Contract (continued)

Genuine intention to be bound Misrepresentation Fraud Mistake Duress Undue influence Unconscionability

Mistake Under common law system

- Mistake under common law means a misunderstanding about a fact by the parties of a contract.

a) Common mistake Party A thinks that X is Y, Party B thinks that X is Y, and they entered i

nto a contract based on the fact that X is Y. but after the contract was formed, they found that both of them have made a mistake, the truth is that X is not Y ,X is Z.

Scott v Coulson – void - only if the mistake of the subject-matter was sufficiently fundamenta

l to render its identity different from what was contracted, making the performance of the contract impossible. (Bell v Lever Brothers Ltd)

McRae v Commonwealth Disposal Commission – valid- The common mistake was caused by the fault of the defendant, - The contract can still be performed.

b) Mutual mistake

A think X is Y, but B think X is Z, A and B enter into a contract based on X without knowing each other’s misunderstanding

- The contract is void.

Raffles v Wichel: Raffles (P) contracted to sell 125 bales of Surat cotton to

Wichelhaus (D). The goods were to be shipped from Bombay to Liverpool, England on the ship “Peerless”. Neither party was aware that there were two ships names “Peerless” carrying cotton from Bombay to Liverpool, one arriving in October and the other in December.

Wichelhaus thought he had purchased the cotton arriving on the October ship, but Raffles sent his cotton on December ship. Wichelhaus refused to accept delivery of the cotton arriving on the December ship and Raffles brought this lawsuit for breach of contract.

c) Unilateral mistake Part A think X is Y, Party B think X is Z, the fact is X

is Z not Y, This contract is entered into based on Party A’s unilateral mistake.

- The contract is valid (to protect the expectation and reliance of the other party)

unless

1. the other party is aware, or should be aware the mistake

2. the mistake is leaded by the fault or carelessness of another party

Civil Law system - mistake

French Civil Code Article 1110 states the error is a ground for annulment of an agreement only where it rests on the very substance of the thing which is the object thereof.

German Civil Code section 119 - 1) a party may revoke his expression is he has made error relating to the consent, or he would not have made this expression at all if he had reasonably known the facts 2) an error about the nature of a person or a thing, confined to only substantiality in transaction, is regarded as error about content of expression.

China China contract law – ARTICLE 54 – a party may

petition the People’s Court or an arbitration institution for amendment or cancellation of a contract if the contract was concluded as a result of serious misunderstanding.

According to interpretations by the Supreme Court of the People’s Republic of China, serious misunderstanding refers to

1. misunderstanding to the nature of contract2. misunderstanding to the other party3. misunderstanding to the quality of the contracted object4. misunderstanding to the assortment of the contracted

object5. misunderstanding to the price and expense.

PICC- ARTICLE 3.5(Relevant mistake)(1) A party may only avoid the contract for mistake if, when the contract was

concluded, the mistake was of such importance that a reasonable person in the same situation as the party in error would only have concluded the contract on materially different terms or would not have concluded it at all if the true state of affairs had been known, and

(a) the other party made the same mistake, or caused the mistake, or knew or ought to have known of the mistake and it was contrary to reasonable commercial standards of fair dealing to leave the mistaken party in error; or

(b) the other party had not at the time of avoidance reasonably acted in reliance on the contract.

(2) However, a party may not avoid the contract if (a) it was grossly negligent in committing the mistake; or (b) the mistake relates to a matter in regard to which the risk of mistake

was assumed or, having regard to the circumstances, should be borne by the mistaken party.

Error in expression or transmissionPICC - ARTICLE 3.6

An error occurring in the expression or transmission of a declaration is considered to be a mistake of the person from whom the declaration emanated.

Duress - Duress means a threat of harm made to compel a person to

do something against his or her will or judgment, especially, a wrongful threat made by one person to compel a manifestation of seeming assent by another person to a transaction without real volition.

1. There must be a threat. a) physical duress b) economic duress 2. The threat should be impropriate 3. The threat should be enough to deprive the party’s will – objective test – depends on the situation of the victim4. The victimized party enter into a contract under such

threat

Undue Influence a person uses a position of influence to persuade

someone to enter a contract that provides the stronger person with a direct or indirect benefit.

