In this report we will discuss the law of contract which is a very important law which governs the relationship between parties who enter into a legal agreement, and the law of tort which is known as civil wrong and it protects people from civil wrongs and gives damages for the injury caused. There are many types of contracts like written contracts, unilateral contracts are those types of contract in which only one party make an articulate promise, or accept a performance without firstly taking a reciprocal promise from the other party (THE FREE DICTIONARY, 2014),bilateral contracts, oral contracts, which has been discussed in this report. Also there are different kinds of torts like negligence and vicarious liability; all these have been discussed with applicable case scenarios in this report. This ECB College Aspects of Contract and Negligence in Business Assignment report tries to establish what importance law of contract and law of tort have in Business.
P1.1 The importance of essential elements required for the formation of a valid contract
The law of contract is a very important law which governs the relationship between parties who enter into a legal agreement; there are some essential elements of a contract that are offer, acceptance, consideration, intention and capacity of the parties. They are also known as aspects of contract
Offer: An offer is a clear proposal to contract which, if accepted completes the contract and makes both the parties to the contract bound by it (DUHAIME, Lloyd, (n.d.)).
Acceptance: It is an express or implied consent also given in the form of an act, where the party is ready to be bound by all the terms of an offer to contract (THE FREE DICTIONARY, 2014).
Consideration: It is basically the benefit that every party gets or expects to get from the contract, which has some value in the eyes of the law (STIM, Rich, 2010).
Intention: For a contract to be in existence there needs to be an agreement which must have been formed with the intention to be legally binding in nature, because if an agreement is not formed with a legal intention than it will not be binding on the parties (AUSTRALIAN CONTRACT LAW, 2010).
Capacity: Every person cannot enter into a contract; therefore the parties entering a contract should have the legal capacity to be a part of a contract which means that a person should be an adult and also he should possess a sound mind (AUSTRALIAN CONTRACT LAW, 2013).
CASE SCENARIO 1
After discussing the essential elements of a contract, we will now see its application in the present case scenario where Teddy wanted to sell his bicycle and john agrees to buy it for £50.
(a) The bicycle becomes John’s bicycle as soon as he agree to pay £50 for the bicycle to Teddy and after the agreement gives the consideration of £50 in lieu of the bicycle.
Offer: when Teddy informs john that he will sell his bicycle for £50 that is an offer to John.
Acceptance: When john agrees to pay £50 to Teddy for the bicycle, it is an acceptance of the offer.
Consideration: £50 is the consideration for the bicycle.
(c) The contract in the above scenario is a valid contract as it fulfils all the elements of a contract.
(d) In this contract there is an offer by Teddy to sell his bicycle and there is an acceptance by John in lieu of a consideration of £50 and he pays the £50 for the bicycle and the contract is complete and it is a valid one.
(e) Yes Teddy and John should have signed a document for the sale of transaction as written contracts are easier to prove than oral contracts, also if after the payment Teddy refuses to give the bicycle than John can claim for the breach of contract, and give the written document in proof.
P1.2 The impact of different types of contract
The various forms of contracts are as follows:
Unilateral contracts: are those types of contract in which only one party make an articulate promise, or accept a performance without firstly taking a reciprocal promise from the other party (THE FREE DICTIONARY, 2014).
Bilateral contracts: Those contracts in which both the parties are obliged to perform promise i.e. both the parties exchange their promises (NOLO, 2014).
Oral contracts: The contracts that are not made in written form but are verbally agreed upon by the parties, they are still held valid and enforceable (BUSINESS DICTIONARY, 2014).
Written contracts: A contract in which all the terms are in written form; generally these agreement are presented in prescribed form and are signed by both the parties to make it valid (HM REVENUE & CUSTOMS, (n.d.)).
CASE SCENARIO 2
In the present case Martin offers to buy Karen’s Economics Textbook (Principle of economics) at £10 and Karen accepts the offer gives the book to Martin and he promised to pay Karen the next day but refuses to pay him saying there was no written contract between them.
(a) Yes the contract between Martin and Karen was a valid contract as there was an offer by Martin to buy Karen’s book for £10 and there was an acceptance by Karen, £10 was the consideration of the book. This was a bilateral oral contract as there was exchange of promises. Also oral contracts are legally valid. Also in the present contract Karen fulfilled his promise by giving the book to Martin and Martin has breached the contract by not fulfilling his promise to give £10.
(b) If the present case was about Karen selling Martin his house than the contract would be void as section 2 of the law of property Act 1989 provides that a sale of land, or transfer of interest in land must be in writing only than it would be valid, this was decided in the case of (SHARMA V SIMPOSH, 2011).
