Agency refers to a type of relationship involving two parties: an agent and a principal. The principal can be an individual person or a company. In an agency relationship, the agent is granted the authority, to act on behalf of the principal. This includes the ability of the agent to create binding contractual relationships between the principal and third parties. So, for instance, if you proceed to sell goods through an agent, you (the principal) are liable under these contracts entered into by your agent on your behalf and you can be sued on such contracts. When an agent creates contractual relationships between their principal and a third party, the agent is not a party to the contract. Thereby, they are not liable to the third party to perform any obligations stated therein. An agent may be liable to perform obligations under a contract, in some cases, if they act outside of the scope of their authority. What duties does an agent owe to a principal? In an agency relationship, an agent owes many duties to their principal: 1) Duty to act in the best interests of the principal In essence, this is a duty imposed on the agent such that when the agent is acting on behalf of the principal, the agent must act in the principal’s best interests. In a commercial context, this would mean that if an agent is negotiating an agreement for his/her principal, the agent must use their skill and knowledge to obtain the most favourable terms for the principal. 2) Duty to avoid conflicts of interest In practical terms, this means, an agent should not act for another principal if the interests of that other principal conflict or may conflict with the former principal. This is unless the agent makes a disclosure of the conflict of interest to both principals and obtains both of their consent. 3) Duty not to make any secret profits The agent should not make a profit or obtain any benefit in the course of acting as an agent, without obtaining the

What is an NDA? An NDA, which stands for a non-disclosure agreement, is a legally binding contract in which a business or individual promises to keep certain information received from another party confidential. There are generally two parties to an NDA: discloser and disclosee. The discloser is the party who is disclosing the confidential information subject to the terms of an NDA. The disclosee is the party to whom the confidential information is being disclosed, subject to the terms of an NDA. There are different forms of a non-disclosure agreement, depending on whether only one or all of the parties to the agreement owe obligations to maintain confidentiality: Unilateral NDA: This is used where only one party is disclosing confidential information. The party who receives the confidential information is the only party who owes obligations to maintain confidentiality. Mutual NDA: Both parties share and receive confidential information with the other. Both parties owe obligations to maintain confidentiality with each other.Three-Way: Three parties all agree to share confidential information with each other and keep confidential the information received from the other two. What counts as confidential information? Non-disclosure agreements often have very comprehensive definitions of what constitutes confidential information. Non-disclosure agreements usually define confidential information to include any and all non-public information disclosed by one party to the other. The information might be in written form or oral. It may include ideas, concepts, designs, techniques, plans or any other form of information. When should you use an NDA for your business? As a general rule, whenever your business is disclosing information that is considered confidential or proprietary, your business should enter into an NDA with the party you are disclosing that information. Here are some common examples of situations where your business will likely

A misrepresentation is a false statement of law or fact made by one party (party A) to another party (party B) which induces that other party (party B) to enter into a contract. The three elements that must be present for misrepresentation are: (i) Someone has made a statement of fact or law; (ii) That statement is false; (iii) That false statement has induced the innocent party to enter into the contract It is important to distinguish between a “statement of fact” and a “statement of opinion”. A statement of opinion, if false, as a rule, does not constitute a misrepresentation. On the other hand, a statement of fact, if false, can constitute a misrepresentation. Example: For instance, the seller of a motorcycle would only be making a statement of opinion if he stated that the motorcycle might be able to transport 500 kg of goods and requested that you test it before purchasing it. Let’s say, on the other hand, the seller, knowing that a motorcycle was actually 5 years old, stated to a buyer that it was only 5 months old. If the buyer purchased the bike in reliance on this statement, this would be a misrepresentation. In Hong Kong, if a party is found to have made a misrepresentation, under the Misrepresentation Ordinance (Cap. 284 of the Laws of Hong Kong), the innocent party can apply for an order to rescind the contract (whereby the contract will be cancelled, and the parties will be restored to their position before the contract was made) and to claim compensation.

