Law Assignment – Contract Law

The main issues are whether or not the court would consider that the restrictive covenant in issue is void for contrary to public policy. The relevant legal principles are: A covenant must be no wider than is necessary to protect the legitimate interest of the employer. Attempting to stifle competition is impermissible and it is irrelevant that the employer taught the ex-employee everything he knows. The court area particular to prevent contracts, which seek to prevent an employee from practicing his livelihood. The courts have regard to three facts: -The period during which the restriction purports to apply.

-The geographical area in which the restriction purports to apply. -The scope of the restriction. Ho Wing-cheong t/a Hong Leong Securities v. Graham Margot (1987) D worked as a stockbroker for P. There was a covenant that D could not seek employment with any other securities firms within 3 years after leaving this employment. Held: 3 years was too long to protect P’s legitimate interests. More latitude may be allowed, where the restraint is directed solely towards protecting a company’s goodwill by prohibiting solicitation of established clients.

A contract in restraint of trade is prima facie void: Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd (1968) Any term of a contract restraining trade is void except where it is shown to be reasonable and the court will not uphold a contract with such a term unless that term can be released. Kao Lee & Yip v. Edwards (1994) D worked with P solicitor firm as a salaried partner. The agreement contained a clause that if D left P, could not work as a solicitor for 5 years in the whole world. Held: The covenant was too wide in terms of both scope and duration and was void.

Applying the above legal principles it would appear that the restrictive covenant to the effect that Andrew is not allowed to work for another accounting firm in Hong Kong for a period of 3 months after the termination of employment is not too long and therefore is not void on the grounds of contrary to public policy. Part B (i) The main issue here lies in whether or not Fred’s silence (by not returning to Derrick) is amounted to acceptance of goods, i. e. the book and hence, has to pay Derrick $500. According to the law, acceptance is ‘an absolute and unqualified consent to all the terms of the offer’.

Any attempt to vary the terms of the offer, may amount to a counter offer, destroying the original offer. If there is no stipulated method of acceptance, then the offeree can accept by any reasonable method, which can include conduct. Brogden v Metropolitan Railway (1877) D did not expressly agree to take coal under a contact setting out terms, but deliveries and had paid initially on the terms. Held: Acceptance was implied by conducts. If there is a stipulated method like acceptance must be in writing, the offeree must use the method.

There are exceptions that silence cannot be an acceptance and an alternative equally effective acceptance. Felthouse v. Bindley (1862) Negotiation regarding the price of a house. P wrote: “If I do not hear from you, I consider the house is mine”. D did not reply. Held: D’s silence did not constitute an acceptance to the offer by P. Applying the above legal principles, it would appear that Fred’s silence could imply acceptance by conduct. Since on the letter, there was a clear requirement of returning the book to Derrick if Fred did not want the book within 7days.

However, we would also need to take note of another issue, whether or not, the book was sent on Fred’s request or Derrick just randomly sent books to ask for payment. According to the Unsolicited Goods and Services Act 1971, it defines “unsolicited” as in relation to goods sent to any person that they are sent without any prior request made by him or on his behalf. It confers the recipient of the goods with the right to: “Use, deal with or dispose of {the goods} as if they were an unconditional gift to him, and any right of the sender to the goods shall be extinguished. “

The “silence by acceptance” rule prohibits, “inertia selling” whereby businesses may deliver unsolicited goods and then demand for payment on the basis that the “customer” has accepted the goods by not rejecting them. The law is clear that silence in face of an offer should be viewed as a rejection not an acceptance. Applying all the above legal principles, he is not liable to pay Derrick $500 or return the unsolicited book as it would consider an unconditional gift to him. (ii) In the context of the law of contract, consideration is meant by “the price of the other persons promise”.

The law enforces bargains, not bare promises. A bare promise is unenforceable, unless bought by some consideration provided by the other party. There are some certain rules in determining consideration. First, it must be valuable but need not be adequate. In the case of Chappell & Co Ltd v. The Nestle Co LTD (1960), Nestle offered pop music recordings for a nominal sum of money plus three chocolate wrappers. The court held that the wrappers were virtually worthless but to be part of the consideration. Second, it must be sufficient.

This means that the promisor must truly incur dome form of loss, and that promise must truly gain some form of benefit. The court held that Performance of an existing obligation imposed by law in Glasbrook Bros Ltd v. Glamorgan County Council (1925), forbearance to sue, and promise to perform an obligation owed to a third party are good considerations. However, in Stilk v. Myrick (1809) the court held that performance of an existing contractual duty owed to the other party to the contract is not a consideration. Third, it must pass at the time the contract is made (executed consideration) or afterwards (executor consideration).

Re McArdle (1951) the court held that past consideration is regarded as valueless as there is nothing to be carried out by way of consideration when the contract is entered into. However, there is exception when the act is done at the promisor’s request. Pao On v. Lau Yiu-long (1980) the court held that an act before the giving of a promise to make a payment or to the conferment of some other benefit is sometimes consideration for promise. In short, we can conclude that consideration must be valuable not adequate, sufficient and must pass at the time the contract is made with an exception of the act is done at the promisor’s request.