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A contract is an agreement between two or more parties that is legally binding and enforceable by law. The following are some practical tips about signing a contract in a property transaction.  CAUTION: These are only general tips; they should not be treated as legal advice.

 

Essential elements of a contract

The essential elements of a contract are offer, acceptance, consideration, and intention to create legal relations.

• Offer and acceptance: An offer is a definite promise to do or to forbear from doing certain acts.  An acceptance must be unqualified.  A conditional acceptance will act as a counter-offer and destroy the original offer.  Also, silence does not amount to acceptance.
• Consideration: Simple contracts require consideration to be enforceable, but a contract by deed is enforceable without consideration.  Consideration has to be of value and cannot be past. 
• Intention to create legal relations: A contract must show that the parties intended their promises to be binding and to create a legal relationship between themselves.
  
  

Practical tips before signing a property transaction contract

Consider these practical tips before signing a property transaction contract:

• Ensure all essential terms have been filled in: Signing a contract with essential terms of a transaction left blank is highly risky.  It creates an opportunity for unscrupulous parties to insert terms at a later stage that you have never agreed to.
• Verify the identity of the parties: Always check the identity of the other parties or their authorized signatories to avoid fraudulent misrepresentation.  Failure to do so may render the contract unenforceable.
• Follow instructions for prescribed forms: Some contracts are prescribed by law, e.g., the estate agency agreements prescribed under the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation (Cap.511C). These must be completed according to their corresponding instructions.
• Initials: Initials are typically required when hand-written amendments, alterations or erasures are made to a written contract prior to or during execution. This helps authenticate that all parties accept the changes.   In practice, parties should place their initials next to each specific alteration or erasure.
• Attestation: Attestation (i.e., execution in the presence of witness) is not legally required for the prescribed estate agency agreements set out in the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation (Cap. 511C).  There are no legally prescribed forms for provisional and formal tenancy agreements, nor provisional and formal sale and purchase agreements.  It is common practice that the estate agency company prepares provisional and formal tenancy agreements and provisional sale and purchase agreements without requirement for attestation.  Formal sale and purchase agreements are usually prepared by solicitors with attestation requirement.  Generally speaking, attestation is a well-established and recommended practice in conveyancing to promote certainty and avoid unnecessary legal disputes. In the case of deeds, attestation is a standard practice to ensure valid execution.
• Exercise caution if one party intends to use pre-signed contracts as a tool for negotiation: If one party forwards a pre-signed contract to another party and the latter signs it, the contract will immediately become binding. 
• Understand every single term: Do not let anyone rush you into signing a contract.  Read the entire contract carefully, including the fine print.  If a clause is confusing or vague to you, demand a clear explanation before putting your pen to paper.
• Put verbal promises into writing: There may be attractive verbal promises during negotiations but it is always best to set out the terms clearly in writing to avoid subsequent disputes.  If a promise is important to you, ensure that it is written into the contract before you sign it.
• Ensure that land contracts are in writing: Under Section 3(1) of the Conveyancing and Property Ordinance (Cap. 219), oral agreements for property transactions are generally not enforceable. To protect your legal rights, any contract for purchasing, selling, or transferring property should be made in writing and signed.
• Seek legal advice when in doubt: If you are unsure about any contract terms or your potential liabilities, seek independent professional advice before signing.  This can prevent you from possible financial and legal headaches later.
• Demand for a copy of the contract once signed: Always ask for your own copy of the executed document immediately after signing for your records and future reference.
• Note the restrictions regarding electronic execution of contract: Under the Electronic Transactions Ordinance (Cap. 553), electronic execution is not applicable to documents or instruments concerning land or property transactions in Hong Kong. However, estate agency agreements prescribed under the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation (Cap. 511C) may be executed electronically.

 

Breach of contract

• If one of the parties to a contract breaches a term of the contract, he is in breach, and the innocent party is entitled to claim damages from him for any loss the latter suffered as a result of the breach.
• If the term so breached is of a condition, or the court finds that the breach is a serious breach, the innocent party may also terminate the contract.

 

Mediation

• If there is a contractual dispute between two parties, such as a vendor and purchaser, landlord and tenant, or estate agent and client, mediation offers an alternative to court proceedings. Mediation is a process involving a trained, impartial mediator who assists the parties to identify issues, explore options, communicate clearly, and reach an agreement to resolve the dispute, in whole or in part, at a lower cost.