Week 1 Agreement I: Offer

Offers and replies to inquiries

Harvey v Facey [1893]
Factual History: Facey was going to sell his store to Kingston when Harvey and another telegraphed him a
message stating Will you sell us Bumper Hall Pen? Telegraph lowest cash priceanswer paid. (Consists of
2 questions.)
Facey answered by telegram, Lowest price for Bumper Hall Pen 900. (Answering Harveys 2nd question.)
Harvey answered by telegram, We agree to buy bumper Hall Pen for the sum of nine hundred pounds asked
by you.
How would a reasonable person in Harveys position would have been justified in treating the telegram as a
firmed offer?
Reason:
Answers to enquiries CAN BE contractual offers (depends on wordings and circumstances and how
they can be understood by a reasonable person)
2 questions were asked but only one was answered.
Advertisement
Partridge v Crittenden [1968]

Everyone reading the newspaper is not exposing himself to a contract to sell whatever number people
are writing in
Asking people reading the magazine to make an offer and he will accept such offers as he chooses
People are offering to buy, but defendant is not offering to sale

Carlill v Carbolic Smoke Ball Co [1893]

100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing
epidemic influenza colds, or any disease caused by taking cold, after having used the ball three times daily
for two weeks, according to the printed directions supplied with each ball.
1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter.
Carlill argued it was a contractual offer. Offer was to pay 100 reward if you smoke ball and got sick. Carlill
performed the act and got sick. In a unilateral offer, you don't have to communicate the acceptance of offer,
just perform the act.
3 arguments made by Carbolic Smoke Ball Co (You have the obligation to put forward to the court every
plausible argument that might favor your client)

Words in ad were a mere puff (no reasonable person would think they were seriously intended as a
contractual offer)
o NOT a mere puff [1000 is deposited with the Alliance Bank, Regent Street, showing our
sincerity in the matter.]
Cannot make a contract with the whole world
o Court does not accept argument. Not a contract with the whole world, but an OFFER to the
whole world
Words were too vague, doesn't say how long the protection will last
o Reasonable person will interpret that the snowball is promised to protect people either while
using it or for a reasonable period after finishing it

Conclusion:

Read ad in plain meaning as public will understand

Was intended to issue and read by public
How would reasonable person reading this ad understand?

Leonard v Pepsico Inc 88 F Supp 2d 116 (1999)

Any reasonable person looking at the ad will not think it is seriously intended as a contractual offer.
Everything about it is a joke.

Shop displays
Price tag is usually or probably NOT an offer to sale
Request to customer to make shopkeeper an offer to buy the item at price of tag
Shopkeeper, on behalf of employer, has the right to accept/reject the offer
Price tag is usually an invitation to treat, transformed into an offer when customer takes the tagged item to
checkout, and that offer is accepted by the shopkeeper takes the offered payment (act of acceptance of offer)
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953]

Argument made by plaintiff: Price tag was an offer, and offer is accepted when, in the customary way,
one takes item off the shelf and drop into the shopping basket (signifies acceptance of offer on the
price tag)

HKSAR v Wan Hon Sik [2001]

Wan was not offering for sale

Another offense under the act: exposing for sale
But Wan was only charged for offering for sale

Tenders
Spencer v Harding (1869-1870)

Unless there is something unusual about the wording of the invitation to tender, invitation to tender
is an invitation to treat (request to persons addressed to make an offer, and when offer is made, the
invitor is free to accept or reject => can reject all offers)

Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council [1990]

Is there a contractual obligation to consider a tender?

o Yes, with certain conditions to be satisfied. Where an invitation to tender is made to a limited
number of parties, all of them known to the invitor and where those parties are invited to
follow a procedure, where they comply with that, then invitor is contractually obliged to
consider every tender. (If you don't consider, it is a breach to the contractual obligation)

Invitation to tender is:

Invitation to treat
Unilateral offer => obliged to consider all applications

City University of Hong Kong v Blue Cross (Asia-Pacific) Insurance Ltd [2001]
Lobley Co Ltd v Tsang Yuk Kiu [1997] HKLR 863, [1997]

Property will be sold to whichever bidder bids the highest amount and includes a certified check for
10% of the nominated purchase price made out to the company who owns the property <= this is a
firmed offer, not an invitation to treat (if you do X, we will do Y)

Revocation of offer
Payne v Cave (1789)

Offer was withdrawn before it was accepted => NO contract

Dickinson v Dodds (1876)

Promise to keep offer open. No consideration for owners promise to keep offer open
Option agreement (promise of a payment)

Errington v Errington and Woods [1952]

Unilateral promise: He told his daughter-in-law that if they paid off the remaining mortgage 500in
weekly installments, he would transfer the title to them when the house was completely paid for
Cannot be revoked once the couple entered upon performance of the act, unless they left it incomplete
and unperformed which they have not done

Lapse of offer
Manchester Diocesan Council for Education v Commercial & General Investments Ltd [1969]

Week 2 Agreement II: Acceptance

Rejected offer cannot later be accepted

Once you reject an offer, you killed it (no longer available to be accepted)
When the offeree came back to accept offer the next day => becomes a brand new offer
Even though it is framed as an acceptance, in reality it is an offer
Offeror then gets to decide whether to accept or reject the offer
Roles are reversed (original offeror becomes offeree, vice versa)

Acceptance and counter-offer

Counter-offer: Legally same effect of rejection

Acceptance is got to be Yes! not Yes, but Yes, and
Acceptance adding new stuff or removing stuff from the offer => not accepting the offer

Hyde v Wrench (1840)

Hyde accepted on the basis of paying only 950 killed the original offer (unconditionally accepted),
proposed a new contract (which offer/counter-offer was never accepted)

Capacious Investments Ltd v Secretary for Justice [2001]

Accepted offer but threw something new (reserved rights to claim interest)
Becomes counter-offer which destroys original offer
Capacious became offeror and HK Gov. becomes offeree
Offeree never accepted the counter-offer

Not every reply to an offer will be either an acceptance or counter-offer

Stevenson, Jacques & Co v McLean (1879-1880)

It was not a counter-offer, only seeking clarification of the offer

How a reasonable person, in position of the defendant, would be justified in interpreting the message?

Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979]

The letter written on Jun 5, in regards to the words used and the context that was used, the reference
to the terms of the letter of May 23, was reasonably understood by the person in position of Ex-Cell-O
as referring only to the identity and cost of the machine
Ex-Cell-Os order sought to change the term of the quotation, in reality was a counter-offer, which
completely destroyed the offer including the price variation and the entire contract
The principle of last shot: Whoever gets into the last shot (active counter-offer) wins. The
difficulty is determining which is a shot whether the document truly is probably understood by a
reasonable person in position of the addressee, a counter-offer or something.

Communication of acceptance: general rule

Postal acceptance rule and electronic acceptance
Post acceptance rule: Where the parties reasonably contemplated that the postal service might be used to
communicate acceptance, any such acceptance will be effective at the time and in the place it is delivered to
the postal service in the customary way
Eg. The acceptance is effective at the moment the letter drops into the post box at the location of the post

box.
Holwell Securities Ltd v Hughes [1974]

Shall be exercisable by notice in writing to the intending vendor => Court interpreted it has to be
actually arrived
Reasonable person would conclude that the parties did not intend to use the postal service or postal
service acceptance rule as means of communication of acceptance
Language of offer and nature of contract might make the postal acceptance rule not effective

Waiver of right to communication

Carlill v Carbolic Smoke Ball Co [1893]

Carbolics argument: She received the offer but she never communicated the acceptance
If offeror waives the right to communicate the acceptance, then offeree will not need to communicate
the acceptance

Prescribed means of acceptance

A makes an offer to B, and says that in order to accept the offer, B has to telephone As wife and tell her

The moment B telephones As wife, there is a contract, even though B hasn't actually communicated
the acceptance to A
But if A included that no other means of accepting offer will work. And B informed about acceptance
face-to-face, there probably would not be a contract.
Can lay down some alternative means, and if you comply to that alternative means, then it will be
effective to close the deal

Manchester Diocesan Council for Education v Commercial & General Investments Ltd [1969]
States that the tender should be informed about the acceptance of tender by letter sent to him by post
addressed to the address given in the tender, and acceptance of defendants tender was sent to Ds
surveyor
There was no acceptance by plaintiff because plaintiff did not follow the prescribed means of
acceptance
Plaintiff did not say no other means would be accepted, and the method chosen was no less
advantageous than the method suggested
Felthouse v Bindley (1862)

Method of acceptance prescribed: keeping silent => nephew did as told => Cannot specify silence as
method of acceptance

Acceptance by conduct

If accepted by conduct, the conduct must be such, that it is reasonable unambiguously referable only
to an intention by the offeree to accept the offer
If there is more than one reasonable alternative explanation for what the offeree did, that is
reasonably not referable to the offer made, then it will not be effective

Brogden v Metropolitan Railway Co (1877)

There was an acceptance by conduct by Metropolitan

When they started dealing with Brogden, on the basis of his offer, and continued to do that
They were conducting themselves in such a way, that a reasonable person in Brogdens position,
would be justified in regarding to the conduct as being the same /equivalent as a verbal acceptance.
But the conduct, in order to be effective as an acceptance, must have no alternative reasonable
explanation than the intention to accept the offer.
How would a reasonable, objective person, in position of the offeror, be justified in interpreting the
conduct

Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd [2004]

Where the offeror knows a fact that the offeree did not intend by his conduct to enter into a contract,
then there will be no contract (even if a reasonable person, in position of offeror, would otherwise be
justified in interpreting the offerees conduct that way)
Only because Shanghai really knew what was going on in Casils mind, that Casil was not bound by its
conduct, which might otherwise have suggested that the conduct was intended to accept the offer
made by offeror

Acceptance in ignorance of offer

Williams v Carwardine (1833)

The only that matters was the knowledge of the offer, not the motive

R v Clarke (1927)

He knew of the offer at the very least because the police told him of the offer. He has the knowledge of
the offer and performed the requested act.
Clarke was motivated to save himself, but motive is irrelevant.
Clarke claimed that the thought of reward was not present in his mind (no knowledge of offer) at the
time he performed the requested act => he was lying, in order to create a false impression of himself

to the trial court => no agreement, no contract, no obligation to pay 100

Week 3 Agreement III: Certainty of Terms
Certainty as to consideration
May and Butcher Ltd v R [1934]

Party themselves are responsible to settle all the essential terms and if they don't do that, they may
have failed to agree (missing the first pillar)
Different types of contract have different essential terms, but common to them all, is consideration.
Always an essential term, because of third pillar.

