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Contract Law in Hong Kong - Guide for Investors

Contract Law in Hong Kong

Updated on Monday 05th July 2021

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The contract law in Hong Kong is the sum of rules, regulations and legal provisions which govern the conclusion of agreements, regardless of their purpose. Two parties interested in entering an agreement must be fully aware of the legal implications of signing such a document. 
 
The contract law covers a wide range of agreements, but some areas are regulated through specific laws in the field in which they are concluded. Employment contracts are such an example and the reason for this is that the employment law has its own particularities compared to the common law.
 
While any individual or corporation is entitled to conclude a contract, the law restricts this capacity in case of minors, mentally ill individuals and corporations. The latter must also pay attention to the Company Law when engaging in any economic or business agreements.
 
Before entering into any contractual relationship, either for business or personal purposes, it is advisable to seek the services provided by the representatives at a law firm in Hong Kong. A lawyer will be able to help you draft or edit a contract and understand the real legal implications of entering a contractual relationship.
 

Laws governing agreements in Hong Kong

 
The Hong Kong contract law, like the common law, has been influenced by the common law of England. The legal background that influences any written agreement between two parties in Hong Kong is usually the Basic Law or the common law. Thus, the contract can include elements of civil law, commercial law, local law or other legislation adherent to the field in which the contract will be enforced. 
 
Understanding ways in which contract law has developed in Hong Kong can help investors, entrepreneurs and individuals interested in signing agreements for personal purposes. When drafting agreements with a team of local experts, such as out lawyers in Hong Kong, one can draft a document that will reflect proper intention and will be able to interpret contractual terms as well as bring the needed rectifications.
 

Concluding an agreement in Hong Kong

 
There are several elements that must be present in every contract in order for it to be considered valid:
  • - Offer: the intention to enter into a legal relation expressed through the offer made by one of the parties;
  • - Acceptance: the other party’s acceptance of the aforementioned offer according to the specific terms;
  • - Consideration: benefits awarded to the party accepting the offer; must be sufficient.
  • - Certainty: the terms of the agreement must be valid and the parties must have the legal ability to enter into an agreement; the terms used in drafting the document must not be ambiguous or meaningless.
 
The certainty of the contract is an issue that can be ensured when choosing to work with a team that has drafted the type of agreement you are seeking to conclude. Our lawyers are able to help you express the terms in a manner that is approved by law and that will not be considered meaningless or void. Failure to draft a comprehensive document may result in a court being able to declare the agreement void for uncertainty.
 
Some of the issues that can be covered by the clauses defined in the document are the following:
 
  1. Terms: those that are expressly agreed upon and that both parties wish to include in the agreement;
  2. Representations: the statements that are made during the contract negotiation phase; these do not have a promissory nature;
  3. Warranties: the terms that are secondary to the main ones expressed in the agreement; a breach of warranty can allow the harmed party to claim damages for breach of contact, however, it is not grounds for the cessation of the agreement;
  4. Force majeure: a clause that excepts one or both parties from their contractual duties during the course of uncontrollable events, such as natural disasters; a version of this clause is frustration, the situation in which an event makes the performance of the contract impossible or illegal as opposed to how the parties originally conceived of it at the time the contract was executed;
  5. Termination: The contract can stipulate the manner in which it can be terminated and how damages and remedies can be awarded to one of the parties if the other has failed to meet its duties and responsibilities under the agreement.

Recognition of foreign judgments

 
In many situations, when drawing up a contract in Hong Kong, the agreement will be between legal entities or individuals who are not based in Hong Kong, foreign companies or foreign investors, or subsidiaries/branches of foreign companies in the Special Administrative Region. An international contract will need to include a governing law clause, one that will expressly stipulate the chosen applicable law.
 
For these international agreements, especially for those related to the provision of services or international trade, where a foreseeable international implication is in place, our lawyers in Hong Kong advise clients to keep in mind the manner in which the contract will be enforced in other jurisdiction as well as how foreign judgments will influence the contractual matters.
 
A foreign judgment can be enforced under The Foreign Judgments Ordinance of the Laws of Hong Kong and a prior registration must be made. This registration is required in order to facilitate reciprocal recognition and enforcement.
 

Dispute resolution in contractual matters

 
Along with a governing clause, contracts will include the manner in which the parties choose to resolve the disputes that can derive from the arrangements made under the agreement. The governing law will also indicate to a certain extent the manner in which the disputes will be solved. In most cases, the choice of jurisdiction for solving the disputes will be the same as that for the governing law, otherwise, potential complications may arise.
 
An arbitration clause is frequently included in contracts as an alternative dispute resolution method. If the parties agree to solve the issues through arbitration, they can greatly decrease the chances of having to resort to litigation. When such a clause is included, it will stipulate the seat or arbitration as well as the qualifications of the arbitrators and how they will be appointed (along with the language of arbitration, most commonly in international contracts).
In case of legal disputes, a lawyer will be able to help you find the best way to solve the case, either through litigation, arbitration or mediation.
 

Doing business in Hong Kong

 
Hong Kong is an international business hub. Foreign investors have various business prospects in sectors such as financing and insurance, real estate, professional and business services, accommodation and tourism, import/export trade and wholesale.  Business and client agreements as well as employment agreements are required irrespective of the chosen business field. When drafting these documents that bind two or more parties, it is advisable to seek proper legal counsel, just as before entering into an agreement in any of the aforementioned business sectors or others.
 
Our experts highlight some Hong Kong statistics below, as presented by the Census and Statistics Department:
  • Population: 7,474,200 (2020 year-end)
  • Gross national income: increased by 7.5% in the first quarter of 2021;
  • Direct investment income increased by 4.7% in 2021 compared to 2020.
 
You can contact our law firm in Hong Kong for more details on concluding any types of contracts and legal assistance for a variety of matters.