I OVERVIEW

The well-developed legal system in Hong Kong plays a crucial role in maintaining Hong Kong as a prominent commercial and financial centre.

i Court structure in Hong Kong

The basic court structure (in ascending order) in Hong Kong for the purpose of commercial litigation is as follows:2

  1. the District Court;
  2. the Court of First Instance (of the High Court);
  3. the Court of Appeal (of the High Court); and
  4. the Court of Final Appeal.

ii Minimum amount in disputes

The majority of commercial litigation in Hong Kong is commenced in District Court (the amount of the claim must be over HK$50,000 but not more than HK$1 million) or the Court of First Instance (which has unlimited jurisdiction over all civil matters).

With effect from 3 December 2018, the civil jurisdiction limits of the District Court and the Small Claims Tribunal will be increased as follows:3

Existing limit New limit
General financial limit of the civil jurisdiction of the District Court HK$1 million HK$3 million
Financial limit for land matters of the District Court (in terms of the annual rent or the rateable value or the annual value of the land) HK$240,000 HK$320,000
Limit for the equity jurisdiction of the District Court where the proceedings do not involve or relate to land HK$1 million HK$3 million
Limit for the equity jurisdiction of the District Court where the proceedings wholly involve or relate to land HK$3 million HK$7 million
Limit for the Small Claims Tribunal HK$50,000 HK$75,000

iii Time limit in bringing a claim

The time limit for starting a civil claim in Hong Kong is prescribed in the Limitation Ordinance, Cap 347. A civil action for breach of a commercial contract generally must be instituted within six years4 from the date on which the breach of contract happened. The limitation is 12 years for contracts under seal (specialty).5 In commercial cases, it is not uncommon for a contractual provision to impose a time limit shorter than the time allowed under the Limitation Ordinance.6

iv Bringing proceedings in the commercial list

Complex commercial cases involving substantial amounts will be directed by the court to the Commercial List, often referred to as the Hong Kong Commercial Court,7 for prompt and efficient resolution of commercial disputes.

II CONTRACT FORMATION

A contract is the major medium through which commercial transactions are effected.

i Elements of contract

To be legally enforceable, a contract must contain the following elements:

  1. an agreement;
  2. the intention to create legally binding relations;
  3. the capacity to enter into the agreement;
  4. consideration (unless the agreement is contained in a deed); and
  5. certainty of terms.

Agreement reached?

An agreement is normally reached when an offer made by a party (the offerer or promisor) is accepted by the other party (the offeree or promisee). An offer is an indication to enter into a contract on specified terms, made in such a way that it is to become binding once it is accepted by the offeree.8 Acceptance is the unequivocal acceptance to all the terms specified in the offer. An agreement is thus reached as soon as the offeree accepts the offer.

An offer must be distinguished from an invitation to treat. An invitation to treat is only a display of willingness to receive offers, such as a display of goods on shelves in a self-service store.9 Both offer and acceptance can be made by words or conducts. The courts normally apply the objective approach, in other words, how a reasonable person would interpret a party's intention from his or her conduct in all the circumstances, in deciding whether the parties have reached an agreement. An offer may be terminated by various means. The most common methods include rejection by the offeree, revocation by the offerer and lapse of time. Once an offer has been rejected by the offeree, it cannot be accepted at a later stage.10

Consideration given?

Consideration, in essence, means 'something of value in the eye of the law'11 (sufficiency).12 An agreement is not binding unless consideration is given by the parties or it is made in a deed. However, consideration need not be 'adequate', in other words, the court will not concern itself with whether the value of consideration is equivalent to that which is promised in return.13

Although the offeree must generally supply the consideration, it is not necessary that the consideration should be intended to benefit the promisor. Past consideration alone is generally not valid support for a promise.14 However, there are exceptions to this general rule. One exception is where the promisor requested the act to be carried out.15 This exception could apply in resolving commercial disputes where the parties must have understood that the act was to be remunerated.

Terms of contract certain?