Section 10, Sale of Goods Ordinance (Cap 26)

Where price is not determined in ordinance with the forgoing provisions, the buyer must pay a
reasonable price.
SGO only applies to contract on sale of goods, and the only thing missing which causes the contract to
be void from certainty, then the buyer must pay a reasonable price.

Commercial contracts
(a) Contextual construction
Hillas & Co Ltd v Arcos Ltd [1932]

Clause 9: for the purchase of 100,000 standards for delivery during 1931.
Standards is not defined in the contract. We know the price, but we don't know the identity of the
things to be sold.
There is more than one way of ascertaining what parties meant which may conclude a contract in a
particular way.
What is the parties intent and how do you ascertain what that intention is.
They had a contract which they did not argue in disagreement in 1930 and that went perfectly well.
What does standards mean in 1930? => when they use the same term now, it probably means the
same stuff.

(b) Agreed mechanism

Hyundai Engineering & Construction Co Ltd v Vigour Ltd [2005]

Common means of establishing a mechanism to avoid uncertainty is arbitration. If there is a

disagreement about the interpretation for the operation of this contract, and parties cannot resolve
disagreement by negotiation, then parties hereby agree to submit the dispute for arbitration.
The subject matter of this dispute is not the main contract, but the second contract they got into.
2nd agreement is not a legally enforceable contract.
Set up with reasonable certainty, a mechanism that removes the resolution of dispute from future
agreement of parties

Sudbrook Trading Estate Ltd v Eggleton [1983]

The role of valuer is to determine a market price.

Parties intended that the absent and agreement between them, the price would be the market price.
The court could take the market price of anything
If it is possible to ascertain the mechanism some objective criteria for supplying the missing essential
term, then the court will try save the contract.

(d) Partial performance and parties conduct

F & G Sykes (Wessex) Ltd v Fine Fare Ltd [1967]

The reluctance of courts to strike down commercial agreements as faithfully uncertain esp. in
circumstances where commercial agreement has been partly performed in the apparent belief that it
was binding.
The more parties have done under the agreement; it is much less likely that courts will strike down
the agreement.
If parties have done nothing under the agreement and terms remain vague, it is more likely to strike it
down. => No evidence of what parties intended when they enter the agreement.

(g) Ambiguous conduct

World Food Fair Ltd v Hong Kong Island Development Ltd (2006)

There shall be no binding agreement until a formal lease is prepared.

Even if we say the conduct of World Food Fair was unambiguously referable to a belief that there was
a contract, there are still other essential terms that remain unsettled. Parties have not determined
when, and the term of the lease, not even agreed the rent.
The conduct of the $200,000 deposit, the key and the vacant possession were not unambiguous. =>
People in HK and in this industry know that these steps were unambiguous; steps commonly taken by
developer and tenant while negotiation is still going on and in expectation/hope that a final
agreement would be reached.

Meaningless terms

Meaningless terms will not cause the entire agreement to fail if

o it is not essential terms
o it can be severed (can be cut out)
If it is essential terms, see if you could fill the gaps => if not, then the contract will totally be uncertain

Non-essential terms
iRiver Hong Kong Ltd v Thakral Corp (HK) Ltd [2008]

An interim agreement that anticipates the final agreement that is never reached can be legally binding
provided all essential terms are settled in the provisional agreement and provided there is an
intention to be legally bound by the provision. If both conditions are satisfied, the provision
agreement will be fully legally binding, even if final agreement is never concluded.

Week 4 Contractual Intention

Presumption: state of affairs which is deemed to be in place unless and until it is disproved by evidence

Presumption in domestic & social agreements: that parties did not intend to create legal relations
when they made the agreement
Commercial agreements: court will presume that parties intended to be legally bound by the
arrangements

Domestic agreements
Balfour v Balfour [1919]

At the time the agreement was made, Mr. and Mrs. Balfour were living together in amity as husband
and wife.
What the situation was at the time the agreement was made and whether they have an animus
contract pending at that time. => No

Merritt v Merritt [1970]

At the time the agreements was made, Mr. and Mrs. Merritt was in a process of separating (living
together but not as husband and wife)
No longer living together as husband and wife, therefore no longer could treat this as domestic
agreement

Fong Huen v Anthony Wong [1975]

Parties were family members at the time the agreement was made. The agreement was not essentially
domestic, but commercial (about commercial arrangements).

Parker v Clarke [1960]

Both conditions were satisfied:

o When agreement is executed rather than executory => agreement has to be at least partly
performed by one side or both side
o Seriousness of consequences of breach of arrangement for one of the parties is likely to be
great, then in no circumstances the courts will be satisfied that the usual presumption against
actual intention will be rebutted ()

Commercial agreements
New World Development Co Ltd v Sun Hung Kai Securities Ltd (2006)

No contractual intentions, reasons being:

o Two are uncertain
o Whole history of matter: fact that it is a multi-million dollar deal is done on the basis of a
telephone => void for lack of formality
Not putting anything in writing itself was not fatal, but failure to put anything in writing is evidence of
lack of animus contract
Vagueness with which the arrangement was expressed
o Lack of specificity in terms of agreement also indicates a lack of serious contractual intention
Rose and Frank Co v J R Crompton and Brothers Ltd [1923]

Parties to an agreement cannot agree that courts do not have jurisdiction over a legal dispute (its for
the courts to decide, parties cannot decide)
If we say in the agreement we are not legally bound, then we will not be legally bound.

Union Insurance Society of Canton Ltd v The Hong Kong Land Co Ltd [1977]

No final agreement of contract

No formal written contract => no animus contract

Attorney General of Hong Kong v Humphreys Estate (Queens Garden) Ltd [1987]

Even where there is offer, acceptance, certainty, consideration and even where you have got complete
performance of the arrangement
If in the negotiation, one party said to the other, subject to a formal lease/document/contract, until
that happens, there is NO contract even though everything else is present except the animus contract

Ever-Long Securities Co Ltd v Wong Sio Po [2004]

If one party has actually executed a formal contract document, there is virtually zero chance you will
be able to make an argument that there is no intention for a legal relation

Baird Textile Holdings Ltd v Marks & Spencer plc [2002]

Where the parties appear to have settled a reasonable certainty all the essential term, even though the
agreement might not be complete, then the court will more easily presume, when those essential
terms are all settled, an intention to create legal relation.
And when there is an intention to be legally bound, then you can be bound by the interim agreement
(even though the final agreement is never reached)

Letters of Comfort
Contract to Guarantee

Promise of future conduct: if in the future, my son/daughter defaults, I promise to make good the
defaults.

Kleinwort Benson Ltd v Malaysia Mining Corp Bhd [1989]

Not an effective contract of guarantee =>Nothing in that letter constitutes a promise as to future
conduct; only a statement of current or past facts.
Merely a statement of comfort, not an enforceable contractual guarantee

Bouygues SA v Shanghai Links Executive Community Ltd [1998]

It is a contract of guarantee; guaranteeing the contract price only, not guaranteeing an arbitration
award. Court refuses to make the declaration as to the proper interpretation.
Could not use this guarantee to enforce payment of an arbitration award out of the segregated
account.
Whether the statement is a contractual promise is: looking at the totality of the words in the context
in which they are uttered, to see whether a reasonable person in the position of the party to whom
those words are addressed, would understand it in ALL the circumstances

Week 5 Consideration
Definition of consideration
Consideration is the price of promise you are seeking to enforce
In common law system contract law: we do not enforce mere promises; we enforce bargains/ deals.
Three elements essential to the common law doctrine consideration:
(i)
(ii)

(iii)

Consideration must be sufficient, but need not be adequate;

Consideration must not be in the past;
Consideration must be worth more than nothing
Need not to be adequate: does not have to be fair/market/reasonable price
Consideration must move from the promisee at the promisors request.
Must state in offer what the price of promise is
Must ask to pay

Adequate value not required

Bainbridge v Firmstone (1838)

Can be EITHER a benefit to promisor or detriment to promisee

Identifiable detriment to promise: being without the boilers for any period of time (the moment
Firmstone started disassembling the boiler)

Chappell & Co Ltd v The Nestl Co Ltd [1960]

Nestle placed advertisements asking if consumers send them money order of 1shilling and 6p and 3
nestle chocolate bar wrappers => in return for a hit recording (copyright owned by Chappell)
Breach of copyright action against Nestle => Nestle said they are protected under s8 Copyright Act
6.25% royalty needed to be paid on the ordinary retail selling price to the owners of copyrights
Chappells argument: Selling price not expressed entirely in money => Nestle not protected
Nestle: wrappers are pre-condition of sale
o Eg. Some teen went into liquor shop and owner asked for proof of age. Proof of age was a precondition of sale. NOT part of price, NOT part of sale
Wrappers worth nothing (they are litter) => How can that be consideration? => Because thats what
Nestle asked for => This IS consideration