1. Presumed undue influence 1) parent and children 2) trustee and beneficiary

3)doctor and patient 4)solicitor and client 5) guardian and ward 6) religious adviser and devotee

2. The defendant bears the burden of rebuttal – prove there is independent will.

Unconscionability

Procedural unconscionability - unconsicionability in negotiation

- overwhelming bargaining position due to their knowledge, experience, status, information, financial situation

Substantial unconscionability

- unfaire contract terms in the contract

Formality of the contract

Verbal contract Written contract Notarial contract Real contract - valid when the object is transferred

PICC – no requirement to the formality of the contract

CISG – no requirement to the formality of the contract

China - The international sale of goods contract must be put in writing

1. TO ENTER INTO A VALID CONTRACT, WHAT ARE THE ISSUES YOU NEED TO CONSIDER?

2. WHAT ARE THE ISSUES THAT YOU NEED TO CONSIDER WHEN PREPARING AN ONLINE CONTRACT?

TO ENTER INTO A VALID CONTRACT, WHAT ARE THE ISSUES YOU NEED TO CONSIDER?

--If you are the offeror: draft the initial offer precise, clear and definite.

- look at a sample of a similar contract

fix a time in the offer Late acceptance - Send the response immediately. When receive the acceptance, check whether there is material change carefully.

- If are the offeree Accept the offer within the time, by a reasonable method, and do not make the mater

ial alteration Bear in mind that the time of effective is different in different legal system. In commo

n law system, it is better to contact the offeror and confirm the acceptance has been received.

When singing the contract, the parties must be of sound mind.

If you are entitled to avoid the contract, exercise the right as soon as possible.

A written agreement is recommended because it becomes your proof of what was agreed upon, prevents ambiguity or misunderstanding, and prevents either party forgetting or changing the terms later.

Consult a lawyer to find whether the contract is contravene to any public law , public policy and public interest

WHAT ARE THE ISSUES THAT YOU NEED TO CONSIDER WHEN PREPARING AN ONLINE CONTRACT? Sell goods on line - offer – make sure you describe

the goods and terms precise and definite. The purchaser click the accept or purchase button t

o make the acceptance It is important that an automatic confirmations be se

nt so there is no misunderstanding. Before the purchaser click the accept button, make

sure the purchaser had read the agreement. The best types of online contracts are those where t

he customer pays in advance (eg by credit card) or where you know your customer.

Material matters

· The price (including GST); · The description of the goods or services; · When the goods will arrive; · Delivery method details and charges; · Terms of payment; · Any special conditions; · The customers name and contact details; · The seller’s name and contact details.

Interpretation of the contract “The sale of the property includes the sale of

the furnitures inside the property.”

- The rules of interpretation

PICCARTICLE 4.1

- Intention of the parties (1) A contract shall be interpreted according to

the common intention of the parties. (2) If such an intention cannot be established,

the contract shall be interpreted according to the meaning that reasonable persons of the same kind as the parties would give to it in the same circumstances.

How to determine the intention of the parties?ARTICLE 4.3(Relevant circumstances) In applying Articles 4.1 and 4.2, regard shall be had to all the

circumstances, including

(a) preliminary negotiations between the parties;(b) practices which the parties have established between

themselves;(c) the conduct of the parties subsequent to the conclusion of the

contract;(d) the nature and purpose of the contract;(e) the meaning commonly given to terms and expressions in the

trade concerned;(f) usages.

1. A contract for the writing of a book between A and B, a publisher, indicates that the book should consist of “about 300 pages”. During their negotiations B had assured A that an approximate indication of the number of pages was necessary for administrative reasons and that A was not bound to stick precisely to that number of pages, but could exceed it, substantially if need be. A submits a manuscript of 500 pages. Has A breached the contract?

2. A, a Canadian manufacturer, and B, a United States retailer, conclude a number of contracts for the delivery of optical lenses in which the price is always expressed in Canadian dollars. A makes B a new offer indicating the price in “dollars” without further specification, but intending to refer again to Canadian dollars. But B claiming it should be referred to US. dollar. Whose intention should prevail?