An agreement may be held to fail for uncertainty, 'where the parties have expressed themselves in language that is too uncertain, vague or unintelligible'.16 The courts will endeavour to find practical meaning in commercial contracts and are reluctant to strike down as too vague and uncertain agreements that businessmen have made and acted upon.17 The court also has the power to sever a meaningless term, leaving the rest of the contract enforceable in law.18

ii Third-party beneficiaries

In common law, the doctrine of privity of contract dictates that a third party cannot sue on a contract intended by the parties to be for his or her benefit.19 A way of circumventing the injustice or commercial inconvenience placed by the privity doctrine could be by finding a collateral contract between the contracting party and a third party.20

The doctrine of privity of contract was modified by the Contracts (Rights of Third Parties) Ordinance (Cap 623), which came into effect on 1 January 2016. The Ordinance (Cap 623) allows a third party to enforce a term of a contract (including a term that excludes or limits liability) if '(a) the contract expressly provides that the third party may do so'; or '(b) the term purports to confer a benefit on the third party'.21 Notably, classes of contract set out in Section 3(2) are excluded from the Ordinance.

iii Promissory estoppel

A party (the promisee) may invoke the doctrine of promissory estoppel to prevent the other party (the promisor) from enforcing his or her strict legal rights under a contract. It occurs where it would be unjust or unconscionable for the promisor to go back on his or her promise not to enforce his or her contractual rights after detrimental reliance was placed by the promisee on such promise. Waiver is analogous to promissory estoppel.22 A promissory estoppel might arise where:23

[T]he parties are in a relationship involving enforceable or exercisable rights, duties or powers;

or

[O]ne party (the promisor) by words or conducts, conveys or is reasonably understood to convey a clear and unequivocal promise or assurance to the other (the promisee) that the promisor will not enforce or exercise some of those rights, duties or powers;

or

[T]he promisee reasonably relies upon that promise and is induced to alter his position on the faith of it, so that it would be inequitable or unconscionable for the promisor to act inconsistently with the promise.

Nonetheless, as a general rule, a promissory estoppel is suspensory, not extinctive. It does not permanently alter the legal relationship between the parties; in other words, the promisor may resile from his or her promise on (1) giving reasonable notice and (2) providing to the promisee a reasonable chance to resume his or her position.24 The promise will only become final and irrevocable if the promisee cannot resume his or her position.25

iv Quantum meruit

If the court takes the view that the contract is too uncertain to be enforced, the court may order that a reasonable sum of money be paid for services rendered or work done.26

III CONTRACT INTERPRETATION

i Interpretation of contract terms

Interpretation of a document or a contract is the ascertainment of the meaning that the document would convey to a reasonable person having all the background knowledge (factual matrix) that would reasonably have been available to the parties in the situation in which they were at the time of the contract.27

The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent.28 Equally, the parties' subsequent conduct is not normally admissible.29 The court interprets terms in their context in both statutory and constitutional interpretation.30

In resolving the ambiguity of language in a contractual term, it is relevant to consider whether a particular construal leads to a very unreasonable result, since the 'more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear'.31 In commercial litigation, the court construes terms in light of business common sense, namely, 'in the way in which a reasonable commercial person would construe them'.32

ii Conflict of law

In commercial litigation, it is uncommon for a contract to cover more than one jurisdiction. In those circumstances, there is a need to determine which law governs the contract or any part of it. In Hong Kong, conflict of law is regulated by common law, which recognises the parties' freedom to contract. Thus, first, the court looks at the express terms of the contract to see whether the proper law was expressly provided for.33 In the absence of an express choice, the court considers whether, from the terms and nature of the contract, and from the general circumstances of the case, there are any other indications of the parties' intention.34

If there is no indication of the parties' intention, the court goes on to consider the system of law with which the contract has its closet and most real connection.35 In practice, in the absence of an express choice of law clause, since the tests of inferred intention and close connection merge into one another, the courts tend to move straight to the test of close connection.36

IV DISPUTE RESOLUTION

There are various alternative dispute resolutions available in Hong Kong, including arbitration and mediation. Parties in commercial transactions should include in their contracts terms of dispute resolution. In many commercial contracts, such as those in the area of construction or insurance, there will be an arbitration clause requiring the parties to arbitration before commencing legal proceedings.

