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Contract (continued)
Charlie enters a music store in a shopping centre. Brian, who
owns and operates the store, has placed the following sign in
the store window:
Special Offer
The Beatles – Abby Road
Only $10 each
Charlie, who operates a competing music store in another
shopping centre, realises that he easily can sell this great CD
for $20 in his store. Charlie collects all the copies of the
relevant CD and brings them to the cash register. Brian
knows that Charlie is a competitor and refuses to sell the
CDs to Charlie. However, having been told by Charlie that
there is a binding contract since he has accepted Brian’s
offer, Brian gives up and sells the CDs to Charlie.
Two hours later Mick enters the shop saying that he accepts
the offer and that he wants a CD. When Brian explains that
he has no more copies of the CD, Mick argues there is
already a binding contract, since he has accepted Brian’s
offer.
(a)
(b)
(c)
(d)
In your opinion, was Charlie correct in claiming
a right to buy the CDs?
Does Mick now have a right to sue Brian for
breach of contract?
Do you think it would make any difference, in
relation to Charlie’s situation, if there was no
sign at all, but the CDs’ price tag stated the
price of $10?
Do you think it would make any difference if
the sign outside the shop said:
Special Offer
The Beatles – Abby Road
$10 each, 100 CDs in stock
Until stock is cleared
Case 2

A invites B to submit a written offer of the terms
on which B is prepared to construct a building.
On 15 August, B presents a detailed offer
containing the statement “Price and other
conditions are not good after 1 September”.
Later on 16 August, B sends a notice to A saying
that: “We hereby revoke the offer sent yesterday.”
Is the revocation effective?
Case 3

A, an antique dealer, asks B to restore ten
paintings on condition that the work is
completed within three months and that the
price does not exceed a specific amount. B
informs A that, so as to know whether or not to
accept the offer, B finds it necessary to begin
work on one painting and will then give a definite
answer within five days. A agrees, and B, relying
on A’s offer, begins work immediately. Later on
the third day, A revokes the offer. Is the
revocation effective?
Acceptance


1.
2.
3.
4.
5.
An acceptance is the offeree’s manifestation of
intention to enter into a binding agreement on the
terms stated in the offer.
Requirements of acceptance
an acceptance must be made by the offeree
an acceptance must be communicated to the offeror
An acceptance must be made by the specific method
prescribed in the offer.
An acceptance must be made within the period of
validity
An acceptance should not materially alter the term in
the offer



1.
2.
3.
Billy offered to sell his car to Jimmy for $5000
and stated that he would assume that Jimmy
had accepted his offer unless he informed Billy
to the contrary within 10 days. Jimmy did not
reply to Billy within 10 days but he has
contacted his bank manager and agreed a loan
to purchase the car. Was there a contract
existed between Billy and Jimmy?
Mere silence and inactivity cannot be construed
as acceptance.
An acceptance must be made within the period
of validity
Fixed time
Reasonable time
Oral offer – accept immediately
Battle of the form



Traditionally: The mirror image rule
Reform:
Under the UCC 2-207(1) – a definite expression of
acceptance or a written confirmation of an informal
agreement may constitute a valid acceptance even if it
states terms additional to or different from the offer or
informal agreement. The additional or different terms are
treated as proposals for addition into the contract under
UCC 2-207(2), such as between merchants, such terms
become part of the contract unless: (a) the offer expressly
limits acceptance to the terms of the offer, (b) material
alteration of the contract results. (c) Notification of
objection to the additional/different terms are given in a
reasonable time after notice of them is received.
Material Alternation:

A change in the subject matter, quantity,
quality, price or remuneration, time ,place
and method of performance, liabilities for
breach of contract or method of dispute
resolution is a material change to the
terms of the offer.

E是一家英国的航空公司，一日，E公司为
售出某台及其而向荷兰H空中服务公司发出
要约：售X机器一台， 请汇5000英镑。H公
司立即回电：接受你方要约，已汇5000英
镑至你方银行账户，在交货前该笔款项将
由银行代为你放保管，请立即交货。合同
是否成立？
Effective of acceptance
Common law - mail-box rules

Exceptions:
Billy offered to sell his golf clubs to Jimmy. Jimmy
immediately replied by letter accepting Billy’s offer
but, the acceptance never reached Billy.



Was there a contract existed between Billy and Jimmy
under Postal rule?
What if Billy wrongly addressed the letter due to his
carelessness? Would your answer to a) be different?
Exceptions to mail-box rules

Billy offered to sell his golf clubs to Jimmy.
Jimmy immediately replied by letter
accepting Billy’s offer but, the acceptance
never reached Billy.
 Was
there a contract existed between Billy
and Jimmy under Postal rule?
 What if Billy wrongly addressed the letter due
to his carelessness? Would your answer to a)
be different?
 Was there a contract existed between Billy
and Jimmy under Receipt Rule?
Exceptions to mail-box rules
1. If the offeree knows or has reason to
know that the letter of acceptance never
reached the offeror.
 2. The offeror failed to receive the
acceptance because of the negligence of
offeree
 3. The rule does not apply to instaneous
forms of communications.