Past Consideration
Roscorla v Thomas (1842)

The time the promise is made, the contract of sale was already concluded => it was in the past => no
sufficient consideration
The promise that the horse was in good health was nudum pactum (just a gift) => not supported by
consideration

Ho Sang v The Hong Kong & Kowloon European Style Tailors Union [195355]

Implied promise by tenant not to commit gambling on the premise was made in the past

Olley v Marlborough Court Ltd [1949]

Hotel argued: By seeing that notice, Mrs. Olley was impliedly making a promise

Contract was concluded before she entered the room => deal was done in the past by the time the new
term was introduced, and the promise to Mrs. Olley was nudum pactum

Lu Shang Chang v Kingroup Ltd [1995]

Clause: if you don't remove within 7 days, the items are forfeited and become Kingroups property
again.
What is the consideration for the promise by Mr. Lu to accept forfeiture of the goods if he doesn't
remove them in 7 days? => sale of goods

Pao On v Lau Yiu Long [1979]

Promise being sued upon: promise by Lau to guarantee and indemnify the min. share price of shares
purchased by Pao from a company entirely owned by Lau
The consideration for the promise was entering into contract to buy Fu Chip (was 2-3 months in the
past) => no legal consideration for the promise to guarantee
When they promise in the principle contract (purchase of shares between them and Fu Chip) not to
sell shares within 12 months => always understood by reasonable person, that concession by the Pao
would have to pay for
Subsequently, Lau agreed to guarantee and indemnify the value of those shares (this is the payment)

Lampleigh v Brathwait (1615)

Not strictly a past consideration

When the service/conduct was requested, at that time, a reasonable person in position of these
parties, would have always understood there would be some kind of reward or payment
When subsequently the payment was nominated, fixing the price that was always anticipated what
would be paid
o Eg. You take the taxi to airport and driver forgot to turn on the meter. And you offered to pay
the normal price of ~$200
o Once you made the promise of paying, you are contractually bound to pay

L & D Associates v Chan Man Chon Madalena [1987]

Consideration was legal had it been agreed at the time the service was performed
Illegal for an agent (real estate agent) to accept a secret permission from one party without disclosing
existence to another

Performance of duty owed to third party

Pao On v Lau Yiu Long [1979]

Benefit to promisor
An agreement to do an act to which the promisor is under existing obligation to third party to do, may
well quite amount to consideration
The promisee obtains the benefit of the direct obligation
Gets right in the other transaction which he didn't have before (sufficient to amount for a
consideration)

Practical benefit
Stilk v Myrick (1809)

Holding and Rule: No. A contract for services may not be modified without consideration.

The court held that under these facts, the seamen who remained with the ship had the obligation to do
all that they could under all emergencies during the voyage. They had sold all of their services until
the voyage was completed. The agreement would have been proper if the seamen had had the liberty
to depart sooner and chose to remain on the voyage longer in exchange for greater compensation.
The court held that a desertion is considered to be an emergency the same as a death among the crew.
The court found in favor of D on the grounds that there were not changed circumstances sufficient to
compel a change in the contract.
Disposition: For D; Ps recovery limited to 5 pounds per month.

Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991]

An exeption to Stilk v Myrick

Reasonable person in 1991 was not the reasonable person in 1809

UBC (Construction) Ltd v Sung Foo Kee Ltd [1993]

Promise to payment to was enforceable

Promisor obtained practical benefit (avoided penalty clause)

Part payment of liquidated debt

Practical benefit doctrine does not apply

If A owes B $10,000 as debt, and A offers to discharge that debt completely by paying $5,000 (paying
a lesser sum than original amount) and B accepts the offer and takes the money => A cannot sue B

Week 6 Promissory Estoppel

Practical benefit: Change of contract without any fresh consideration being given to the person promising to
pay more under the contract (promise to pay more)
Promissory estoppel arises in a situation where there is an existing contract to which the promissory
estoppel promise can be attached

One party of the contract agrees/promises to accept less than he is entitled to under the contract
Some other conditions are satisfied => equity will intervene, in certain circumstances:
o To prevent the promisor from in effect pretending that he never made the promise
o To prevent from going back on his promise
o Insisting on the enforcement of his strict contractual right (no u-turns even though there is
no consideration for the promise made)

The emergence of promissory estoppel

Hughes v Metropolitan Railway Co (1877)

No expressed promise, merely a kind of implied promise based on conduct

Implied promise that while the negotiations are going on, the 6-month stopwatch is suspended
In order establish what equity requires you to do, look at all the facts and circumstances of the case

Central London Property Trust Ltd v High Trees House Ltd [1947]

Central wrote to High Trees agreeing to reduce rent by 50%, backdated to beginning of the lease
o Does not say when it ceases to bind, what conditions have to be satisfied
Lease was never amended => Never a discussion of amending the lease, even if it had been, there is
no consideration
Landlord wins
The promise will last for as long as it would be inequitable to allow the promisor to resort to his strict
contractual rights
o Court heavily implies that if the full rent had been sued for, prior to end of 1944, when there
were still some trouble getting tenants for High Trees, then the action would probably fail
The promise must be reasonably unambiguous

Clear and unequivocal promise

Woodhouse AC Israel Cocoa SA v Nigerian Produce Marketing Co Ltd [1972]

Ambiguity in letter as to what the promise is by the sellers

Would not infer promise to accept/designate under the contract the price in pounds (will continue to
be in Nigerian pounds)
Must be reasonably unambiguous

Philip Tye (t/a Tye Enterprises) v Meadowsfreight (Asia) Ltd [1987]

Clause 20: Meadowsfreight will not be liable for loss or damage to Tyes goods above a certain value.
Clause 22: If you want to bring a claim to Clause 20, you have to bring it within 14 days of the loss.
(limitation period)
Statement by Meadowsfrieght is unambiguous as far as it relates to the limitation clause and Tye has
waited more than 14 days

Alteration of position

Socit Italo-Belge pour le Commerce et lIndustrie SA v Palm Oil and Vegetable Oils (Malaysia) Sdn Bhd
(The Post Chaser) [1982]

Clause in contract: If sellers do not inform buyer of the identity of ship in according to the clause, the
buyers can reject the goods => Clearly in breach of term
Inform seller to send commercial and legal documents directly to sub-buyers
Sub-buyers rejected the goods
Argument of buyers: If seller don't comply with the obligation, buyers have right to reject the goods
Argument of sellers: When buyers told them to send documents directly to sub-buyers, that was
something not obliged to do and they complied (altered their position)
o Unambiguous implied promise: If you do this, we wont reject the goods.

Inequitable conduct by promise

D & C Builders Ltd v Rees [1966]
Suspension and extinction of rights
How long does a promise last for?

As long as a reasonable person, in regards to the words used and circumstances, would understand

Defensive character of promissory estoppel

Promissory estoppel

Cannot give rise to cause of action (does not give you right to sue anybody)
Defense of equity (can only used as a shield, but not a sword)

Combe v Combe [1951]

Week 7 Misrepresentation
What is misrepresentation?

A false statement of fact which induces the other party to enter into a contract

Must meet all three criteria to consider an actionable misrepresentation

A false statement
A false statement of fact
A false statement of fact that induced the contract

WAYS TO MAKE A MISREPRESENTATION

False statement of fact
Opinion

Must be false statement about some fact (past or present)

o Eg. You could write with this pen for a year
Opinion => NOT misrepresentation
Stupid forecast => NOT misrepresentation
o Eg. I believe everyone will be using this pen in a year

Bisset v Wilkinson [1927]

A sold B a farm, saying that the farm can raise 2,000 sheep, but it couldn't
Seller was not an expert in raising a sheep farm
The statement of the farm being able to raise 2,000 sheep was only a mere opinion and not a fact

Esso Petroleum Co Ltd v Mardon [1976]

Esso rented a gas station to B, estimating it could sell X gallons a year, but it couldn't
Esso had expertise in that area, so the statement made was a fact
If you are an expert => there may be misrepresentation

Future intentions

Normally, statement of future intention cant get you into trouble

But if don't actually have the intention when you say it, can be a false statement of fact (false
statement of existing fact)

Edgington v Fitzmaurice (1885)

Company asked public to buy debentures, intention was to use the money to improve and expand
business (but it was really used to pay off debts)
They knew it was false at the time
Expression of future intention can be misrepresentation

Misrepresentation by conduct
Shum Kong v Chui Ting Lin [2001]

A showed B house, also showed B garage and garden (not part of sale)
B thought it was part of sale => rescinded contract => A sued for breach

Although A never said it was part of sale, SHOWING the garage and garden can also be regarded as
misrepresentation

Green Park Properties Ltd v Dorku Ltd [2001]

Real estate agent showed B tenancy plans that showed yard as part of property (but it was a common
area)
The real estate agent was not trying to mislead, only showing in good faith
Even if you didn't have the intention to do it
Objective measurement: what a reasonable person would think if that was a misrepresentation

Misrepresentation by silence
With v OFlanagan [1936]

A sold medical practice to B, which was worth $2,000 (true when contract was signed)
A got sick and value dropped
He knew the value dropped but he didn't disclose it => misrepresentation

Failure to verify
Redgrave v Hurd (1881)

A sold law practice to B, which was worth $300

A showed papers that proved $200, remainder in other stack of papers
Failure to verify is still misrepresentation
Exception:
o He knew it wasn't true
o He did not rely on the representation to induce into a contract.