Arbitration is founded on consent and may offer the advantages of speed, privacy, informality and flexibility. The parties may select an arbitral tribunal with experience in the subject matter of the dispute. Further, the arbitral award is enforceable by law, both locally and internationally. The Hong Kong Arbitration Ordinance (Cap 609) came into effect on 1 June 2011. It requires arbitration agreements to be in writing.37 The court may stay court proceedings in favour of arbitration38 and it has limited power to assist and supervise in arbitral proceedings, such as by granting interim measures.39 Crucially, the parties may seek the court's assistance in enforcing arbitral awards, whether made in or outside Hong Kong.40

In all civil proceedings in Hong Kong, there is a voluntary mediation procedure41 made available to the parties, which is normally deployed in the early stage of the proceedings to encourage settlement. There may be cost implications if a party unreasonably refuses to participate in mediation.

V BREACH OF CONTRACT CLAIMS

A breach of contract may arise in the following circumstances:42

  1. failure to perform contractual obligations (an actual breach);
  2. defective performance of contractual obligations (an actual breach); or
  3. refusal or inability to fulfil contractual obligations due in the future (an anticipatory breach).43

Broadly speaking, there are two types of breaches: one that allows a party to sue for damages and another that discharges a party from further performance under the contract (in addition to a claim for damages). The burden of proof of repudiation is on the party who alleges it.44

i Materiality of breach

The following events allow the innocent party to terminate the contract and treat himself or herself as discharged from further liability under the contract:

  1. the guilty party has shown a clear unwillingness to satisfy the contract ('renunciation');45
  2. performance has been rendered impossible by the guilty party's breach;46
  3. there has been a breach of an important term of the contract ('condition'); or
  4. there has been a breach of an intermediate (or innominate) term that '[goes] to the root of the contract'.

A contractual term may be classified as a condition if it has been so categorised by statute47 or by judicial decision,48 or if the parties have so agreed in their contract.49 Where the failure of performance is a breach of a term classified as a warranty (i.e., a non-essential term), it will merely entitle the non-breaching party a right to damages.50 In contrast, where the failure of performance is a breach of an intermediate term, the non-breaching party will only be entitled to terminate the contract (in addition to claiming damages) if the breach in question deprived him or her of 'substantially the whole benefit' of the contract.51 Notably, the effect of the breach will only be determined after the breach.

ii Right of election

A repudiatory breach normally allows the innocent party the right to claim damages for the breach and the right to elect to:

  1. bring the contract to an end, in other words, terminate the contract; or
  2. accept the breach and treat the contract as continuing, in other words, affirm the contract.

If the innocent party elects to terminate the contract and sue for damages, he or she is discharged from further performance. For the defaulting party, his or her primary obligation to perform is replaced by a secondary obligation to pay damages for the loss resulting from failure to perform the primary obligation.52

Where a repudiatory breach takes place, in order to terminate the contract, 'the innocent party must clearly and unequivocally accept the repudiation.'53

VI DEFENCES TO ENFORCEMENT

There are a number of defences available to enforcement of a contract. Most notably, a contract cannot be enforced unless all its essential terms are established with reasonable certainty. In this section, the most notable defences are discussed, specifically, uncertainty of essential terms, duress and undue influence, and unconscionable contracts.

i Uncertainty of essential terms

Parties to a contract sometimes fail to reach an agreement because their agreed terms are too uncertain or some of the essential terms are simply missing.54 An objective standard is used when determining whether terms are too uncertain. The objective standard is that of a reasonable person in the position of the contracting parties. When the parties have failed to agree on essential terms because some of them were missing or because some were unclear, Hong Kong courts will not make the contract for the contracting parties. If any unclear term is essential in the pertinent way, the entire contact will be void for uncertainty even if the parties intended it to be contractually binding.55

Lack of consideration is a defence to enforcement of a contract as the consideration or price of the deal is always an essential term in any contract. A contract that fails to clearly establish consideration with sufficient certainty will be void.56 When the parties fail to agree on the price to be paid (in monetary terms or otherwise) for any obligations to be performed, a contract may fail for uncertainty of consideration.

