Contracts in Hong Kong Law? These are the six conditions required for a contract to be valid

A contract is an integral part of a business transaction. It establishes the rights and obligations of the parties and provides legal protection for the transaction. What are the basic requirements for a valid contract? In this article, we will analyze the six basic conditions of a contract from the perspective of Hong Kong law.

What is a “contract” in Hong Kong law?

In the context of Hong Kong law, “contract” reflects the process of reaching an agreement. In the context of commercial activities, Hong Kong does not have a specific code for contracts. Since the handover of Hong Kong, relevant cases in the United Kingdom and other common law jurisdictions are still of reference value to Hong Kong, and the courts generally take into account and draw on the judicial experience of other common law jurisdictions.

A “contract” in Hong Kong is a legal act formed out of the mutual agreement of the parties, including but not limited to property sale and purchase contracts, employment contracts, insurance contracts, procurement contracts, loan agreements and guarantee contracts. Contracts can be entered into orally or in writing. However, certain types of contracts, such as cheques, insurance contracts, transfer of shares, installment payments, sale or lease of real estate, etc., must be in writing under Hong Kong’s mandatory rules and regulations.

What constitutes a valid contract?

To ensure that a contract is legally valid, one of the Hong Kong judges’ judgment can be referred to as “Based on the basic principles of contract law, three key elements are required for the formation of a contract: an offer, a promise, and a cause of the contract”.

Of course, in practice, other factors such as the certainty and enforceability of the terms of the contract need to be taken into account. According to the Center for Law and Information Technology Studies of the University of Hong Kong, the following are the 6 common conditions for a valid contract:

1. Intention to enter into a legally binding contract

First, both parties must intend to enter into a legally binding contract. This means that both parties understand and accept that once the contract is signed, they must abide by the terms and conditions of the contract. If one party does not have this intention, then the contract may not be legally recognized.

2. Offer

An offer is a proposal with specific conditions made by one party (the offeror) to another party (the offeree). The offer should be clear and must show the offeror’s willingness to form a contract as soon as the offeree accepts it.

3. Undertaking

Acceptance of an offer or commitment is the offeree’s explicit response to the offer. Acceptance of an offer can be verbal, written or behavioral, such as payment or provision of goods. A contract can only be formed when the offer is accepted.

4. Consideration (cause)

Every valid contract must involve some consideration, i.e. a mutual benefit. This can be in the form of money, goods, services, or a promise to do or not to do a certain act. The consideration must be of substantial value and agreed to by both parties at the time the contract is signed.

5. Contracting status

Contracting status means that both parties to the contract must be legally competent to enter into the contract. If a party is a minor, mentally ill, or legally incompetent, the contract may not be valid.

6. Uncertainty

Finally, there must be no uncertainty about the content of the contract. The terms and conditions of the contract must be clear and there should be no ambiguity or uncertainty. If there is uncertainty in a contract, then the court may find that the contract is void. The above information is for reference only. If you have any questions or information regarding tax return (personal tax return, corporate tax return, accountant tax return), you are welcome to contact our professional advisors and we will provide you with a free quote and consultation service later.