- Civil Law – Receipt rule
 China Contract Law - a notice of
acceptance becomes effective once it
reaches the offeror.
 PICC, CISG – Receipt Rule
Late Acceptance
A indicates 31 March as the deadline for acceptance of its
offer. B’s acceptance reaches A on 3 April.
1) Is this acceptance effective?
2) A, who is still interested in the contract, intends to “accept”
B’s late acceptance, and immediately informs B of its
intention. Is the acceptance effective?
3) If B knowing that the normal time for transmission of letters
by mail to A is three days,B sends its letter of acceptance
on 25 March. Owing to a strike of the postal service in A’s
country the letter, which shows the date of its mailing on the
envelope, only arrives on 3 April. Is B’s acceptance
effective? What if A objects without undue delay?
Late Acceptance


(1) A late acceptance is nevertheless effective as
an acceptance if without undue delay the offeror so
informs the offeree or gives notice to that effect.
(2) If a communication containing a late
acceptance shows that it has been sent in such
circumstances that if its transmission had been
normal it would have reached the offeror in due
time, the late acceptance is effective as an
acceptance unless, without undue delay, the offeror
informs the offeree that it considers the offer as
having lapsed.
Consideration and cause
– something in value
1.
Consideration must be given for
pursuing the enforceability of a promise
2. Consideration must be referable to the
promise
3. Consideration must be sufficient, but
need not be adequate
4.
Consideration could be a promise or an
activity.


William E. Story and his nephew, William E.
Story II, agreed that the uncle would pay his
nephew $5000 if the nephew would refrain from
drinking, using tobacco, swearing, and playing
cards and billiards for money until he turned 21.
The nephew accepted it and did so until his 21
years old. When the nephew turned 21, his
uncle sent him a letter indicated that the nephew
had earned the $5000. The uncle died later
without having transferred the funds to his
nephew. The nephew brought suit against the
executor of the uncle’s estate, Franklin Sidway.
Question: Is there a sufficient consideration to
create a valid and enforceable contract in this
case?
Nature of consideration
 Does something (an act) or promise to
do something he or she is not legally
bound to do.
 Refrains (from an act) or promises to
refrain from doing something she or he
has a legal right to do.
Requirements of consideration
1.
2.
3.
Consideration must be present or future
and cannot be past
Performance of an existing contractual
duty to the promisor is not consideration
Performance of a public law duty is not
good consideration
Exception to Consideration



Promissory estoppel:
Central London Property Trust Ltd v High Trees House
Ltd[1947]KB130.
原告于1937年将伦敦的一套公寓楼出租给被告租期为99年从
1937年9月起算租金为每年2500镑。由于第一次世界大战爆发很
多人离开伦敦因此租住公寓的人很少被告无力支付房租所以双方
于1940年11月协商同意将租金减半征收但当时没有说明期限。到
1945战争结束时公寓又重新客满于是原告写信给被告要求被告支
付全额租金。被告主张1940年的协议应该持续到整个租赁协议期
满;换句话说由于原告没有在1945年9月前要求支付超出的1250
镑这就表明他放弃了要求支付超出金额的权利。
【判词】原告胜诉但在答应减租的那段期间这一协议是由约束力
的尽管它没有对价的支持。Ｌｏｒｄ ｄｅｎｎｉｎｇ－ 债权
人曾表示接受部分债务的履行以清偿全部债务，债务人已如约履
行， 在这种情况下， 应禁止债权人违反其诺言。
Promissory Estoppel requires:
1.
2.
3.
4.
a promise or a representation as to future
conduct which is intended to affect the legal
relations between the parties and which
indicates that the promisor will not insist on his
strict legal rights against the promisee.
A clear and unequivocal promise by words or
conduct.
Evidence that there is a change in position of the
promise as a result of the promise (reliance but
not necessarily to their detriment)
Inequity if the promisor were to go back on the
promise.
France - Cause
 China, German, PICC- Nether
consideration not cause required

Legality
violate compulsory law
 contravene to the public interest
 contravene to the public policy

- Void contract
Validity of Contract

-
-
-
Genuine contractual intention
at the time of entering into a contract
How to determine whether people has a
genuine intention when entering into a
contract?
words or actions of the parties
Misrepresentation
 Fraud
 Mistake
 Duress
 Undue influence
 Unconscionability