However, failure to reach any agreement as to consideration in a contract for the sale of goods or the supply of services will not cause the contract to be void for lack of certainty.57 Section 10 of Sale of Goods Ordinance (Cap 26) and Section 7 of Supply of Services (Implied Terms) Ordinance (Cap 457) provide that, in the absence of agreement between the parties, the consideration shall be a reasonable price or charge.

The general rule is that failure to settle all essential terms with reasonable certainty is adequate as a defence to enforcement of a contract as it can suggest a lack of intention between the parties to create legal relations.

ii Duress and undue influence

A contract may be voidable on the ground of duress or undue influence if it was entered into under some forms of threat or pressure. Duress is confined to violence or threats of violence or imprisonment by one contracting party to the other or others whereas undue influence consists of pressure by unfair persuasion.58

Duress is categorised into different types. Duress to the person consists of 'violence or threat of violence to the person or imprisonment or threat of imprisonment'.59 In order to rely on duress, one must show that the contract was entered into while he or she was subjected to the other party's actual or threatened violence.60

Duress to property (or goods) consists of unlawful seizure or detention or threat of seizure or detention of property. In Hong Kong, this form of duress involving unlawful damaging or destruction of a person's properties extends to include land.

Economic duress is 'illegitimate economic pressure in the form of threat to a person's economic well-being, business or trade, with the result that a contract is entered or payments are made'.61 It is necessary to institute pressure amounting to coercion of the will of the victim or the absence of choice.62 In such a situation, the pressure exerted must be illegitimate and must constitute a significant cause inducing the victim to act.

Whereas duress deals with forced pressure directed against the victim's life, property or economic interests such that his or her will is diverted and his or her practical alternative options are eliminated, undue influence deals with the more delicate situation where one party unfairly abuses his or her position of trust or influence over the other in order to obtain the other's agreement to a contractual relationship.63

iii Unconscionable contracts

Hong Kong's statutory models for unconscionable contracts are from Australia where unconscionability has gained more traction than in England. The Unconscionable Contracts Ordinance (Cap 458) came into force in October 1995.

A critically important limitation on the scope of the Ordinance is that it applies only to contracts for the sale of goods or supply of services, and only if one of the parties deals as a consumer. Commercial contracts and contracts for an interest in land, intellectual property and securities are outside the reach of the Ordinance.64

The onus of proof lies on the party asserting that a contract is unconscionable.65 Where a court finds that a contract, or any part of a contract, was unconscionable in the circumstances relating to the contract at the time it was made, the court has three powers: (1) refuse to enforce the contract; (2) enforce the remainder of the contract without the unconscionable part; (3) limit the application of, or revise or alter, any unconscionable part so as to avoid any unconscionable result.66

Under the Ordinance, unless the party against whom the plea is raised knew or ought reasonably have known of any weakness, which impairs his or her ability to make a judgment as to his or her own interests, and has taken advantage of it, the weakness of the party pleading unconscionability is not a factor.

VII FRAUD, MISREPRESENTATION AND OTHER CLAIMS

Contracts may be unenforceable because of fraudulent inducement, or misstatement or misrepresentations. Misrepresentation is often categorised into three types: fraudulent, negligent and innocent. The significance of this categorisation is that different remedies are available for each type.

i Fraudulent misrepresentation

Given the possibly grave civil and criminal consequences, fraudulent misrepresentation is difficult to prove. Hong Kong follows the general principles set out in Derry v. Peek.67 Lord Herschell said, 'fraud is proved when it is shown that a false representation has been made (1) knowingly; or (2) without belief in its truth; or (3) recklessly, careless whether it be true or false.'68 The test to be applied is a subjective one.

In considering fraudulent misrepresentation made recklessly, the Hong Kong Court of Appeal has referred to Lord Herschell's reasoning in Derry v. Peek and emphasised that the required absence of care exhibited by the representor is not a synonym for negligence.69

Even if one makes a misrepresentation out of the most admirable rationale, he or she may still be liable for fraud.

