Contract Terms in Hong Kong

Abstract

This chapter examines three closely connected issues in defining the contents of contracts in Hong Kong: first, the approaches adopted in interpreting the meaning of agreed contractual terms and, second, to what extent additional terms are implied to supplement the express terms. It discusses the underlying philosophy of interpretation with regard to the dichotomy of ‘objective’ and ‘subjective’ approaches; it details the various interpretative aids, such as customs, usages, the commercial background, and the negotiations of the parties; and it shows how Hong Kong law resolves the tension between literalist and contextualist approaches to interpretation. A number of hypothetical scenarios illustrate how Hong Kong courts deal with issues of contractual interpretation and gap-filling in practice. Third, this chapter examines how Hong Kong law deals with extremely one-sided, onerous, or otherwise unfair terms, such as exclusions or limitations of liability, penalty clauses, or restraint of trade clauses. It discusses the overt judicial control of such terms under specific legislation, sometimes targeted exclusively at standard terms or consumer contracts. It also analyses how the courts have exercised a more indirect control by employing traditional general contract law doctrines, such as contract formation and interpretation or the rules on procedural fairness, in order to protect parties against unfair terms. Hypothetical cases are discussed to illustrate how unfair contract terms are regulated in practice.