Contract Law in Hong Kong

2: Sources of Hong Kong Contract Law

2 Sources of Hong Kong Contract Law OVERVIEW Hong Kong contract law, like Hong Kong law in general, has been dominated, for 150 years, by the common law of England. Hong Kong’s post-colonial “constitution”, the Basic Law, guarantees that the common law will continue in force for 50 years from the transfer of sovereignty of Hong Kong in 1997, but it is to be expected that, by a process of divergence, the common law of Hong Kong will become increasingly distinct from the common law of England. The Basic Law, the constitutional basis for the Hong Kong Special Administrative Region (HKSAR), states that:1 The laws previously in force in Hong Kong, that is, the common law, rules of equity, ordinances, subordinate legislation and customary law shall be maintained, except for any that contravene this Law, and subject to any amendment by the legislature of the Hong Kong Special Administrative Region. The intention of this section is that the general principles of the common law will continue in force and that the specic rules existing before 1997 2 will also do so unless they are amended or found to be contrary to the Basic Law. While this appears to be a simple proposition, the operational realities are somewhat more complex and need to be examined in detail. It is also clear that, while Hong Kong’s judicial system now enjoys the right of “nal adjudication”,3 Hong Kong should continue to be guided by the courts of other common law jurisdictions since the Basic Law expressly permits reference to such precedents.4 1. Article 8. 2. Although the transfer of sovereignty took place at midnight on 30 June 1997, we will refer to “pre-1997” and “post-1997”. 3. Subject to exception relating to such matters as national security and foreign affairs. 4. Article 84. 22 Contract Law in Hong Kong The intention, then, is that rules of English common law formulated post-1997 will be of no binding effect but merely available for guidance in the same way as the rules of any other common law jurisdiction. While this may be the theoretical position, in practice there is little doubt that post-1997 English court decisions weigh far more heavily with the Hong Kong judiciary than those of other common law jurisdictions, at least as far as the law of contract is concerned. 2.1 Hong Kong Contract Law before 1997 Following the Treaty of Nanking signed by China and Britain in 1842, Hong Kong became a legal possession of Britain. Later treaties, the Conventions of Beijing of 1860 and 1898 ceded further territory to Britain, though under differing terms. After the Treaty of Nanking was ratied by Britain, a constitution for the new territory was established by two documents. The rst, known as the Letters Patent, outlined the constitutional structure and conferred powers upon the governor while making provision for the assistance of an Executive Council and Legislative Council. The second constitutional document, the Royal Instructions, set out the rules relating to the composition of the Executive and Legislative Councils and detailed the procedures to be observed in the passing of laws. After 1843, this constitutional framework allowed laws to be created in Hong Kong. One such example was the Supreme Court Ordinance (SCO), 1844,5 which is signicant in that it incorporated the laws of England, existing in 1843, into Hong Kong law. English laws were to have effect in the colony except as they might be inapplicable to local circumstances or inhabitants, and subject to any modication by the local legislative structure. The SCO also established the court system of Hong Kong. In 1966 the Application of English Law Ordinance6 (AELO) was passed. Section 3 provided that: (1) The common law and the rules of equity shall be in force in Hong Kong: (a) so far as they are applicable to the circumstances of Hong Kong or its inhabitants; (b) subject to any modications as such circumstances may require; (c) subject to any amendment thereof (whenever made) by: (i) any Order in Council which applies to Hong Kong; (ii) any Act which applies to Hong Kong; (iii) any Ordinance. On 1 July 1997, AELO was not adopted as a law of the HKSAR. Thus, prior to the transfer of sovereignty of Hong Kong in 1997, its contract law 5. No.15 of 1844. 6. Cap. 88. Sources...