1. Introduction to LawIntroduction to Law
Contract 1Contract 1
What is a contract?What is a contract?

2. 22
Learning ObjectivesLearning Objectives
 Quick ReviewQuick Review
 Definition of a ContractDefinition of a Contract
 Simple Contracts and WrittenSimple Contracts and Written
ContractsContracts
 Legal Effect of ContractsLegal Effect of Contracts
 Why we have a Law of ContractWhy we have a Law of Contract

3. 33
Important 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 unenforceable
contractscontracts

4. 44
Quick ReviewQuick Review
 In our first class, we saw that youIn our first class, we saw that you
can divide law into differentcan divide law into different
categoriescategories
 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. 55
Quick Review (cont.)Quick Review (cont.)
 Private LawPrivate Law deals with thedeals with the
relationships between ordinaryrelationships between ordinary
people in everyday transactionspeople in everyday transactions
 That includes you and me, as wellThat includes you and me, as well
as businesses and companiesas businesses and companies
 Private Law includes the law ofPrivate Law includes the law of
contract and the law of tortcontract and the law of tort

6. 66
Quick Review (cont.)Quick Review (cont.)
 In this category,In this category, civil lawcivil law dealsdeals
with the relationships betweenwith the relationships between
individual citizensindividual citizens
 Its purpose is to settle argumentsIts purpose is to settle arguments
between 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 Law
so it includes the Law of Contractso it includes the Law of Contract

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What is a contract? ExamplesWhat is a contract? Examples
 I promise to bring chocolates to the wholeI promise to bring chocolates to the whole
class. 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 your
bike to Tiananmen Square and back to ICBbike to Tiananmen Square and back to ICB
in 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. Is
there a contract?there a contract?
 I promise to give you a new bicycle if youI promise to give you a new bicycle if you
agree not to eat Chinese food for oneagree not to eat Chinese food for one
year. Is there a contract?year. Is there a contract?

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Definition 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 of
agreement between two partiesagreement between two parties
 However, not all agreements are contractsHowever, not all agreements are contracts
because not all agreements are legallybecause not all agreements are legally
enforceableenforceable
 legally enforceablelegally enforceable means that a court willmeans that a court will
say 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, for
complete definitioncomplete definition

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Definition of a contract (cont.)Definition of a contract (cont.)
 To decide if an agreement isTo decide if an agreement is
legally enforceable as a contract, alegally enforceable as a contract, a
court will apply the rules andcourt will apply the rules and
principles of the law of contractprinciples of the law of contract
 Therefore, knowing a little aboutTherefore, knowing a little about
these rules can helpthese rules can help
businesspeople to create validbusinesspeople to create valid
contractscontracts

10. 1010
Simple ContractsSimple Contracts
 There isThere is nono general rule in English lawgeneral rule in English law
that 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 at
the beginning of the class, in manythe beginning of the class, in many
situations people do not realise thatsituations people do not realise that
they are making a contractthey are making a contract
 Some contract can be made verbally orSome contract can be made verbally or
by actionsby actions
 These are known asThese are known as parolparol oror simplesimple
contractscontracts

11. 1111
Simple Contracts (cont.)Simple Contracts (cont.)
 Although there is no requirementAlthough there is no requirement
for a simple contract to be infor a simple contract to be in
writing, sometimes the partieswriting, sometimes the parties
might record the contract inmight record the contract in
writingwriting
 This can be useful later if there isThis can be useful later if there is
disagreement about the contractdisagreement about the contract
 If the contract is important orIf the contract is important or
involves a lot of money it might beinvolves a lot of money it might be
wise to put it in writingwise to put it in writing

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DeedsDeeds
 DeedsDeeds are kind of contract whichare kind of contract which
must alwaysmust always be in writingbe in writing
 Conveyances of landConveyances of land: this is the: this is the
legal process of transferring thelegal process of transferring the
ownership of land from one partyownership of land from one party
to anotherto another
 This is different from theThis is different from the
agreement to sell the landagreement to sell the land
 The conveyance follows theThe conveyance follows the
agreement to sellagreement to sell

13. 1313
Contracts which must be inContracts which must be in
WritingWriting
 Some contracts must be in writingSome contracts must be in writing
but they don’t have to be by deedbut they don’t have to be by deed
 Most of these requirements comeMost of these requirements come
from Statutefrom Statute
 Some examplesSome examples
• bills of exchangebills of exchange
• contracts for the sale of landcontracts for the sale of land

14. 1414
Legal EffectLegal Effect
 As we mentioned earlier, contracts areAs we mentioned earlier, contracts are
agreements, but not all agreements areagreements, but not all agreements are
legally enforceable contractslegally enforceable contracts
 In fact, the legal effect of agreementsIn fact, the legal effect of agreements
fall into 4 categoriesfall into 4 categories
 Valid contractsValid contracts
 Void contractsVoid contracts
 Voidable contractsVoidable contracts
 Unenforceable contractsUnenforceable contracts

15. 1515
Valid ContractsValid Contracts
 These are agreements which areThese are agreements which are
completely binding andcompletely binding and
enforceableenforceable
 Parties to valid contracts gainParties to valid contracts gain
rights and responsibilitiesrights and responsibilities
 The courts will make sure that theThe courts will make sure that the
parties follow these rights andparties follow these rights and
responsibilities if there is anyresponsibilities if there is any
argumentargument