(c) All the contracts are not required to be in writing, for example in sale of goods oral contracts are perfectly valid in law but some contract like the sale of property or land need to be in writing to be valid in law.
(d) A contract for the sale of property requires both the parties to sign a written contract which need to be attested by the concerned authorities and requires a minimum of two witness, as given in the section52 law of property Act 1989.
(e) Sample contract- Andy offers to buy Bob’s land for £10,000 and Bob accepts that offer, after that Andy gives Bob £10,000 and Bob says that now the land belongs to Andy. To be valid this contract need to be in writing and it should be attested and should be signed in front of at least two witnesses as given in the section52 of Law of Property Act 1989.
Oral contracts: The contracts that are not made in written form but are verbally agreed upon by the parties, they are still held valid and enforceable (BUSINESS DICTIONARY, 2014). Oral contracts are difficult to prove. All contracts cannot be made orally like contract for the sale of a property.
Written contracts: A contract in which all the terms are in written form; generally these agreement are presented in prescribed form and are signed by both the parties to make it valid (HM REVENUE & CUSTOMS, (n.d.)). Written contracts have more value and are easily proved also some of the contracts are mandatory to be made in written form like contracts of property transfer.
P1.3 contract terms and their meaning and effect
There are four types of contract terms express term, implied terms, exclusion terms and innominate terms. These terms have been explained below.
CASE SCENARIO 3
In the present case Mr. Johnson booked for a hotel and he was promised that there would be a piano in the hotel lobby for his daughter to play but when they reached hotel, the suite was ok but the piano was in a bad condition and Mr. Johnson wanted to cancel the contract and sue for damages.
(a) The terms of a contract are the core elements of a contract which describes the whole purpose, nature and application of a contract.
(b) There are four types of contract terms express term, implied terms, exclusion terms and innominate terms.
Express term: Express terms are those terms that the parties themselves have set out, in express terms all the crucial element of a contract are present (US LEGAL, 2014). A party cannot breach the express terms and if those terms are breached the other party can sue the other party.
Implied terms: Those terms in a contract that are clearly mentioned in written or oral way but are still considered a aspects of contract as they are introduced in the contract by law or courts to bring out the true intentions of the contracting parties (BUSINESS DICTIONARY, 2014). Some implied terms can also be implemented if they are breached but are generally considered as a part of law or custom.
Exclusion terms: Exclusion terms are also known as no liability terms, these terms excludes the contracting parties of the legal liability that arises out of the breach of a contract subject to certain conditions (BAKER, Adam, (n.d.)). A party can escape from its liabilities if another party suffers an injury due to the breach of one party according to the conditions specified in the exclusion clause.
Innominate terms: Those terms those are neither classified into a warranty or a condition but are somewhat in between both and are decided from case to case (DUHAIME, Lloyd, 2014). They are decided according to the effect the breach of the term has on the contract, the breach which has higher effect will be considered as condition whereas a breach with lower effect will be considered as a warranty.
(d) In the present case the promise by the hotel about the presence of a piano was a warranty and it was present in the hotel but it was in a bad condition, therefore Mr. Johnson can sue for damages but he cannot cancel the whole contract as the hotel suite was perfectly fine and the piano was just an add on to the hotel and if the hotel suite was not fine then Mr. Johnson could have cancelled the contract as that would come under the condition term.
(e) The differences between a condition and a warranty have been explained below:
Condition: It is the most crucial term in a contract, which must be met by the other party to have the duty to fulfil his or her commitment (FREE DICTIONARY, 2014). If the conditions of a contract are broken then the other party can cancel the whole contract and sue for damages.
Warranty: It is an assurance from one party to another party and it is a secondary provision of the main intention of the agreement or contract (WALLACE, Byrne, 2010). The breach of a warranty is less important in nature therefore its breach will only lead to claim for damages.
See the HND Marketing in Travel and Tourism Sector Assignment
P2.1 elements of contract in a given business scenario
CASE SCENARIO 4
In the present case Miriam saw an ad of wrist watch for £40 and sent the payment on 14th April 2013 and went to the shop 0n 20th April to buy it but she was told that the watch has been sold on 19th April, 2013 to Mrs. Branson. Miriam claimed that she had bought the watch when she had sent the payment on 14th April, 2013.
(a) In the present case the shop did not receive the payment from Miriam till 19th April, so sold it to another customer Mrs. Branson, in the present situation the shop was correct in selling it to another customer as they have not received any payment from Miriam.
(b) Yes in the present case there was a sale of contract between the shop and Miriam because according to the postal rule which was given in the case of (Adams v Lindsell, 1818) where it was held that a valid contract comes into existence as soon as the letter of acceptance is posted. Therefore there was a sale contract between the shop and Miriam on 14th April when she sent the payment through post.