Atwood v Small [1838]

A told B property worth X amount, but it worth less

B had accountants check and said it was right
He took steps to verify it (had accountants check it)
Did not rely upon representor => no misrepresentation

Multiple inducements to conclude contract

Even if representation accounts for 1% of reason to conclude contract => there is still misrepresentation
Welltech Investment Ltd v Easy Fair Industries Ltd [1996] 4 HKC 711 (HC)

Buyer might have another reason for inducing, but it doesn't matter => still misrepresentation

REMEDIES FOR MISREPRESENTATION

Rescission
Rescission

Fix the situation

Amend the contract to keep it going
Terminates the contract from its beginning

Four situations where you CANT get rescission

1. Affirmation
Long v Lloyd [1958]

A sold truck to B, but it broke down

A accepted Bs offer to fix it, but broke down again
By allowing A to fix the truck, B is affirming the contract (affirm through conduct)

2. Lapse of time
Leaf v International Galleries [1950]

A bought painting and realized it was not original 5 years later

Buyer could not rescind because he had ample time (5 years) to verify the authenticity

3. Third-party rights

Third party gains some interest over subject matter

4. Just impossible
Clarke v Dickson (1858)
Damages
Types of misrepresentation
Tort
1. Fraudulent misrepresentation (tort of deceit)

Responsible for all the damages caused (no cap.)

No test of remoteness
Have to show proof that you are innocent

Derry v Peek (1889)

Assessment for damages is not limited

Set out framework under common law
Establish the following to establish fraudulent misrepresentation (extremely difficult to prove)
o Person made the statement knowingly (Knowing that the statement was false)
o Without believe in its truth
o Reckless, as to the truth (did not bother checking)

2. Negligent misrepresentation (tort of negligent misstatement)

Measure for damages is constrained

Responsible for the ripples that you foresee it happen only (doctrine of remoteness)
Objective test: reasonable person could reasonably foresee the ripples would flow from the
misrepresentation, then you are responsible for it

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964]

Established the rules that we need in order to figure out when there is negligent misrepresentation
Have to show that representor:
o Have some sort of expertise
o You relied on their expertise
o They know you are going to rely on their expertise

Misrepresentation ordinance
3. Negligent misrepresentation (fiction of fraud)

Can claim damages the same way as fraudulent misrepresentation

Section 3(1) Misrepresentation Ordinance

unless he proves that he had reasonable grounds to believe and did believe up to the time the
contract was made that the facts represented were true.
Onus of proof shifted to the accused

If no contract => no access to ordinance => treat as tort

Plaintiff prefers ordinance

Week 8 Mistake
What is mistake?

A situation where an error of understanding by one or both parties operates in such a way as to
deprive the contract of the consensus ad idem
Must be present at the time of formation of contract
Must be one of fact
Cant be an error in forecast or prediction

Legal effect of mistake

Void ab initio (void)

o There NEVER was a contract
Mistake in equity => voidable
For a period of time, there was a contract
But because of the misrepresentation, misrepresentee can claim rescission or damages
Void =/= voidable

Mutual mistake
Parties are at cross-purposes about some fundamental fact
o Eg. A thinking about X and B thinking about Y
Raffles v Wichelhaus (1864)

A agreed to sell cotton to B shipped from Indian on the Peerless

There were two different ships with the same name leaving on different dates
No contract because no consensus ad idem (meeting of minds)
If there is no reasonable and objective way to ascertain offerers true meaning => no contract

Common mistake at common law

Both parties make the same error about some fundamental fact

Types of common mistake

1. Res extincta

Subject matter has perished before the contract was concluded

Eg. A agreed to buy dog from B, but dog died before delivering to A

Scott v Coulson [1903]

A wants to buy life insurance for B from insurance agent, but B indeed is dead

2. Res sue

Party contracts to buy something which in fact belongs to him

Cooper v Phibbs (1867)

A leased fishery from uncle, after uncle died, A wanted to renew with aunt
But A already inherited the fishery

3. Mistake as to quality

Some quality difference which makes the thing essentially different from what it was believed to be
Have to radically different

McRae v Commonwealth Disposals Commission (1951)

A sold B right to salvage oil tanker by a reel full of oil

There was no tanker, not even the reef
If it is reasonable for one party to take reasonable steps to verify and they did not => NOT common
mistake

Bell v Lever Bros Ltd [1932]

Leaf v International Galleries [1950]

A thought he was buying a painting of Constable

B said it was Constable
Later when A put it up for auction, he was told it was not a Constable
Contract was for a painting, and A got the painting => not sufficiently different

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003]

A contracted B (tug boat) to rescue As boat

Both mistaken as to the difference between the boat and tug boat
Tug boat was not 35 miles away, but 410 miles
The distance did not make the journey impossible, just more difficult (not sufficiently different)
Impossibility is a threshold criteria for sufficient transformation
Four part test
o Common assumption as to existence of a state of affairs
o No warranty by either party that state of affairs existed
o Non-existence of the state of affairs is nobodys fault
o There was a common mistake in relation to a fundamental assumption which rendered
performance of the obligation impossible
If it is impossible, we can assume this is a threshold criteria to qualify as radically
different in terms of quality

Tony Investments Ltd v Fung Sun Kwan [2006]

A had to sell land to B

1/3 reclaimed former slipway
A had right to get slipway from gov. but never applied
A wants to get out of contract by common mistake
NO common mistake => NOT impossible to apply for re-grant

Prior allocation of risk

A plea for common mistake will be defeated where, despite shared misunderstanding about a state of
affairs essential to the agreement, one party has assumed the risk of error.

Jan Albert (HK) Ltd v Shu Kong Garment Factory Ltd [1989]
Unilateral Mistake

Elements for unilateral mistake

One party makes a mistake and the other knows (or should have known) it
Non-mistaken party has actual or constructive knowledge that a mistake has been made

Tamplin v James (1880)

Non-mistaken party is neither actually nor constructively aware of other partys error
Not even contributed to the mistake in other partys mind => NO unilateral mistake

Hartog v Colin & Shields [1939]

A buys hare skin from B, and B was offering at $10 per skin
Final offer was $10/lb (which was cheaper)
Court knew A had actual knowledge that the skins are priced at per pound rather than per pound
Unilateral mistake => void ab initio
When it is obvious that someone has made a mistake in terms of an offer, one may not simply snap up
the offer

Centrovincial Estates plc v Merchant Investors Insurance Co Ltd [1983]

Onus to establish unilateral mistake is on the party asserting it (Accuser has to provide the evidence)

Chwee Kin Keong v Digilandmall.com Pte Ltd [2005]

People who ordered printers are taking advantage of the mistake (they have ordered before)
Consumers were not retailers, but end-users => why would they order 1,000 printers?
Court will look at surrounding circumstances

As plaintiff, you prefer to go with unilateral mistake at common law (more powerful)
Unilateral mistake in equity not as strong
o Rely on constructive knowledge (what you should have known, but you didn't know)
o Only leaves contract voidable

Unilateral mistake must concern contractual term

Error MUST concern a term of an agreement in unilateral mistake

Smith v Hughes (1871)

A contracted to buy oats from B

A thought they were old oats, but they were new oats
Should have asked whether they were old oats => cant assume they were old (caveat emptor)
Oats age is not a term => NOT unilateral mistake
Where there isnt an express or implied warranty making it part of the bargain that the thing possess
some particular quality => the buyer will be stuck with it
There were meeting of minds (in terms of oats) => there IS a contract

If contract is voidable:

If contract is void ab initio:

Remedies for unilateral mistake

Kowloon Development Finance Ltd v Pendex Industries Ltd (2013)

Court not restricted to void ab initio or rescission

If theres provision that one party knows the other party know or misunderstands, court can

o Stop enforcement of provision

o Rectify () the written agreement to give effect to what the mistaken party thought had been
agreed to

Week 9 Frustration
What is frustration?

After the contract has been formed, something happens (that is beyond the parties control and is
unforeseen) that makes the contract impossible to perform, or renders performance radically
different.
Must occur after formation
Beyond control of both parties
Impossible to perform or radically different

Doctrine of Absolute Obligations

Contract obligations are absolute: If you signed a contract, you are completely obligated to the terms
of that contract.
Freedom of contract: The government has no right to interfere the contract, as long as it is legal.
Parties must provide for the event
o Paradine v Jane (1674)
A rented land from B
War prevented A from using land for 3 years
A refused to pay rent for that period of time
A is obligated to pay because he could have provided for it in contract.
If they put in contract that if the invading army occupied the property, A doesn't have to
pay => A will not need to pay

Frustration and implied term theory

Taylor v Caldwell (1863)

Implied term that the contract will be terminated if something happened (no one ever said it, it wasn't
in the contract)
Fire frustrated the contract
Implied term that music hall wouldn't be burnt down to the ground
Contract will be frustrated even if the event is not explicitly provided for in the contract.

Radical transformation of bargain theory

Davis Contractors Ltd v Fareham Urban District Council [1956]
EVENTS THAT CAN FRUSTRATE A CONTRACT
Performance rendered impossible

Destruction of subject matter or something essential for its performance

S. 9 Sale of Goods Ordinance (Cap 26)

Where there is an agreement to sell specific goods, and subsequently the goods, without any fault on the part
of the seller or buyer, perish before the risk passes to the buyer, the agreement is thereby avoided.