1999 年 1 月，福州某矿泉水公司与福州郊区一村镇经济合作社签订了“租赁土地协议书”。合作社将 13873 平方米的土地租给矿泉水公司使用，租期 30 年。租金如下： 1999至 2000年度支付 5万元， 2000至 2001年度支付 8万元， 2001至 2002年度支付 11万元， 2002至 2003年度支付 15万元， 2003到 2008年度支付 17万元。 2005 年，矿泉水公司长期欠缴租金， 合作社起诉其违约。 双方对租金的条款存在争议。

ARTICLE 4.4

(Reference to contract or statement as a whole)

Terms and expressions shall be interpreted in the light of the whole contract or statement in which they appear.

ARTICLE 4.5

(All terms to be given effect)

Contract terms shall be interpreted so as to give effect to all the terms rather than to deprive some of them of effect.

ARTICLE 4.6

(Contra proferentem rule)

If contract terms supplied by one party are unclear, an interpretation against that party is preferred.

Exception: The parties have discussed the contract

ARTICLE 4.7 (Linguistic discrepancies) Where a contract is drawn up in two or more

language versions which are equally authoritative there is, in case of discrepancy between the versions, a preference for the interpretation according to a version in which the contract was originally drawn up.

Privity of the contract

The essence of privity is that only the parties to the contract can enjoy the benefits of that contract or be held liable for liabilities in that contract. the contract benefits the third party the contract incurs damage to the third party the breach of the contract attributed to the third pa

rty

Tweddle v Atkinson The father of the groom and the father of the

bride entered and agreement in celebration of the marriage that they would each give a sum of money to the groom, William. All seemed fine but the bride’s father died without making his payment so William tried to enforce the agreement against the executors of the will.

CISG United Nations Convention on Contracts

for the International Sale of Goods a binding agreement or contract between

nations. Once a country becomes a party of the

CISG, they should be bound by the Convention, unless they make any declarations or reservations.

What is the purpose of the CISG? Uniform the law governing international sales

contracts

Development of CISG

UNCITRAL – 联合国国际贸易法委员会 United Nations Commission on International

Trade Law It takes 10 years for UNCITRAL to prepare

the draft of CISG, finally, Came into force generally on 1 January 1988

When does the CISG come into play? 1. The contract is one for the sale of goods;2. The parties have their place of business in

different countries; and the countries have ratified the convention.

3. The States are Contracting Parties to the CISG Convention (1980) or the rules of private international law lead to the application of the law of a Contracting State;

The contract is one for the sale of goods No definition in the convention a description can be derived from Article 30

and 53. A contract pursuant to which one party is

bound to deliver the goods and transfer the property in the goods sold and the other party is obliged to pay the price and accept the goods.

2. The parties have their place of business in different States Place of business – “the place from which a business activity is d

efacto carried out [...]; this requires certain duration and stability as well as a certain amount of autonomy”

Nationality is not a criteria Article 10- For the purposes of this Convention: (a) if a party has more than one place of business, the place of b

usiness is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract;

(b) if a party does not have a place of business, reference is to be made to his habitual residence.

The States are contracting Parties to the CISG Convention Which countries are "Contracting

States?" How do we find out who they are?

http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html

3. The rules of private international law lead to the application of the law of a Contracting State

- China makes reservation to this clause.

When is CISG excluded?

Article 2 – the contract for sale specific goods Article 3 – contract for manufacture Article 4 – validity of the contract and

ownership of the goods Article 5 – product liability Article 6 – excluded by the parties

Article 2 ：This Convention does not apply to sales: (a) of goods bought for personal, family or household u

se, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use;

(b) by auction; (c) on execution or otherwise by authority of law; (d) of stocks, shares, investment securities, negotiable

instruments or money; (e) of ships, vessels, hovercraft or aircraft; (f) of electricity.

Article 3(1) Contracts for the supply of goods to be man

ufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production.

(2) This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services.

Article 4

This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with:

(a) the validity of the contract or of any of its provisions or of any usage;

(b) the effect which the contract may have on the property in the goods sold.

Article 5

This Convention does not apply to the liability of the seller for death or personal injury caused by the goods to any person.

Article 6

The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.

-- OPTING OUT EXPRESS EXCLUSION IMPLICIT EXCLUSION