Hong Kong Legal Case Study

Synopsis

The case situation is concerning the business deal between Charles and Alan. There are 2 main issues to discuss in order to confirm whether there is any contract between them. First, is there any offer and acceptance between two parties. Second, will the promise made by Charles keep an offer open binding for Alan.

These two areas will be examined through analyzing the elements under the law of contract: requirements of valid contracts and legal binding of promises.

Essential elements of a valid contract

Two of the essentials in forming a valid contract are offer and acceptance and consideration. Offer refers to an expression of willingness to form and agreement on the terms made by a party (i.e. the offeror) with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed (i.e. the offeree). An invitation to treat is a statement which indicates the wish of the statement maker to negotiate. It is important to decide whether a statement is an offer or an invitation to treat. If the statement is an offer and it is accepted, a contract may result. If the statement is an invitation to treat, it cannot be accepted as it is merely an invitation to make an offer. In short, if a statement is made to one specific person, it will constitute an offer; but if it is made to a group of people, it will constitute an invitation to make an offer. Acceptance of the offer is the process which brings an agreement into existence and fixes the terms of the contract. Statements which are made after the offer has been accepted cannot be the terms included in the original contract. The process of acceptance must conform with a number of well-established general: the offeree must agree to all the essential terms of the offer, acceptance cannot be deemed or assumed and acceptance must be communicated to the offeror.

Advertisement - Invitation to treat

In the case situation, “The rare antique vase is on offer for $1,500,000.” was stated in the advertisement placed by Charles. This is not an offer but an invitation to treat. Generally, advertisements are invitations to treat since they do not show clear intention. However, there are exceptional cases. In Carlill v Carbolic Smoke Ball Co (1893) (note 1), the company advertised in a number of newspapers saying that they would reward $100 if customers still caught influenza after using their smoke ball 3 times daily for 14 days. The advertisement of Carbolic Smoke Ball Co (note 1) is an offer because it supplied with detailed information, not only a stated price. It stated clearly that customers can claim a sum of money which had already deposited into the bank by Carbolic Smoke Ball Co if its ball could not prevent them from catching influenza. However, Charles’s advertisement is not detailed enough. It only stated the price of the vase and there was no other information. Thus, it is only an invitation to treat but not an offer.

Offer and counter offer

Offerors refer to the ones who make offers to offerees with the intention to enter a contract. Alan was the offeror because he gave an offer of $1,250,000 to Charles for purchasing the antique vast. However, Charles did not accept the offer and made a counter offer of $1,400,000 to Alan. Alan needed one week for consideration