An exemption or exclusion clause is a term in a contract which seeks to exclude or limit the liability of one of its parties. For example, it may state that a party has no liability if the contract is breached or, alternatively, seek to limit the range of remedies available to one party for a breach by the other party. The Control of Exemption Clauses Ordinance (Cap. 71 of the Laws of Hong Kong) regulates the efficacy of exemption clauses. Generally, this ordinance renders exemption clauses which seek to exclude liability for personal injury or death ineffective. Other exclusion clauses, that restrict or exclude liability for damage or loss caused to the other party, are valid so long as they satisfy a test of “reasonableness”. Guidance on the type of clause that will be considered “reasonable” is provided in Schedule 2 of the Control of Exemption Clauses Ordinance. In accordance with Schedule 2 of the Control of Exemption Clauses Ordinance, whether a clause is considered reasonable will depend on a number of factors including: The strength of the bargaining positions of the parties relative to each other;Whether the customer received a benefit in exchange for agreeing to the particular term;Whether the customer was aware of or ought reasonably to have been aware of the existence and extent of the term;If a term excludes liability should a specified condition not be fulfilled, whether it was reasonable at the time of entering into the contract to expect compliance with that condition;Whether the goods were manufactured, adapted or processed to the special order of the customer; For more details regarding the reasonableness test, please refer to Schedule 2 of the Control of Exemption Clause Ordinance (Cap.72 of the Laws of Hong Kong).

when the parties have breached the obligations they have agreed to in the contract. Obligations are those responsibilities or commitments that a party is legally bound to fulfil in an agreement. Example: Let’s say two parties have entered a contract for the sale of certain goods. One of the most important obligations for the buyer will be to pay for the goods by a certain date. The seller’s obligations will include the obligation to deliver the goods being purchased by a particular date and an obligation to ensure the goods meet certain requirements regarding quality. Should the seller or buyer fail to meet any of these obligations, they will commit a breach of contract. What happens after a breach of contract? Depending upon the severity of the breach and how much you value your commercial relationship with the other party, you may attempt to deal with the breach informally or formally In order to deal with a breach informally, you may have an informal conversation with the breaching party. Through this conversation, you may ask the breaching party to continue performing their obligations under the contract and agree to an informal settlement with them to compensate you for any losses caused by the breach. If your informal attempts fail, you may decide to institute formal legal proceedings. The first step, as part of such formal legal proceedings, is normally for the innocent party to prepare and send a document called a “Letter Before Action” to the defaulting party. A letter before action is a document which will describe the breach committed by the defaulting party and offers an opportunity for the breaching party to rectify the breach by a certain stated deadline. If the issue remains unresolved by the deadline stated in the letter of action, then the innocent party may institute formal legal proceedings. These formal legal proceedings would involve filing a lawsuit against the guilty party. If formal legal

Most assume that once one party has made an offer and the other party has accepted, a contract has been formed. In reality, however, there are six elements that must be fulfilled for a valid, legally binding contract to exist. A contract is valid and legally binding if the following six key elements are present: (i) Offer (ii) Acceptance (iii) Intention to create legal relations (iv) Consideration (v) Capacity (vi) Certainty Each will be explored in turn below. (i) Offer An offer is a specific proposal by one party, which if unconditionally accepted by the other party, can result in a valid, legally binding contract. For example, if a company tells you that they are willing to sell you 10 bags of rice in exchange for $1,000, the company is making an offer to you. An offer can be made orally or in writing. It is important to distinguish between an offer and an invitation to treat. An invitation to treat is an invitation made by one party to another for the latter party to make an offer. The former party can then elect either to accept or reject this offer. An invitation to treat does not constitute an offer. In order to create a valid contract, an offer must be made, which is then subsequently accepted. Accepting an invitation to treat will not lead to the creation of a valid contract. Invitations to make tender offers, advertisements of goods in newspapers and displaying goods in shops are all examples of invitations to treat and not offers. (ii) Acceptance Acceptance is an agreement to the terms of an offer. Until the person to whom the offer is made accepts the offer, there is no valid, legally binding contract. Normally, acceptance must be communicated to the offeror. Ordinarily, contracts are accepted orally or in writing. Generally, silence cannot be treated as an acceptance. In some cases, acceptance can be by conduct. Example: Let’s say you draft a