Where a claim of fraudulent misrepresentation is made, the burden of proof remains the civil standard of balance of probabilities. Although the civil standard is applicable, greater evidential strength will be required to satisfy the burden of proof.70

Following the English precedent, it is clear that a representor of a fraudulent misrepresentation is liable even if the representee was not in privity of contract with him or her. Since the House of Lords decision in Hedley Byrne & Co Ltd v. Heller & Partners Ltd, non-fraudulent but negligent misrepresentation is actionable even where there is no contract between the representor and representee.

An exemption clause in a contract will not release a person from liability for fraud implicated. Indeed, exemption clauses are under statutory rule in Hong Kong and inspection of the courts. An argument has been successfully made where an exemption clause could not exonerate the person making misrepresentation where the person induced the representee to enter into the contract in the first place.71

ii Negligent misrepresentation

Prior to 1963, it was thought that there was no liability for negligent misrepresentation unless the representor owed a contractual duty of care to the representee. Since 1964, legal liability for negligent misrepresentation has been firmly established.72

Then, in the context of commercial litigation the question is in the absence of any contractual relationship between a representor and representee whether a representor owes a duty of care to the representee. That is, tort of liability for economic loss can be invoked in such situation. In 1990, the House of Lords in Caparo Industries plc v. Dickman73 confirmed that liability for economic loss can be established where damage is foreseeable; there is a relationship of proximity between the plaintiff and defendant; and it is just and reasonable in the circumstances of the case to impose liability on the defendant.74

Apart from common law principles, Hong Kong has the Misrepresentation Ordinance (Cap 284), which has created a wider cause of action for negligent misrepresentation. Where the representor and representee are in contractual privity, liability arises even when they are not in any special relationship. The burden of proof is shifted to the representor to prove that he or she had reasonable grounds to believe that the representation to be true. Under the Ordinance, the representee does not need to prove the negligence of the representor.

VIII REMEDIES

In Hong Kong, as held by Steyn LJ in Surrey County Council v. Bredero Homes Ltd,75 there are largely three separate interests to protect: expectation interest; reliance losses; and restitutionary interests.

i Expectation interest

The general common law rule dictates that where a party suffers a loss by the other party breaching the contract, he or she is to be placed in the same position as if the contact had been performed. Thus, the courts do whatever they can to place the suffered party in as good a situation financially as far as it can be done. The courts have found largely two different means of fulfilling the expectation. The first is to reinstate the financial position to that before the contract was made. The second is to compensate costs of curing the defects in performance.76

ii Reliance losses

Reliance interest is often claimed in speculative transactions. As held by Fletcher Moulton Lj in Chaplin v. Hicks:77

[B]y reason of the defendant's breach of contract, she has lost all the advantage of being in the limited competition, and she is entitled to have loss estimated . . . They must of course give effect to the consideration that the plaintiff's chance is only one out of four . . . But having considered all this they may well think that it is of considerable pecuniary value to have got into so small a class, and they must assess the damages accordingly.

In certain situations, a party has to choose the measure of damages for loss of profit or wasted expenditure.

iii Restitutionary interest

Restitutionary interest is intended to deprive the defendant of the benefit gained under the contract; where no price was paid, the plaintiff can demand return of goods sold and delivered.

iv Contributory negligence

Contributory negligence deals with the situation 'where the party suffering the damage contributed to his or her own loss through contributory negligence. In such situation, the suffering party would not be fully compensated'.78

v Equitable remedies

Under equitable remedies, there are two main kinds of remedies: specific performance and injunction. Specific performance is a method the court can use to require the performance of contractual obligations. It is an exceptional remedy as opposed to common law damages. In Hong Kong, specific performance cannot be ordered against the government of Hong Kong in accordance with Crown Proceedings Ordinance (Cap. 300).79 Under Sections 16 and 17 of High Court Ordinance (Cap. 4), the Hong Kong High Court has the power to grant an order for specific performance.80 An injunction is a court order requiring a person to do, or refrain from doing, a particular action.

