Frequently Asked Qustions - Contract Law
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Is an oral contract legally enforceable?
Generally speaking an oral contract is indeed legally enforceable (although for most complicated contracts such as those in complex commercial transactions, the contractual parties usually create agreements in writing in order to avoid any dispute regarding the terms). However, certain types of contracts, for example those creating rights and obligations in and over real property, must as a matter of law be in writing to be legally enforceable.
If a contractual party conceals certain important information from the other party (or even lied) in the course of negotiation about, for example, the components of the relevant product, would it vitiate the contract?
This is called "misrepresentation". If the innocent party had believed and relied upon the misrepresentation in entering into the contract in question, the contract may be rendered "voidable" (i.e. the innocent party may either elect to treat the contract as valid or elect to treat the contract as void).
Is an agreement for service with relatives or friends a legally enforceable contract?
Much depends on whether the two parties in question had the intention to enter into a legal relationship when they made their promises. If the promises were made casually in a social occasion, the law would presume that the parties had no such intention and, unless this presumption can be rebutted and the intention to enter into a legal relationship proved, the agreement would not be legally enforceable.
Is an agreement to perform illegal acts a legally enforceable contract?
No. This is not a legally enforceable contract. Any agreement the subject matter of which is illegal or is otherwise manifestly contrary to public policy will not be enforced by the courts.
How are the contents of a contract classified?
Terms and Representations:
A "Term" is part of the contract but a "representation" is not. During the course of negotiation the parties to a contract might have made a large number of representations to each other, some of which might have been incorporated into the contract as a "term" but others might not.
Conditions, Warranties and Innominate Terms:
Contractual terms are generally divided into "conditions", "warranties" and "innominate terms"
"Conditions" are the more important terms (i.e. those which "go to the heart of the contract"). Where there has been a breach of one or more of the conditions, the innocent party is entitled to set aside the contract in question in addition to receiving compensation for the loss and damages he has suffered.
"Warranties" are the less important terms (i.e. those which are only "peripheral to the subject matter of the contract"). Where there has been a breach of one or more of the warranties, the innocent party is only entitled to compensation, but not to set side the contract.
"Innominate Terms" are those intermediate terms that can neither be classified as "conditions" nor as "warranties". Where there has been a breach of innominate terms the innocent party is entitled to compensation but may or may not be entitled to set aside the contract, depending on the gravity of the breach.
Express Terms and Implied Terms:
"Express terms" are terms that have been unambiguously expressed by the two parties in writing (or orally) in the contract.
"Implied terms" are terms that have never been expressly mentioned by the parties. Terms may be implied by the parties themselves, by law, or by customs.
"Exemption clauses" are contractual terms that purport to exclude or limit the liability of a party against the other. The effects of any such clauses are regulated by the Control of Exemption Clauses Ordinance (Chapter 71, Laws of Hong Kong).
What remedies are available in a breach of contract action?
The remedies available in a breach of contract action include:
Damages, i.e. monetary compensation;
Specific Performance, i.e. an order of the court compelling a party to honour his promises; and
Injunction, i.e. an order of the court prohibiting a party to do certain acts.