterms of the contractterms of the contract
  • 29. 2929ReadingReading Chapter 9Chapter 9• Page 255 last paragraph “The formation of aPage 255 last paragraph “The formation of acontract”contract”• Page 256 paragraph entitled “Agreement”Page 256 paragraph entitled “Agreement”• Page 256 first paragraph in section entitledPage 256 first paragraph in section entitled“Offer and invitation to treat”“Offer and invitation to treat”• Page 257 paragraph entitled “Invitation toPage 257 paragraph entitled “Invitation totreat – price indications: price lists andtreat – price indications: price lists andcatalogues”catalogues”