vi Damages for misrepresentation

Common law damages may be available where the misrepresentation was fraudulent or negligent. Where fraud is established, the plaintiff may bring an action for damages in the tort of deceit. In addition to constituting a tort, fraudulent misrepresentation is encompassed by the crime of fraud, for which the maximum penalty is 14 years' imprisonment.81

The main purpose of the Misrepresentation Ordinance (Cap 284) was to reform the availability of rescission and damages as remedies for misrepresentation. Damages for consequential loss are also recoverable. Under Section 3(1) of the Ordinance, damages can be claimed even where the representee has completed the contract after knowing of the facts.

Section 3(2) of the Ordinance enables the courts to substitute damages 'in lieu of rescission, if . . . it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contact were upheld, as well as to the loss that rescission would cause to the other party'.

IX CONCLUSIONS

Notable forthcoming changes to commercial litigation practice in Hong Kong is that the Law Reform Commission is considering whether to expand the scope of 'representative proceedings by introducing a scheme of 'class actions' for consumer claims. As laws on third-party funding were passed in 2017, allowing arbitration cases to be funded by third parties, the Law Reform Commission is discussing whether existing prohibitions against the use of conditional fees should be lifted for certain types of civil litigation.


Footnotes

1 Athena Hiu Hung Wong and Moses Wanki Park are barristers-at-law at Liberty Chambers.

2 The list does not encompass various other courts and tribunals in Hong Kong.

3 Commencement notices for jurisdictional rise of District Court and Small Claims Tribunal and Small Claims Tribunal (Fees) (Amendment) Rules 2018 gazetted: https://www.info.gov.hk/gia/general/201807/06/P2018070500771p.htm.

4 Section 4(1)(a) of the Limitation Ordinance.

5 Section 4(1)(3) of the Limitation Ordinance.

6 Cases showed that 'the court always gave effect to such a clause and did not regard the same as against public policy': Kanson Crane Service v. Bank of China Group Insurance HCA 4246/2002 (Unreported, 1 August 2003), at Section 14.

7 The Commercial List contains claims arising out of trade and commercial transactions.

8 Commercial contracts are presumed to be legally binding: Gibson v. Manchester City Council [1979] 1 WLR 294.

9 Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401.

10 Lee Siu Fong Mary v. Ngai Yee Chai [2006] 1 HKC 157, at Paragraph 15.

11 For instance, the payment of a mere £1 per year by a widow and her keeping the house in good repair were good consideration for her being allowed to live there for the rest of her life: see Thomas v. Thomas (1842) 2 QB 851, 859.

12 Lush J in Currie v. Misa (1874–75) LR 10 Ex 153, 162 defined it as 'A valuable consideration, in the sense of the law, may consist in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.'

13 Thomas v. Thomas (1842) 2 QB 851.

14 For instance, a promise to reimburse a person's expenditure on home improvements made after such expenditure and improvement had occurred, was not enforceable: see Re McArdle [1951] Ch 669.

15 The exception will only apply upon the fulfilment of the following three conditions: 'An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise. [a] The act must have been done at the promisors' request; [b] the parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit and [c] payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance', per Lord Scarman in Pao On v. Lau Yiu Long [1979] HKLR 225, at p.234.

16 New World Development Co Ltd v. Sun Hung Kai Securities Ltd (2006) 9 HKCFAR 403, [31], per Ribeiro PJ.

17 New World Development Co Ltd v. Sun Hung Kai Securities Ltd (2006) 9 HKCFAR 403, [32], per Ribeiro PJ.

18 Gee Tai Trading Co Ltd v. Sun Wah Oil & Cereal Ltd [1994] 1 HKLR 50.

19 Tweddle v. Atkinson [1861] EWHC J57 (QB); B + B Construction Ltd v. Sun Alliance and London Insurance Plc [2000] 2 HKC 295.