Have to be a specific good to qualify for the ordinance

o If I agree to sell you 10,000 apples, and 10,000 apples got burnt before the delivery => will not
qualify
o If I agree to sell you the 10,000 apples stored in the next room => specific goods

Death or incapacity

It must be a contract for that specific person

o Eg. Contract for an opera singer (any opera singer) to sing at a wedding, and some opera singer
dies, => NOT frustrated, because they could get some other opera singer

Robinson v Davison (1871)

Illegality

Cant contract for something illegal.

Situations where it is legal at the time the contract was formed, but intervening event happened that
rendered that illegal.
Shifted from legality to illegality will render the contract frustrated.

Denny, Mott & Dickson Ltd v James B Fraser & Co Ltd [1944]

A wants to import goods to Bs country

Gov. bans importation of those goods after contract was formed => contract frustrated

Metropolitan Water Board v Dick, Kerr & Co Ltd [1918]

Contract to build a water reservoir

Gov. stepped in and considered illegal to build water reservoir => contract frustrated

Nam Sun Trading Co v Anderson, Meyer & Co Ltd (1951)

Considered illegal in other jurisdiction, but legal in own jurisdiction

Contract in own jurisdiction will still be frustrated

Non-occurrence of anticipated event

Parties anticipated something to happen, but it doesn't happen

The anticipated thing has to form the foundation of contract (from both parties perspective)

Krell v Henry [1903]

A rented a flat from B to see kings crowning ceremony

King got sick and cancelled the ceremony
Contract frustrated (Frustrating event being cancellation of ceremony)
Saw this contract not just as renting an apartment, but foundation of contract was to see the crowning
ceremony and both parties knew it
The event can form the contracts foundation even if no explicit reference is made to it.

Herne Bay Steamboat Co v Hutton [1903]

A rented a boat from B to see kings coronation

King got sick and cancelled the whole event
A wanted to render contract frustrated
Court ruled contract NOT frustrated => still has value (boats value has a lot more than just seeing the
kings coronation)

Change of commercial context

Davis Contractors Ltd v Fareham Urban District Council [1956]

..render [further performance] a thing radically different from that which was undertaken by the
contract.
A contract B to build houses
Cost of building went up because of WW1, making B lose money
NOT frustration (only make it costly to build the houses, does not change the contract to get a
different kind of contract)

Wong Lai-ying v Chinachem Investment Co Ltd [1980]

Scale of destruction was so great, together with the unforeseen nature, that made the contract into a
new kind of contract (so much damage done, that they have to rebuild everything)
Contract frustrated
Sheer scale of the change may render it radically different

LIMITATIONS OF FRUSTRATION (Barriers to frustration)

Express provisions for frustrating events

If parties have made provision in the contract for the event which occurred, the contract will NOT be
frustrated. (forseeable)
But if it is worded very generally => not enough to say that it is unforseeable

Metropolitan Water Board v Dick, Kerr & Co Ltd [1918]

Relied on Condition 32 to claim frustration ( ...if 'by reason of any difficulties, impediments,
obstructions, oppositions, doubts, disputes, or differences, whatsoever and howsoever occasioned, the
contractor shall, in the opinion of the engineer... ) => Too vague

Wong Lai-ying v Chinachem Investment Co Ltd [1980]

Clause 22: should any unforeseen circumstances beyond the Vendor's control arise whereby the
Vendor becomes unable to... => too vague

Absence of express provision

In certain commercial situation, it is so understood that there is no need to put it in the contract
(everyone in the industry knows this)
Absence from contract indicates it is completely foreseeable => no frustration
Test:
o look at surrounding facts and circumstances to establish objectively the parties true intention
o interview industry experts and determine whether people in industry actually know it
If theres no such custom or usual practicethe silence of the contract probably indicates no intention
to allocate risk => CAN be frustration

Jan Albert (HK) Ltd v Shu Kong Garment Factory Ltd [1990]

A ships product to B from China

China changed export rules so A could not export
Export license to be supplied by A 45 days before shipment date (Prior allocation of risk =>
Foreseeable that it can happen) => NOT frustrated

Self-induced frustration

You cant claim frustration if the event you are relying on is caused by yourself.

Ocean Tramp Tankers Corp v V/ O Sovfracht (The Eugenia) [1964]

A risked and chose to go via Suez (shorter route) before Egypt closed it
Egypt closed it and they impounded the boat
If A didn't choose the Suez route, this would never have happened
If frustrating event was a consequence of your choice/action => will NOT qualify frustration

You cant claim frustration if the event results from your own choice or fault

J Lauritzen AS v Wijsmuller BV (The Super Servant Two) [1990]

A hired barge from B to transport oil rig

B had two barges and allocated another barge to another contract
Barge for A sunk before starting the contract (unforeseeable event)
NO frustration => had 2 barges to use and CHOSE to allocate the other to another contract. If B
did not allocate it, he would have the 2nd one on hand, and could complete the contract
Frustrating event was result of own choice

Maritime National Fish Ltd v Ocean Trawlers Ltd [1935]

A chartered 5 fishing trawler from B

A could only get licenses to operate 3 of them
Frustrating event was result of own choice

CONSEQUENCES OF FRUSTRATION
Effects of a finding of frustration

Frustration automatically discharges (terminates/kills) a contract

Pre-1942: killed all rights and obligations BEFORE point of frustration

Chandler v Webster [1904]

A hired room for $141 to see kings coronation

Contract stipulated to pay in advance (A paid $100)
Coronation was called off
A had to pay the remaining because the obligation to pay was before frustrating event

Appleby v Myers (1867)

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943]

Fibrosa (Poland) agreed to buy machinery from Fairbairn ($3000)

Contract concluded in Jul 1939
Fibrosa paid $1000
Nazi took over Poland, England declared war, and the law was not to trade with enemies =>
frustrating event
Fibrosa can recover $1000 because it was a total failure consideration

Law Amendment and Reform (Consolidation) Ordinance (Cap 23) (LARCO)

Section 16 (2)

For actual money

Sums paid before frustrating event are refundable
Sums payable before that event cease to be payable
But the party can claim expenses up to (not exceeding) the amount spent before the contract was
frustrated
o Can deduct expenses from the money he has to refund and refund the rest
o Cant keep more than expenses actually incurred by him in connection with his performance of
the contract

Section 16 (3)

For non-monetary benefit

A party can recover for a partial performance which has, before the discharge by frustration,
conferred a valuable benefit on the other party.
The court can give a just sum

Scenario 1: If A contract B to guard As bank for a 5-year period but the contract is frustrated after 3 rd year
Solution: Compensate him on a pro-rata basis
Scenario 2: If A contracts B to build a swimming pool in the backyard but contract is frustrated (due to
illegality) and ended up a big hold in As yard (but it costs B a lot to dig)
Solution:
How to calculate benefit conferred? => Calculated as end product at the date of frustration
BP Exploration Co (Libya) Ltd v Hunt (No 2) [1982]

It will be the end product at date of frustration

How to calculate just sum? => by looking at parties position after frustrating event and valuable benefit
Situations when terms of Section 16 DO NOT apply:
Parties have made some contrary agreement or settlement
Frustrated contract is a charterparty
Frustrated contract is a contract of insurance
Contract is for sale of specific goods and contract has been frustrated because goods have been
perished

o S.9 Sale of Goods Ordinance apply

Date of frustrating event is earlier than Dec 8, 1941
Court can sever frustrated and non-frustrated parts of the contract

Week 10 Express Terms

What are express terms?

The terms of a contract establish what the parties are required to do or abstain from doing, or what
they must do if they wish to achieve a particular result. The terms, in other words, establish what the
contract is all about.

WRITTEN TERMS: SIGNED

Effect of signature

The simplest case of incorporation of terms occurs when a party signs a document which sets out
terms of the agreement.

LEstrange v F Graucob Ltd [1934]

One is bound by their signature

You are bound by the document you sign, even if you have not read it (even the other party knows you
have not read it)
She has a choice to read to, but she didn't

Ming Shiu Chung v Ming Shiu Sum (2006)

Once you put your signature on it => you own it

Reliance is universally placed on signatures by persons of full age and understanding as signifying
their assent to what that document states.

Incorporated by reference

A term that if referred to only by reference in the signed document can be incorporated.

Landale Development Ltd v Zhum Heng Development Ltd [1990]

A faxed contract to B requesting for signature

Faxed part referred to terms on reverse side (with arbitration clause) which was not faxed
B signed without reading reverse side
By signing it, B is agreeing to ALL the terms (even by reference)
Same as signing without reading a contracts terms => signature will be bound by all provisions even
without reading it

Exceptions:
Non-contractual documents
Grogan v Robin Meredith Plant Hire [1996]

Back of timesheet were terms

Not normal that a timesheet would have terms at the back like a contract
No one would think the timesheet as a contract
NOT incorporated as terms in the timesheet

Unusual and onerous terms

A party will NOT be bound by his signature if: (Have to meet all four)

He was not actually aware of the term

The term was unusual and onerous
The signing party did not have a reasonable opportunity to acquaint himself with the term
Where the other party did not take such steps as were reasonable in all the circumstances to draw the
term to the signers attention.

