Contract 1 - What is a Contract

8/2/2019 Contract 1 - What is a Contract

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Legal Environment

Contract 1

What is a contract?


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Learning Objectives

Quick Review

Definition of a Contract

Simple Contracts and Written Contracts

Legal Effect of Contracts

Why we have a Law of Contract


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Quick Review

In our first class, we saw that you can

divide law into different categories

Some of those categories were private law v. public law

civil law v. criminal law


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Quick Review (cont.)

Private Law deals with the relationships

between ordinary people in everyday

transactionsThat includes you and me, as well as

businesses and companies

Private Law includes the law of contractand the law of tort


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Quick Review (cont.)

Civil law deals with the relationships

between individual citizens

Its purpose is to settle arguments betweenindividuals

It helps people to find remedies or solutions

it doesnt really punish people

Civil Law includes all Private Law so it

includes the Law of Contract


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Common Law System (based on English System)

CommonLaw

StatuteLaw

Civil Law

PrivateLaw

Public Law

CriminalLaw


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Definition of a contract

A legally binding agreement

that means there must be some kind of

agreement between two parties

However, not all agreements are contracts

because not all agreements are legally

enforceablelegally enforceable means that a court will

say that an agreement is a contract


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Definition of a contract (cont.)

To decide if an agreement is legally

enforceable as a contract, a court will apply

the rules and principles of the law ofcontract

Therefore, knowing a little about these rules

can help businesspeople to create validcontracts


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Simple Contracts

There is no general rule in English law thata contract must be in writing

In fact, people do not realise that they aremaking a contract in many situations

Some contract can be made verbally or byactions

These are known as parol or simplecontracts


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Simple Contracts (cont.)

Although there is no requirement for asimple contract to be in writing, sometimes

the parties might record the contract inwriting

This can be useful later if there isdisagreement about the contract

If the contract is important or involves a lotof money it might be wise to put it inwriting


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Deeds

Deeds are kind of contract which mustalways be in writing

Conveyances of land: this is the legalprocess of transferring the ownership ofland from one party to another

This is different from the agreement to sellthe land

The conveyance follows the agreement tosell


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Contracts which must be in

Writing

Some contracts must be in writing but they

dont have to be by deed

Most of these requirements come fromStatute

Some examples

bills of exchange

contracts for the sale of land


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Legal Effect

As we mentioned earlier, contracts are

agreements, but not all agreements are legally

enforceable contracts

In fact, the legal effect of agreements fall into 4

categories

Valid contracts

Void contracts

Voidable contracts

Unenforceable contracts


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Void Contracts

In fact, these are not contracts at all

They have no legal effect

As we will see in later classes, there are a

number of things which can make a contract

void

eg mistake, illegality

The important thing to remember is that you

cannot enforce a void contract


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Void Contracts - Example

Keith gives his students so much

homework that they decide to kill him

The students pay a Russian hitman

5000 RMB to kill Keith


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Void ContractsExample (cont.)

However, the Russian simply spends all the

money in bars in Sanlitun and then goes

homeHe does not kill Keith

The students cannot claim their money backbecause it is illegal to hire a hitman to kill

someone. Their contract with him is void.


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Voidable Contracts

This kind of contract is valid unless one of

the parties has it set aside (ie declared void)

This could happen where one party istricked into entering a contract by the other

party

This is an example offraud


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Voidable Contracts - Example

Keith pays for a holiday in Yunnanprovince because the travel service shows

him pictures of a lovely 5 star hotel in LiJiang

However, when he arrives, Keith finds thatthe hotel is still being constructed.

There is a room where he can stay, but notall the facilities are available and the hotelcertainly doesnt look like the pictures


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Voidable ContractsExample

(cont.)

So the contract is not automatically void

(like with the hitman), it is voidable at

Keiths choice


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Unenforceable Contracts

These are agreements which are legal but

which cannot be enforced in court for some

reasonFor example, a time limit for enforcing the

contract may have expired


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Why have a Law of Contract?

As we saw from the examples at the

beginning of the class, contracts arise in

simple, everyday situationsModern society operates by people and

companies exchanging goods and services

The Law of Contract helps to give astructure to this


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Why have a Law of Contract?

The Law of Contract is part of Private Law

so it is concerned with relationships

between partiesIt helps us to decide what is a valid contract

The Law of Contract is also part of Civil

Law so it is also concerned with remediesIt helps us if the other party to a contract

does not keep to the agreement


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Summary

a contract is a legally binding agreement

simple contracts do not have to be in

writingthe legal effect of contracts falls into 4categories:

Valid contracts

Void contracts

Voidable contracts

Unenforceable contracts


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Contract Exercises

I agree to buy a shipment of coffee to keep

my employees awake at work from a food

distributor. The clerk accidentally tells methe price is Y10,000 but is was supposed to

be Y12,000. Is this contract valid, void,

voidable, or unenforceable?

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Contract Exercises (cont.)

I have always wanted a Rolex watch but can

only afford a Chairman Mao watch they sell

at Tiananmen Square. I offer Ting Ting 6Mao to steal one for me. Valid, void,

voidable, or unenforceable?

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Contract Exercises (cont.)

I pay 1 Mao for a years supply of coffee.

Valid, void, voidable, or unenforceable?

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Summary (cont.)

Business is an important part of modern

society

The Law of Contract tells us what isnecessary to make a valid contract

It also gives us remedies where another

person does not follow the terms of thecontract


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Reading

(MacIntyre book) Pages: 29-37, 41 (refusal,

lapse of time), 43

(Kelly book) Pages: 111-123

Pharmaceutical Society v Boots

Partridge v Crittenden

Felthouse v Bindley

Documents

Contract 1 - What is a Contract