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Approaches for defining contracts

15 January, 2016 - 09:11

A contract requires the consensual expression of intent by the parties. However, not all consensual acts constitute contracts. Please go through the following Case Study.

Case Study 1.2

The ‘kow-tow’ case

Judgment of the people’s court in Bishan County Chongqing Municipality dated 8 November 2000

(Published here)

The defendant built a pile of sand in front of the claimant’s restaurant, causing prejudice to the claimant’s business. The claimant complained about the defendant’s conduct. The defendant went to the claimant’s restaurant in a luxurious car. The claimant asked the defendant to remove the pile of sand. The defendant refused, making rude comments. The claimant said, ‘You own a luxurious car, so what?’ The defendant took over the conversation, ‘If you greet me as gandie and kow-tow, I will give you the car.’ Hearing this, the claimant immediately performed a kow-tow and called him gandie. The defendant refused to give the car to him as promised. The claimant commenced legal proceedings against the defendant.

Do you think that the defendant’s promise constitutes a valid contract of gift?

It was held that by asking the claimant to greet him as gandie and kowtow, the defendant’s intent was just to embarrass the claimant. However, the claimant’s conduct was also in lack of good faith. As the defendant did not deliver possession of the car to the claimant, nor did he register the transfer, the alleged contract of gift between the parties was invalid. In accordance with article 55 of the General Principles of Civil Law, and articles 5, 186 and 187 of the Contract Law, the claimant’s claim was dismissed. Obviously the parties did not intend to create any contract in such circumstances.

There are two essential elements of a contract under Chinese law: (1) an expression of intent; (2) the expression of intent having legal significance. A simple test is whether the act is embodied with civil rights and obligations. At common law, the equivalent question is whether there is any intention to create legal relations.

At common law, consideration is an essential element of a contract, but there is no equivalent concept in Chinese law. In Case Study above, assuming that common law applied, the court would have held that the promise did not constitute a contract due to the lack of consideration. In Chinese law, on the contrary, the court has to rely on the ground of lack of expression of intent with legal significance.

Activity 1.2

Five persons enter into an agreement that each of them will buy a lottery ticket every day by rotation with a fixed set of numbers. One day, it is Peter’s turn to buy the lottery ticket, but he forgets. It turns out that the winning numbers are those they have chosen. The other four sue Peter for compensation.

Is Peter liable to compensate the other lottery group members?

Self-test 1.2

David invites Mary to watch a movie together. Mary accepts, but does not turn up. David feels sad, and goes to a pub to drink. When he returns home, he is so drunk that he drives in the wrong lane and is seriously injured. He sues Mary for damages, including medical expenses and damage to his car. Do you think his claim will be upheld? Please explain.