Tilden Rent-A-Car Co v Clendenning (1978)

A rented a car from Tilden and crashed the car

A wanted Tildens insurance to pay, Tilden refused
He didn't have reasonable opportunity to draw acquaintance to the term

Wing On Properties and Securities Co Ltd v Wave Front Enterprise (HK) Ltd [2007]

Break clause: Both agreed to rent the premise for a year, but one party could break it off early
Used logic of Tilden Rent-A-Car Co v Clendenn

WRITTEN TERMS: UNSIGNED

Sometimes a written term is found in a document that the parties have not signed.
These unsigned terms will be incorporated into a contract only if three overlapping preconditions are
all satisfied:
1. Timeliness: Notice of the term must have been given before, or at the time, of contracting.
Thornton v Shoe Lane Parking Ltd ([1971]

The customer is bound by the terms in the offer (in the notice near or on the machine stating what
is offered for the money).
He is not bound by the terms printed on the ticket if they differ from the notice, as the ticket was
issued after the conclusion of the contract => The contract could not be altered by words printed
on the ticket itself.
Contract was concluded when customer put money in the machine

2. Contractual document: Must been contained in a notice that a reasonable person would understand to
have contractual effect
Chapelton v Barry Urban District Council [1940]

Man rented a deck chair at the beach, got a receipt

A ripped the chair and injured himself, tried to sue store
Exemption of liability for personal injury on back of receipt
No reasonable person would treat the receipt as a contract => NOT incorporated into contract

Li Mun Chung v East Asia Steam Laundry Co [1961]

Customer knew when she deposited the suit for cleaning that it contained conditions relating to
the contract => then its ok

3. Reasonable notice: Must have taken reasonable steps to draw it to the attention of the other party.
Parker v South Eastern Railway Co (1876 1877)

A left bag in cloak room and it disappeared

Ticket said see back exemption for liability

South Eastern couldn't prove it took reasonable steps to draw attention to the terms => NOT
incorporated into contract

Wong Wai-Chun v The China Navigation Co Ltd [1969]

A fell and died on boat

Ticket had exemption of liability clause
No one would think a ticket as a contractual document and no reasonable notice was given =>
NOT incorporated into contract

Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989]

A sent B a parcel containing 47 photographic transparencies with a delivery note stating a late
delivery clause
B opened parcel but didn't read delivery note
The clause was not sufficiently brought to attention => NOT incorporated into contract

What is reasonable? To establish reasonableness:

Burden of proof is on party relying on the unsigned written term that he has sufficiently drawn that
term to other partys attention

Pre-contractual statements
Tools to assist in determining the parties intention towards the statement:
1. Invitiation to verify

Where a party making a statement suggests that the other party verify it for himself, it is likely that
the statement was intended to be a representation rather than a term

Ecay v Godfrey (1947)

A said boat was good, but asked purchaser to get an expert survey it (invitation to verify)
Did not want him to rely on his opinion => NOT intended to be a term in the contract => Statement
NOT a term of the contract

2. Invitation NOT to verify

Where a statement is made and the other party is dissuaded from verifying it for himself, it is likely
that the statement was intended to be a term rather than a representation

Schawel v Reade [1913]

You need not look for anything; the horse is perfectly sound => strengthening the statement that
the horse is well and not wanting buyer to verify it => Meant to be a term of the contract

3. Timing of statement

The lapse of time between the statement being made or repeated and the conclusion of the agreement
=> representation

Inntrepreneur Pub Co (GL) v East Crown Ltd [2000]

The longer the lapse of time, the less likely it is going be a term in the contract

4. Declared importance of statement

If the statement is made in circumstances where the party to whom it is addressed expressly declares
it to be of importance to him, it is more likely that the statement will constitute a term of the
subsequent contract

Bannerman v White (1861)

A bought hops to make beer, asked if the seller added in sulphur (which was bad for the hops) =>
Seller said he didn't, but he actually did
A declared that he didn't want to buy hops with sulphur used => term of contract

5. Relative expertise of the parties

Where the party making the statement possesses less expertise or special skill concerning the
statements subject matter than the party to whom the statement is addressed, it is less likely that the
statement was intended to be a contractual term (representation only)

Oscar Chess Ltd v Williams [1957]

A wanted to buy car, seller checked car was a 1948 model, turned out gave him the wrong year
Statement about cars age is misrepresentation only (seller himself did not have knowledge of the
year, had to rely on registration book)

Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965]

6. Agreement reduced to writing

Where the agreement has been reduced to writing, the parol evidence rule will come into play
Generally speaking statements left out of contractual documents are less likely to be regarded as
terms

Parol evidence rule

Once a written agreement has been signed by the parties, then it cannot be altered or annulled by any
oral evidence that may contradict the terms of the agreement => Achieve finality of agreement
If the contract is in writing and appears to record the whole of parties agreement, then there is a
rebuttable presumption that it does not entirely record the agreement
o Extrinsic evidence is NOT admissible to add to, vary or contradict the terms of the written
document

Exceptions:

Extrinsic evidence is admissible to prove that parties DID NOT intend the written agreement to set
out all their contractual terms
Often happens when parties agreed that there were going to be additional terms
o Eg. In negotiation process, high stake commercial transaction, parties often have a
preliminary agreement (not contract itself, but an agreement that they will commit to the
negotiation process) => eventually turn out the final contract

Lam Tun Ming v Hu Chun Leung [1991]

Agreement for sale of shares

Unsigned draft agreement containing two conditions to the purchase commitment

Buyer refused to pay for them
Issue: Was that evidence admissible to prove the existence of a collateral agreement (with
conditions of sale) outside the written sales contract?
o The extrinsic evidence as to the existence of collateral agreement outside the written
agreement was properly considered => NO parol evidence rule => can be brought in to
contract

Week 10 Implied Terms & Classification of Terms

What are implied terms?

A provision in a contract that is not directly stated in written or spoken words but is introduced into
the contract by the courts as necessary to give effect to the intentions of the contracting parties, or by
statute

TERMS IMPLIED BY NECESSITY

Business efficacy

A term can be implied where it is necessary to give the contract business efficacy (make it work in a
business sense)
The law is determining an implication from the presumed intention of the parties to give the contract
the efficacy as both parties must have intended.
The implied term must not only be necessary, it must also be one which the parties would have agreed
to if they had they thought about it when concluding the agreement.
If it is necessary to make the contract work => court will imply the term (to reflect the commercial
intent of parties based upon what was necessary to retain business sense to the contract)

The Moorcock (1889)

A contracted for Bs wharf to unload cargo

Ship damaged during low tide when ship came to rest on river bed
Nothing in contract said anything about giving a safe harbor to the ship (but whole idea of the
contract was to provide a safe harbor)
The term must be necessary to give the contract business effect (without it, it doesn't make business
sense)

Luxor (Eastbourne) Ltd v Cooper [1941]

Agreement that estate agent would get a fee if he introduced a buyer to the seller
Agent found a buyer who is willing to pay the price but seller didn't want to sell cinemas
State agent still want the commission (found buyer but seller didn't want to sell)
Can they imply a term here? => NO
o Conflicting commercial interest (Court cant be 100% certain that seller would have agreed to
pay the agent money even if he didn't end up selling the cinema)

Five conditions for implying a term

The five conditions must ALL be satisfied for a term to be implied:
1.
2.
3.
4.
5.

Reasonable and equitable

Necessary to give business efficacy to the contract (Moorcock)
Obvious that it goes without saying
Capable of clear expression
Not contradict any express terms of the contract

BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings
(1977)
Reasonableness of implied term insufficient

Lord Denning: A term may be implied if it is reasonable, and the additional test of necessity is NOT
required
House of Lords rejected this view, insisting that no term can be implied in order to give efficacy to any
contract unless the term is necessary to achieve that objective.

Liverpool City Council v Irwin [1977]

A tenant agreement in a multi-occupational dwelling. None of the tenant contracts had expressed an
obligation to maintain or repair the common parts
Reasonable that landlord should take care of the hallway
Nature of the tenant agreement: Ability to have reasonable enjoyment of the premises
Court implied the term
Term is necessary if we ask what the contract is

Varieties of implied terms

1. Where there is prima facie a complete bilateral contract the courts may imply terms especially in
mercantile contracts where there is an established usage. (custom variety)
Hutton v Warren (1836)

Tenants farmer lease is about to expire

Local custom was farmer still had to work the fields the usual way although he was about to leave and
farmer would get fair allowance for seed and labor
Landlord has to pay (it is a custom) => custom imported into the lease, even if there was no provision
in the lease
Not every industry custom may be implied into the contract => Customs not easy to establish and will
be implied into a contract only if they are:
o Notorious
o Certain
o Reasonable
o NOT contradict an express term of the contract

2. Where there is an apparently complete bargain, the courts are willing to add a term on the ground that
without it the contract WILL NOT work (Moorcock)
3. Where the implication of a term is necessary to establish what the contract is, the parties not having
themselves fully stated the terms
Relationship between conditions and varieties of implied terms

5 conditions are distinct from 3 varieties of implied terms

Two of the 3 varieties (#2 & #3) must have all 5 conditions met:
o Terms implied by necessity in order that the contract will work as intended by the parties (The
Moorcock)
o Terms implied in order to establish what the contract is, the parties not having themselves fully
stated the terms (Irwin)
o Once you figure out youre dealing with #2/#3 kind of implied term => apply the 5 conditions
test => if it meets all 5 conditions, can imply the term

Twinkle Step Investment Ltd v Smart International Industrial Ltd (1999)

Sale of property, with a provisional sales and purchase agreement containing a term that property was
to be sold with all fixtures, decoration and air-conditioner
Buyer sought to conduct inspection prior to completing the sale, but he was not allowed in premises
There was an implied term that purchaser had right of access to the premises to see what he was
getting prior to closing the sale
Irwin test applied: Court must imply the term to establish what the contract is => Buyer has to see
what he was buying (this must be implied to maintain the transaction at a commercial level)
CLASSIFICATION OF TERMS

Terms are classified according to the legal consequences which attach to their breach
NOT of equal importance
o Most important terms: conditions
o Foundation of the contract
Eg. You agree to buy a car, but seller delivered a chicken
o Less important terms: warranties
Eg. You agree to buy a green car, but seller delivered a red car
o Innominate terms
no name

Conditions and warranties

Conditions

Fundamental importance of the contract

Breach of it must go to the root of the contract
Breach will bring contract to an end and innocent party can claim damages
Repudiatory breach will discharge parties of all their obligations under the contract.