16. 1616
Essentials 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 some
casescases
 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 terms
of the contractof the contract
 Contract must not be against public policyContract must not be against public policy

17. 1717
Void 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 are
a number of things which can make aa number of things which can make a
contract voidcontract void
• eg mistake, illegalityeg mistake, illegality
 The important thing to remember isThe important thing to remember is
that you cannot enforce a void contractthat you cannot enforce a void contract

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Void Contracts - ExampleVoid Contracts - Example
 Daniel gives his students soDaniel gives his students so
much homework that theymuch homework that they
decide to kill himdecide to kill him
 
 They pay a Russian hitmanThey pay a Russian hitman
5000 RMB to kill Daniel5000 RMB to kill Daniel

19. 1919
Void Contracts – ExampleVoid Contracts – Example
(cont.)(cont.)
 However, the Russian simplyHowever, the Russian simply
spends all the money in bars inspends all the money in bars in
Sanlitun 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 their
money back because it is illegal tomoney back because it is illegal to
hire a hitman to kill someonehire a hitman to kill someone

20. 2020
Voidable ContractsVoidable Contracts
 This kind of contract is valid unlessThis kind of contract is valid unless
one 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 party
is tricked into entering a contractis tricked into entering a contract
by the other partyby the other party

21. 2121
Voidable Contracts - ExampleVoidable Contracts - Example
 Daniel pays for a holiday in TibetDaniel pays for a holiday in Tibet
because the travel service shows himbecause the travel service shows him
pictures of a lovely 5 star hotel inpictures of a lovely 5 star hotel in
LlahsaLlahsa
 However, when he arrives, Daniel findsHowever, when he arrives, Daniel finds
that 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, but
not all the facilities are available andnot all the facilities are available and
the hotel certainly doesn’t look like thethe hotel certainly doesn’t look like the
picturespictures

22. 2222
Voidable Contracts – ExampleVoidable Contracts – Example
(cont.)(cont.)
 Assuming that the travel company knewAssuming that the travel company knew
about the hotel, then they have made aabout the hotel, then they have made a
misrepresentation to Daniel which mademisrepresentation to Daniel which made
him enter into the contract for thehim enter into the contract for the
holidayholiday
 Daniel could now choose to set asideDaniel could now choose to set aside
the contractthe contract
 However, he could decide that thingsHowever, he could decide that things
are not to bad and that he can still haveare not to bad and that he can still have
a good holidaya good holiday

23. 2323
Voidable Contracts – ExampleVoidable Contracts – Example
(cont.)(cont.)
 So the contract is notSo the contract is not
automatically void (like with theautomatically void (like with the
hitman), it is voidable at Daniel’shitman), it is voidable at Daniel’s
choicechoice

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Unenforceable ContractsUnenforceable Contracts
 These are agreements which areThese are agreements which are
legal but which cannot be enforcedlegal but which cannot be enforced
in court for some reasonin court for some reason
 For example, a time limit forFor example, a time limit for
enforcing the contract may haveenforcing the contract may have
expiredexpired

25. 2525
Why have a Law of Contract?Why have a Law of Contract?
 As we saw from the examples atAs we saw from the examples at
the beginning of the class,the beginning of the class,
contracts arise in simple, everydaycontracts arise in simple, everyday
situationssituations
 Modern society operates by peopleModern society operates by people
and companies exchanging goodsand companies exchanging goods
and servicesand services
 The Law of Contract helps to giveThe Law of Contract helps to give
a structure to thisa structure to this

26. 2626
Why 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 Private
Law so it is concerned with relationshipsLaw so it is concerned with relationships
between partiesbetween parties
 It helps us to decide what is a validIt helps us to decide what is a valid
contractcontract
 The Law of Contract is also part of CivilThe Law of Contract is also part of Civil
Law so it is also concerned withLaw so it is also concerned with
remediesremedies
 It helps us the other party to a contractIt helps us the other party to a contract
does not keep to the agreementdoes not keep to the agreement

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SummarySummary
 a contract isa contract is a legally bindinga legally binding
agreementagreement
 simple contractssimple contracts do not have todo not have to
be in writingbe in writing
 the legal effect of contracts fallthe legal effect of contracts fall
into 4 categories:into 4 categories:
• Valid contractsValid contracts
• Void contractsVoid contracts
• Voidable contractsVoidable contracts
• Unenforceable contractsUnenforceable contracts

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Summary (cont.)Summary (cont.)
 Business is an important part ofBusiness is an important part of
modern societymodern society
 The Law of Contract tells us whatThe Law of Contract tells us what
is necessary to make a validis necessary to make a valid
contractcontract
 It also gives us remedies whereIt also gives us remedies where
another person does not follow theanother person does not follow the
terms of the contractterms of the contract

29. 2929
ReadingReading
 Chapter 9Chapter 9
• Page 255 last paragraph “The formation of aPage 255 last paragraph “The formation of a
contract”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 to
treat – price indications: price lists andtreat – price indications: price lists and
catalogues”catalogues”