Misrepresentation


a)
b)
c)
d)
a false statement of fact made by one party to
another which induces another party to
contract.
Four elements:
It must be a statement of existing or past fact
there is a mistaken impression about an material
fact or facts concerning the subject of the
contract
the victimized party was reasonably relied on this
fact
the victimized party entered into a contract based
on this misrepresentation
Fraud


1.
2.
3.
a false representation of a past or existing
fact – whether by words or by conduct, or by
concealment of what should have been
disclosed
Fraud vs. Misrepresentation
Fraud includes fraudulent misrepresentation
Fraud can be a statement and conduct, ie: forge
a document or certificate
Fraud may constitute a criminal offence
Five elements
a)
b)
c)
d)
e)
A false statement or act should be material fact
The defendant must know that the fact is
untrue.
Intent on the part of the defendant to deceive
the alleged victim.
The victim’s reliance on the false statement
must be reasonable.
The false statement cause the victim entering
into a contract

Whether mere silence could constitute
fraud?
 Depends
on whether the defendant has the
duty to disclose certain fact.
Mistake
- a misunderstanding about a material fact by
the parties
a) Common mistake
Party A thinks that X is Y, Party B thinks that X is Y,
and they entered into a contract based on the fact
that X is Y. But actually X is Z.
only if the mistake of the subject-matter was
sufficiently fundamental to render its identity
different from what was contracted, making the
performance of the contract impossible. (Bell v
Lever Brothers Ltd)
b) Mutual mistake
A think X is Y, but B think X is Z, A and B
enter into a contract for selling X without
knowing each other’s misunderstanding
Raffles (P) contracted to sell 125 bales of Surat cotton to
Wichelhaus (D). The goods were to be shipped from
Bombay to Liverpool, England on the ship “Peerless”.
Neither party was aware that there were two ships names
“Peerless” carrying cotton from Bombay to Liverpool, one
arriving in October and the other in December.
Wichelhaus thought he had purchased the cotton arriving on
the October ship, but Raffles sent his cotton on December
ship. Wichelhaus refused to accept delivery of the cotton
arriving on the December ship and Raffles brought this
lawsuit for breach of contract.
Issues
 If a latent ambiguity arises that shows that there had been
no meeting of the minds, have the parties given mutual
assent to contract?
c) Unilateral mistake
Part A think X is Y, Party B think X is Z, the fact
is X is Z not Y, This contract is entered into
based on Party A’s unilateral mistake.
Generally, unilateral mistake can not be a
ground to rescind a contract, unless


it is unconscionable to enforce the contract
the mistake is leaded by the fault or carelessness of
another party

•
•
•
•
•
China contract law – ARTICLE 54 – a party may petition the
People’s Court or an arbitration institution for amendment or
cancellation of a contract if the contract was concluded as a
result of serious misunderstanding.
According to interpretations by the Supreme Court of the
People’s Republic of China, serious misunderstanding
refers to
misunderstanding to the nature of contract
misunderstanding to the other party
misunderstanding to the quality of the contracted object
misunderstanding to the assortment of the contracted object
misunderstanding to the price and expense.
PICC- ARTICLE 3.5
(Relevant mistake)
(1) A party may only avoid the contract for mistake if, when the contract was
concluded, the mistake was of such importance that a reasonable person in
the same situation as the party in error would only have concluded the
contract on materially different terms or would not have concluded it at all if
the true state of affairs had been known, and
(a) the other party made the same mistake, or caused the mistake, or knew or
ought to have known of the mistake and it was contraryto reasonable
commercial standards of fair dealing to leave the mistaken party in error; or
(b) the other party had not at the time of avoidance reasonably acted in reliance
on the contract.
(2) However, a party may not avoid the contract if
(a) it was grossly negligent in committing the mistake; or
(b) the mistake relates to a matter in regard to which the risk of mistake was
assumed or, having regard to the circumstances, should be borne by the
mistaken party.
PICC - ARTICLE 3.6
 (Error in expression or transmission)
 An error occurring in the expression or
transmission of a declaration is considered
to be a mistake of the person from whom
the declaration emanated.
Duress

a threat of harm made to compel a person to do
something against his or her will or judgment
1. There must be a threat.
a) physical duress b) economic duress
2. The threat should be impropriate
3. The threat should be enough to deprive the party’s will
– objective test – depends on the situation of the victim
4. The victimized party enter into a contract under such threat
Undue Influence
a person uses a position of influence to
persuade someone to enter a contract that
provides the stronger person with a direct or
indirect benefit.
1. Presumed undue influence
1) parent and children 2) trustee and beneficiary
3)doctor and patient 4)solicitor and client 5)
guardian and ward 6) religious adviser and devotee
2. Actual undue influence

Unconscionability

Procedural unconscionability
- unconsicionability in negotiation
- overwhelming bargaining position due to their
knowledge, experience, status, information,
financial situation

Substantial unconscionability
- unfaire contract terms in the contract