20 Shanklin Pier Ltd v. Detel Products Ltd [1951] 2 KB 854.

21 Section 4(1) of the Ordinance (Cap. 623).

22 Chitty on Contracts, Sweet & Maxwell, 32nd edn., Section 3-104.

23 Luo Xing Juan v. Estate of Hui Shui See (2009) 12 HKCFAR 1, Paragraph 55.

24 Perfect Direct Limited and Another v. Dejin Resources Group Company Limited HCCW 76/2014 (Unreported, 19 June 2015).

25 Ajayi v. RT Briscoe (Nigeria) Ltd [1964] 1 WLR 1326, 1330.

26 British Steel Corporation v. Cleveland Bridge and Engineering Co Ltd (1984) 1 All ER 504.

27 Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 836.

28 ibid.

29 James Miller v. Whitworth Street Estates (Manchester) Ltd [1970] AC 583.

30 Ma CJ observed in Fully Profit (Asia) Ltd v. Secretary for Justice (2013) 16 HKCFAR 351, at Paragraph 15, that 'it is context that is key; context is the starting point (together with purpose) rather than looking at what may be the natural and ordinary meaning of words'.

31 L Schuler AG v. Wickman Machine Tool Sales Ltd [1974] AC 235, per Lord Reid at p.251E.

32 Mannai Investment Co v. Eagle Star Life Assurance [1997] AC 749 (HL), per Lord Steyn.

33 Amin Rasheed Shipping Corp. v. Kuwait Insurance Co [1984] AC 50.

34 Whitworth Street Estates (Manchester) Ltd v. James Miller & Partners [1970] AC 583 at p. 611.

35 ibid.

36 York Airconditioning & Refrigeration Inc v. Lam Kwai Hung trading as North Sea A/C Elect Eng Co HCA008176/1993 (unreported, 16 December 1994).

37 An arbitration agreement 'is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement': see Section 19, paragraph (1), Arbitration Ordinance (Cap. 609).

38 Section 20, Arbitration Ordinance (Cap. 609).

39 Section 45, Arbitration Ordinance (Cap. 609).

40 Section 84, Arbitration Ordinance (Cap. 609).

41 Practice Direction (PD31).

42 Lee Mason, Contract Law in Hong Kong, Sweet & Maxwell, 2011, 19-001.

43 'If, before the time arrives at which a party is bound to perform a contract, he expresses an intention to break it, or acts in such a way as to lead a reasonable person to the conclusion that he does not intend to fulfill his part, this constitutes an 'anticipatory breach' of the contract...', per Cheung JA in Chao Keh Lung Bill v. Don Xia [2003] 4 HKC 660, [2004] 2 HKLRD 11 (CA), Paragraph 26.

44 Lombard North Central Plc v. Butterworth [1987] QB 527.

45 Heyman v. Darwins Ltd [1942] AC 356, 397.

46 See footnote 45..

47 For instance, Section 16(2) of the Sale of Goods Ordinance (Cap. 26) provides that 'Where the seller sells goods in the course of a business, there is an implied condition that the goods supplied under the contract are of merchantable quality...'.

48 For instance, a 'time is of the essence' clause in commercial contracts to ensure timely performance is normally classified as a condition for the purpose of commercial certainty: Union Eagle Ltd v. Golden Achievement Ltd [1997] HKLRD 366. Notably, the court will not lightly classify a term as 'condition' because of the serious consequences of a breach of a condition, namely, allowing the innocent party to terminate the contract, irrespective of the actual effects of the breach.

49 Chitty on Contract, Volume 1 General Principles, Sweet & Maxwell, 32 edn, 12-040.

50 Terms of a contract could be classified as 'being either conditions (any breach of which entitled the innocent party to refuse further performance and treat himself as discharged) or warranties (which merely gave him a right to damages)': Chitty on Contract, Volume 1 General Principles, Sweet & Maxwell, 32 edn, 24-039.