Warranties

Of less importance of the contract

Breach WILL NOT bring contract to end
Breach allows innocent party to claim damages
WILL NOT discharge parties of their obligations to the contract

L Schuler AG v Wickman Machine Tool Sales Ltd [1974]

Distribution agreement between X & Y

o Clause 7: it shall be a condition of this agreement that X shall send its representatives to visit
the 6 listed firms at least once every week.
o Clause 11: if the other party committed a material breach and have failed to remedy the same
within 60 days of being required in writing so to do, the contract can be terminated
X committed minor breaches of clause 7 => Y wanted to terminate contract under clause 7
X NOT entitled to terminate (clause 7 is not a condition)
Describing a term as a condition is not sufficient to ensure that it will be treated as a condition

Breach of contract
NOT the case that any minor breach will allow innocent party to terminate the contract
Where the parties express themselves clearly, even a clause which appears to be of relatively minor
importance can be a condition (if it is phrased in a proper way, you could turn warranty into a
condition)
o A common way of indicating such an intention is to specify that a particular obligation is of
the essence to the agreement.
Union Eagle Ltd v Golden Achievement Ltd [1997]
Innominate terms

Some terms defy neat classification as either a condition or a warranty because it is not possible to
establish objectively whether a breach was intended to give a right of termination
Consequences of breach might me serious, or it might not be
o Breach => entitle other party to claim damages only (like warranty)
o Breach of exact same term => so serious that it deprives other party of the whole benefit of the
bargain => Non-breaching party will have both a claim for damages AND right to terminate the
contract (like condition)
Legal consequences of breach depends on nature of the event => cannot classify as condition or
warranty prior

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962]

Week 12 Breach of Contract

DISCHARGE BY BREACH

The innocent party terminates the contract in response to an actual or signaled repudiation of the
agreement by the other party.
Termination ends all future obligations under the contract, but leaves intact obligations arising prior
to termination.

Repudiation

When one party refuses to perform a duty or obligation owed to the other party under the contract =>
makes contract repudiated
The other party can terminate contract (and get damages)

A party will repudiate a contract where he:

Breaches a condition
Breaches an innominate term in such a way as to deprive the innocent part of substantially the whole
benefit of the contract, or
Breaches innominate terms and/or warranties in such a way that a reasonable person would think the
conduct is a renunciation of the defaulting partys obligations under the contract.

Fundamental question: Would their conduct convey to a reasonable person an intention not to comply with
their obligations under the contract?
Creatiles Building Materials Ltd v Tos Universe Construction Co Ltd [2003]

X contracted Y to apply granite spray coating to external walls of building

Payment: 10% upon signing, 30% upon delivery of necessary materials to site and balance would be
paid every 2 weeks during progress of work
X made first two payments and Y started work => X failed to pay first two interim payments
Y said contract was repudiated and wanted to terminate contract unless payment is received
Deliberate refusal to make an interim payment is capable of amounting to a repudiation of the
contract if the circumstances of non-payment show an intention NOT to be bound => X repeatedly
failed to pay the first two interim payment and equivocally indicated to Y that it would not do so
(showed clear intention NOT to be bound)

Vaswani v Italian Motors (Sales & Services) Ltd [1996]

X imported Ferraris in HK for Y

X demanded too much money (based on formula in contract) => Y claimed contract repudiated and
wanted to terminate
NOT repudiation because X honestly believed the amount was justified
Through their conduct (asking for this money), they are not communicating that they are repudiating
the contract

ATAL Technologies Ltd v Stratech Systems Ltd [2012]

Contract to operate HKs e-channel system => contractor argued over payment obligation
X threatened to deactivate machines => repudiation through illegitimate commercial pressure
X didn't really want to repudiate contract, they wanted their money and go on with their contract, but
because they are using illegitimate commercial pressure as a means to achieve => court will consider
it repudiation

Mak Lai Man v Lam Siu Yui Peter [1993]

Where X and Y have a concluded agreement, a refusal by X to sign or accept another contractual
document which contains new or varied terms WILL NOT amount to a repudiation of the agreement.
In fact, Ys assertion that X refusing to sign or accept is a repudiation of the original contract and will
itself constitute a repudiation.

Anticipatory breach

A party makes it clear they will NOT meet their obligations under the contract BEFORE actually
performing those obligations
Can be done by:
o Word (I wont deliver the rest of the goods)
o Action (not showing up with the goods or stop making payments)
Where they signal their intention to not complete their obligations under the contract, the other party
may sue for damages BEFORE the time of performance of obligations has arrived

Hochster v De la Tour (1853)

X agreed to employ Y as a courier for 3 months at 10 per month

X wrote to Y that the service was not longer required
Y sued for breach of contract before agreed commencement date
Where by agreement an act is to be done on a future date, an action can be brought for a breach of the
agreement pre-emptively, before the day for doing the act has arrived
Implied contract of engagement: Where there is a contract to do an act of a future day, the
parties impliedly promise that neither will do anything that undermines the contract before start date

Frost v Knight (1872)

X promise to marry Y once Xs father died

X broke off engagement before his father died
Y can terminate contract and sue for damages right away, without having to wait for Xs father to die

Election of non-breaching party

An anticipatory breach gives the non-breaching party the right to either:

Accept the repudiation, terminate the contract and claim damages

Continue with the contract

Tse Ping Shun David v Lai Ho Man Shan Grace [2010]

Innocent party can refuse to accept breaching partys repudiation => continue with the contract as if
nothing happened

Prevention principle

Where X is unable to perform his contractual obligation because of Ys own earlier breach in the
contract
Prevents Y from treating Xs breach as a repudiation
If Y tries to treat Xs breach as repudiation by refusing to go forward with some part of the contract,
this may itself constitute a repudiation of the contract by Y

Kensland Realty Ltd v Whale View Investment Ltd (2001)

X gave information for payment of property 72 minutes before settlement => Y settled 6 minutes late
(Time was described as of essense)
Can X treat Ys failure to meet the settlement deadline as repudiation? => No, prevention principle
applies (a person is not permitted to take advantage of his own wrong)
o Implied term for X to provide instructions a reasonable time before completion is due
o X did not give enough time for payment => caused Y to pay late => Xs refusal itself is
repudiation
o Time allowed for Y was NOT reasonable
o Xs breach of duty to provide info in time was direct cause of Ys failure to meet deadline =>
cannot treat Ys failure as repudiation

Non-breaching party will lose their right to election and must terminate immediately where repudiating
party can prove either:

Refusal by non-breaching party to accept repudiation and claim damages in all circumstances was
unreasonable because damages would be a sufficient remedy
Non-breaching partys obligations under the contract COULD NOT be performed without repudiating
partys cooperation

Fuji Xerox (Hong Kong) Ltd v Vigers Hong Kong Ltd [2006]
Acceptance of repudiation

Repudiation DOES NOT automatically terminate the contract

If you want to accept a repudiation, you MUST communicate your acceptance to the breaching party
No particular form of words is required => as long as a reasonable person would understand the
communication as indicating a clear and unequivocal acceptance of repudiation

Chao Keh Lung v Don Xia [2004]

X was to pay for share by 5 installments, sale to be completed by Dec 13

Y sold shares to Z on Jun 5, but X refused to pay 4th installment on Jul 6
Does Ys selling of his shares to Z on 6 June constitute anticipatory breach?
o NOT repudiation of contract
Has X accepted the repudiation by not paying the 4th installment?
Repudiation of contract: X not paying the 4th installment

Affirmation of contract

If X becomes aware of Ys repudiation and affirms the contract => X loses right to accept repudiation
=> X must continue with the contract
Affirmation may be express or implied
Fundamental question: Would Xs words or conduct be understood by a reasonable person in Ys
position as affirming the contract?

Perry v Davis (1858)

Chua Ming Yuen v Hentron Investments Ltd [2005]
Lapse of time
In some circumstances, mere lapse of time without an overt act of repudiation may constitute
affirmation
Delay MUST be consistent with affirmation of contract
Any reasonable alternative explanation for the delay => will NOT amount to an affirmation
Cheung Ching Ping Stephen v Allcom Ltd [2010]

X contracted to buy house from Y, settle date was Aug 19 (time was of the essence)
Deed was not granted by Gov. by then
X wrote two letters (reserving rights) to Y inquiring deeds status
X accepted repudiatory breach on Oct 10
Y said it was too late because lapse of time and affirmation
Xs letters were NOT affirmation of contract (expressly without prejudice and reserved his rights)
Delay between contracted settlement date and Xs express acceptance of repudiation was not so long
as to affirm the contract
It was in all the circumstances reasonably consistent with him just continuing to assess his position

Week 13 Damages for Breach

What are damages for breach?

