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Lecture 1

LW2903 Business and Law
Lecture 1
Formation of a Contract
Course Intended Learning Outcomes
On completion of this course, students should
be able to demonstrate;
• knowledge on contract law, tort law,
employment law and legal system and
alternative dispute resolution;
• ability to extract legal principles from decided
• the basic skills in understanding and
interpreting legislation, and ability to
identifying and understanding legal issues
relevant to their future occupation; and
• ability to apply and analyse cases to solve
legal issues.
• Coursework: 30%
– Assignment: (30%) to be submitted in Week 6;
• Examination: 70%
– 3 hours examination.
• To pass this course, a student must obtain a minimum
mark of 30% in both coursework & exam with an overall
mark of 40 or above.
• Textbook – DK Srivastava, Business Law in Hong Kong,
(2020) 6th Edition, Sweet & Maxwell. (ISBN: 9789626617359)
What is a contract?
• Definition: A contract is a legally binding
(enforceable) agreement made between two or
more parties.
• If a party to the contract does not perform its
contractual obligations, the other party can go to
the court and seek a remedy.
• Making a contract: Elements
1. Offer
2. Acceptance
3. Consideration
4. Intention to create legal relations
1. Offer
• An offer is a definite promise or proposal to be
bound on specific terms and it has to be
definite, not vague. An offer may be made
orally, in writing or by conduct.
• Distinction between an offeror and offeree.
• An offer distinguished from an invitation to treat.
• Examples: Display of goods in a shop window
or on the open shelves of a self-service shop
(supermarket), Tenders (construction works)
or Auctions (land), Price List and Merchant’s
Catalogue, general Advertisement of goods
(TV & newspaper).
• In Partridge v. Crittenden (1968), the newspaper
advertisement without sufficient details was held to
be an invitation to treat.
– An advertisement – “Bramblefinch…cocks and hens, 25 shillings
• In Carlill v. Carbolic Smoke Ball Co. (1893), a
newspaper advertisement promised to pay £100 to
any person who used the “smoke ball” and still
contracted influenza and also deposited £1,000 with
a bank for future claims. It was an offer, not a mere
• Mere puff?
Carlill v. Carbolic Smoke Ball Co. (1893)
Counter Offer
An offeree may, upon receiving an offer, suggest
qualifications. If the intention of the offeree is to reject
the offer that he has received, then he is said to make a
A counter offer destroys the original offer and
introduces a new offer, which the original offeror
(offeree of the new offer) may now accept.
Difference between a counter offer and a request for
further information
Acceptance means acceptance of an offer by the
offeree who is willing to be bound by the terms of a
contract or all the terms of the offer.
Can silence amount to acceptance? (Felthouse v
Bindley [1862])
Communication of Acceptance
• Acceptance is not effective until it is
communicated by the offeree to the offeror.
• The offeror may prescribe the method of
• What happens when there is no prescribed
method of communication?
• Acceptance must take place before the offer is
revoked. Unlike an offer, acceptance cannot be
Exceptions to the general rule on Communication
1) Unilateral contract: where the terms of the offer show that
it may be accepted by performance, the performance of
that act is in itself an adequate indication of an assent.
2) Postal Rule: to protect the offer from delays in the postal
system – Adams v Lindsell [1818] : See: Household Fire
and Carriage Accident Insurance Co v Grant (1879) and
the case of Brinkibon Ltd v
Stahlwarenhandelsgesellschaft GmbH [1983]
3) Instantaneous communication - Entores v Miles Far
East Corporation [1955] – communication by telex
4) Auctions
• Consideration and Intention will be
discussed next week