51 Hongkong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, 66.

52 Moschi v. Lep Air Services Ltd [1973] AC 331 at 345, 346.

53 If the party does not do so, they will run the risk of being in breach themselves were they not to perform their side of the bargain.... The basis for this conclusion (often ignored in the business world) is that unless a contract is terminated, it remains in existence for the benefit of the wrongdoer as well as the innocent party: see Chao Keh Lung Bill v. Don Xia [2003] 4 HKC 660, [2004] 2 HKLRD 11 (CA), paragraph 73.

54 New World Development Co Ltd v. Sun Hung Kai Securities Ltd (2006) 9 HKCFAR 403.

55 Although Hong Kong courts would exercise power to strike down contracts for uncertainty in essential terms, non-essential terms in the context of an 'agreement to agree' are permissible and do not render the contract uncertain as long as the parties intend to enter into a binding contract by their provisional agreement. See, LexisNexis Butterworths Hong Kong Contract Law Handbook, Third Edition, [68] Non-essential terms.

56 LexisNexis Ho & Hall's Hong Kong Contract Law, Fourth Edition, [62] Uncertainty in Essential Terms. See, for example, Chan Man Tin v. Cheng Leeky [2008] 3 HKLRD 593. In Chan Man Tin, 'in consideration of the plain loyalty and chastity' of the defendant, the plaintiff promised to provide the defendant with accommodation, material support and to 'cohabit … and live happily together.' It was held that the plaintiff's promise lacked enforceability for want of clarity and certainty because the terms 'loyalty', 'live happily together' were too abstract to constitute consideration.

57 LexisNexis Ho & Hall's Hong Kong Contract Law, Fourth Edition, [64] Uncertainty in Essential Terms.

58 LexisNexis Ho & Hall's Hong Kong Contract Law, Fourth Edition, [415] Duress, Undue Influence and Unconscionability.

59 LexisNexis Ho & Hall's Hong Kong Contract Law, Fourth Edition, [416] Duress, Undue Influence and Unconscionability.

60 LexisNexis Butterworths Hong Kong Contract Law Handbook, Third Edition, [120] Duress.

61 LexisNexis Butterworths Hong Kong Contract Law Handbook, Third Edition, [121] Duress.

62 ibid.

63 LexisNexis Ho & Hall's Hong Kong Contract Law, Fourth Edition, [437] Undue Influence.

64 LexisNexis Ho & Hall's Hong Kong Contract Law, Fourth Edition, [456–457] Unconscionable Contracts Ordinance.

65 Section 5(2) of Unconscionable Contracts Ordinance (Cap. 458).

66 Section 5(1) of Unconscionable Contracts Ordinance (Cap. 458).

67 Derry v. Peek (1889) LR 14 App Cas 337 (HL).

68 Derry v. Peek (1889) LR 14 App Cas 374 (HL).

69 LexisNexis Ho & Hall's Hong Kong Contract Law, Fourth Edition, [304] Fraudulent Misrepresentation. See, Lee Yuk Shing v. Dianoor International Ltd (in liquidation) [2016] 4 HKC 535.

70 LexisNexis Ho & Hall's Hong Kong Contract Law, Fourth Edition, [305] Fraudulent Misrepresentation.

71 F & H Entertainments Ltd v. Leisure Enterprises Ltd (1976) 120 SJ 331, 240 EG 455.

72 LexisNexis Ho & Hall's Hong Kong Contract Law, Fourth Edition, [328] Negligence Misrepresentation.

73 Caparo Industries plc v. Dickman [1990] 2 AC 605 (HL).

74 ibid at 617–655.

75 Surrey County Council v. Bredero Homes Ltd [1993] 3 All ER 705.

76 LexisNexis Butterworths Hong Kong Contract Law Handbook, Third Edition, [139] Remedies.

77 Chaplin v. Hicks [1911] 2 KB 786.

78 LexisNexis Butterworths Hong Kong Contract Law Handbook, Third Edition, [146] Contributory negligence.

79 LexisNexis Butterworths Hong Kong Contract Law Handbook, Third Edition, [148] Equitable remedies.

80 LexisNexis Butterworths Hong Kong Contract Law Handbook, Third Edition, [149] Equitable remedies.

81 Theft Ordinance (Cap. 210).