Monetary compensation that is awarded by a court to an innocent party who has been injured through
the other partys breach of contract
Breach: Person who has failed to perform an obligation set out in a term of contract
Damages are common law, non-discretionary remedy (you have right to claim damages)
Breaching party is liable if he fails to perform his obligation, regardless of intention

Concept of damages

To place innocent party in the same position he would have been in had there been no breach(as if the
contract was played out properly)
Damages (fast forwarding as if contract was played out properly) vs. Rescission (restore back to precontract position)
Innocent party must prove on the balance of probabilities (more likely to be true than not) both:
o The breach itself
o The amount of loss caused by the breach (could be very difficult to prove)

TWO KINDS OF INTERESTS (can only choose either one)

Expectation interest (would prefer this as claimant => would get more money)

In the same financial position as if contract had been fully performed

Court grants innocent party the amount that they would have gained if the contract had not been
breached
Example:
o X contracted with Y to buy 10,000 apples and sell them to Z (for 10x price). Y never delivers
the apple => X gets compensation for profits loss from not selling apples to Z (Y have to pay
back 10x that price of the apples)

Reliance interest (only used when it is impossible to prove/quantify the expectation interest)

The losses which innocent party has sustained as a consequence of relying on the contract
Plaintiff is put back in pre-contract position (before they sustained losses)
Example:
o X contracted with Y to buy 10,000 apples and sell them to Z. X rents a warehouse to store
apples. Y never delivers the apples => X gets compensation for money spent on renting
warehouse only (if cant prove profits/cant quantify what the profits will be => can only go to
reliance interest)

HOW TO CALCULATE EXPECTATION LOSSES

Loss of bargain approach

Compensate innocent party for the losses he suffered by reason of breach

Example
o X contracts with Y to paint walls in his flat for $1000, and Y refuses to proceed with the job
o Next best price X can reasonably agree with third party to complete same job is $1500
o X will be entitled to $500 damages from Y

Cost of cure approach (usually comes up when there is partial performance)

Compensate innocent party for cost of putting right a breach which usually takes the form of a
defective or incomplete performance
Example
o X contracts with Y to paint walls in his flat, but Y instead papers the walls
o X will be entitled to damages equal to the amount reasonably required to remove the wallpaper
and have walls painted in accordance with agreement with Y

LIMITATIONS ON DAMAGES FOR EXPECTATION LOSS

Remoteness of loss of expectation interest

Example:
o X contracts to buy a classic car from Y for $10,000. X plans to sell car to collector who is
willing to pay $100,000, but Y doesn't know about this. Y breaches contract and fails to deliver
the car.
o Should Y compensate X for the $90,000 loss? => No
Even if it is technically caused by the breach, remoteness will protect the breaching
party => will not need to pay $90,000 loss (too remote=no knowledge about the
$100,000 sale)
No reasonable contemplation (not reasonable to state that they could sell the car for
$100,000)
BUT if it is communicate to the person at the time of contract, then they will be
responsible for the $90,000 loss
Loss are recoverable if they:
1. Arose naturally from the breach in the usual course of things
OR
2. May reasonably be supposed to have been in the contemplation of both parties at the time the
contract was made
If there were circumstances under which the contract had been made, and these circumstances
were known to both parties at the time they made the contract => could get damages for it under
the second part
Damages are assessed against a party only when they were reasonably within the contemplation
(intention) of both parties as a probable consequence of a breach

Hadley v Baxendale (1854)

X operated a flour mill, Y was in business as courier

X asked Y to transport crankshaft (machine parts) to its manufacturers to make a replacement part,
but delivery was delayed
Mill was inoperative and not generating profits for 5 days
Y was never told that X had no spare crankshaft or the mill would be inoperative until broken shaft is
replaced
Can X claim damages for loss of profits for the additional period of delay? => No
o Y did not know that mill was shut down and would remain closed until new shaft arrived
o Xs loss of profits could not fairly or reasonably have been contemplated by Y without X having
communicated the special circumstances to him
o NEVER communicated to Y

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949]

Laundry business X contracted with Y to supply a boiler

X needed boiler for big contracts from Royal Navy (X never communicated this to Y)
Y delivered late
Ordinary loss of business was recoverable (Y knew there would be loss of business for late delivery)
Loss of Royal Navy contracts NOT recoverable (loss NOT reasonably contemplated by def., def. had
no knowledge of contract)

Normal vs. abnormal loss

Normal loss
o Arises naturally from breach => RECOVERABLE
o ALWAYS be reasonably contemplated
Abnormal loss
o Recoverable only if reasonable contemplated by the parties when the contract was made
(depend on the facts)
o Needs to be established if it was reasonably contemplates
o Knowledge of parties key to determine if loss is too remote

Degree of likelihood required

Concept of reasonably contemplated must be qualified

What is the degree of likelihood required for this? (Heron II)
o Degree of probability for a breach to cause a loss need to be not unlikely
o a degree of probability considerably less than an even chance but nevertheless not very
unusual and easily foreseeable.
Tort: slight possibility of loss occurring is required
Contract: serious possibility of loss occurring is required

Chen v Lord Energy Ltd [2002]

X contracted to purchase from Y property

Sale did not proceed due to Ys breach of contract
X was awarded specific performance at trial
Apr 7: CA granted a stay of order pending Ys further appeal to CFA
Jan 18: Property was assigned to X
Loss in market value or loss of rental?
o Test: What was within reasonable contemplation of the partieswhat was the kind of loss

which the breaching party ought to have realized was not unlikely to result from the breach?
o It was within the reasonable contemplation of the parties at the time the stay orders were made
that the purchaser might resell the property after assignment and that by being prevented from
doing so, it might suffer a loss due to a drop in the market value of the property
Mitigation of losses
Innocent party has a duty to mitigate (make it less severe) losses
Must act reasonably to reduce the loss
Where claimant has failed to take reasonable steps to mitigate the loss created by the breach, the
award of damages will be reduced by the amount that would have been saved, had the claimant taken
such steps
Example
o X has 12-month employment contract with Y for a job that pays $100,000 a month
o Y breaches contract and fires X after 7 months
o X gets job for $90,000 per month for 2 months that year
o If X did not take the job and just sits back => failure to mitigate loss => Y will pay $180,000
less (for 2 months of possible employment that X did not take) => X will take $500,000 for 5
months minus $180,000
o Whether claimant has taken all steps that were reasonably available to him to mitigate losses is
a question determined objectively having regard to the opportunities available
Payzu Ltd v Saunders [1919]

X was to deliver goods to Y for nine months

Y got discount but paid first installment late
Amounted to breach of warranty not entitling the def. to repudiate the contract, but X wrongfully
refused to continue with original contract
X said if Y paid in cash, he would deliver goods at same discount => Y refused and bought goods
elsewhere at a higher price
X NOT entitled to difference between contractually agreed price and what Y actually paid => Y had
duty to mitigate loss (offer was reasonable and X could have complied with)

The more egregious the conduct of the breaching party, the less likely it is that the non-breaching party will
be expected to mitigate his loss by accepting a new offer from the contract-breaker
Tung Guan Co Pte Ltd v Jih Dong Enterprises Co [1992]

X had twice repudiated a contract to sell soybean extract to Y

Y would have been taking an unreasonable risk if he accepted a third offer by X to supply the goods,
and that Y acted reasonably NOT accepting it

Contributory Negligence

Example:
o An employee contributes by his own negligence to an industrial accident which injures him
o Damages for employers breach of employment contract will be reduced to reflect employees
contribution to the accident
o But contributory negligence has not been accepted in other contexts in HKa claimant's
entitlement to contract damages SHOULD NOT be reduced on account of his own negligence

Reliance Interest

Compensate innocent party for his expenditures in reliance on the breached contracts performance

A party will normally seek damages to compensate him for loss of reliance interest where he cannot
prove loss of performance interest => only option is to seek damages for reliance losses
A party claiming for reliance losses is precluded from making a claim for loss of expectation interest.

McRae v Commonwealth Disposals Commission (1951)

Tender for purchase of oil tanker lying on reef, vessel is said to contain oil
X spent 3000 on the salvage expedition but there was actually no oil tanker
X and Y did not contract to deliver a tanker of particular size or value or condition, nor did they
contract to deliver any amount of oil (impossible to assess expectation interest) => X will have to fall
back on claim for reliance losses (entitled to recover money spent looking for tanker and tender only)

Chaplin v Hicks [1911]

Theatre contest where Young women contestants submitted a photograph of themselves and entry fee
=> Rewarded with places in a chorus line
Def. made it to final group of 50 whom 12 winners would be selected
One girl was wrongly disqualified and she sued for expectation interest (How to quantify this?)
o Claimant was awarded damages for the loss of chance, assessed at 25% of winning the
competition
o Court proceeded on claimants statistical chance of winning without any actual assessment of
her physical attributes against any particular criteria of beauty
If there is some objective way to calculate expectation loss, courts are prepared to do so

Semana Bachicha v Poon Shiu Man [2000]

Employees repudiation of employment contract reduced, but did not eliminate Xs chance of
obtaining permission to undertake alternativr employment in HK
X is entitled to a remedy and court must simply do its best to award damages based on what it regards
as a reasonable assessment of Xs lost chances

Anglia Television Ltd v Reed [1972]

X contracted to play leading role for Anglia TV, but later failed to honor his obligation
Anglia claimed damages of wasted expenditure incurred BEFORE and AFTER concluding contract
Is Anglia entitled to expenditure incurred BEFORE the contract was concluded?
o They can claim expenditure incurred before the contract, provided that it was such as would
reasonably be in the contemplation of the parties as likely to be wasted if the contract was
broken
o X must have known that much expenditure had been incurred on directors fees
o He must have contemplated that if he broke his contract, all that expenditure would be wasted,
whether or not it was incurred BEFORE or AFTER the contract => pre-contractual expenditure
claimed recoverable