(c) According to the law of contract there should be an offer, an acceptance, a consideration and the parties should have the intention to enter into a legal contract. In this case there was an offer from the shop to sell the watch and Mrs. Branson accepted that offer, £40 was the consideration for the watch and both the parties had the intention to enter into the sale contract therefore the contract between them is a valid one.
(d) Yes Miriam can claim her £40 back, because the consideration for which she sent the payment was no longer present and the shop had breached the contract which she had according to the postal rule (Adams v Lindsell, 1818) therefore she can sue for damages and breach of the contract.
P2.2 the law on terms in different contracts
Case scenario 5
In the present case Ahmed was employed by Joseph in a construction firm and there was a contract of employment which Ahmed need to sign and in the contract there was an exclusion clause which held that the company will use health and safety measures but not be liable for any injury caused during the course of employment, Ahmed signed it and agreed to the term but later on suffered an injury.
(a) Exclusion terms: Exclusion terms are also known as no liability terms, these terms excludes the contracting parties of the legal liability that arises out of the breach of a contract subject to certain conditions (BAKER, Adam, (n.d.)). A party can escape from its liabilities if another party suffers an injury due to the breach of one party according to the conditions specified in the exclusion clause. The most significant provision related to exclusion clause is “The unfair Contracts Terms act 1977” (ASHURST, 2009), it applies to both commercial and consumer scenarios, which controls the exclusion and restriction of liability for the breach of express and implied contractual obligations and the common law duty of care.
(b) In the present case Ahmed can take the support of the “Unfair contract terms Act 1977” which provides that it is not possible to exclude a liability for death or personal injury which results from negligence (ASHURST, 2009), therefore in the present case Ahmed got injured during the course of his employment and got injured from the company machines only, so they cannot escape their liability on the basis of the exclusion clause in the contract.
P2.3 the effect of different terms in given contracts
- Fundamental term: A fundamental term is a term which is considered as the central term of a contract and it is a mandatory where its performance cannot be avoided on the basis of any exclusion term(THOMSONS REUTERS, 2014) a leading case on this was the case of (Karsales (Harrow) Ltd. v Wallis, 1956).
- Condition: It is the most crucial term in a contract, which must be met by the other party to have the duty to fulfil his or her commitment (FREE DICTIONARY, 2014) and this was also defined in the case of(Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos), 1970).
- Warranty: It is an assurance from one party to another party and it is a secondary provision of the main intention of the agreement or contract(WALLACE, Byrne, 2010) this was given in the case of (Shanklin Pier Ltd v Detel Products Ltd , 1951).
- Innominate terms: Those terms those are neither classified into a warranty or a condition but are somewhat in between both and are decided from case to case(DUHAIME, Lloyd, 2014). They are decided according to the effect the breach of the term has on the contract, the breach which has higher effect will be considered as condition whereas a breach with lower effect will be considered as a warranty.
- Condition: The condition is considered as the most important element of a contract it shows the intention of the contract, therefore its breach leads to major loss or problem, so when a condition is breached by one party then the other has the option to terminate the whole contract (Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos), 1970).
- Warranty: It is considered as the subsidiary or minor term of a whole contract and its breach does not lead to any huge issue, therefore if a warranty is being breached then the other party can claim for damages only and a contract cannot be terminated on the basis of breach of a warranty(Shanklin Pier Ltd v Detel Products Ltd , 1951).
P3.1 contrast liability in tort with contractual liability
Case scenario 6
In this case IBRAHIM works for Pizza Smart in food and beverages operations department and his contract is to deliver Pizza in East London, on 17th may 2013, he went to deliver pizza and went to see his friend in Woolwich after delivering the pizza, on his way back he had an accident and his car was damaged but Pizza smart told IBRAHIM that they are not liable for the expenses related to the car repair.
(a) The principles of law of contract govern this case; the law of contract is a very important law which governs the relationship between parties who enter into a legal agreement where there is an employee, employer contract between Pizza Smart and Ibrahim. In this Ibrahim had a contract with Pizza smart of delivering Pizzas in East London.
(b) Yes Pizza Smart could be held liable for the costs of the accident as Ibrahim was under a contract to deliver Pizzas in London and he suffered an injury when he went to deliver pizza, as he has suffered the injury and now his car is also damaged so he would be able to deliver pizza, and the contract will not be able to be fulfilled therefore Pizza Smart should pay the costs of the car repair as under the unfair contract terms 1977, a company cannot escape from liability of personal injury or death (ASHURST, 2009).
(c) Vicarious liability is the liability in which one person is held responsible for the torts committed by another person which causes injury to a third person, and this liability is held as one person is the superior to another person and the other person is the subordinate who works on the commands of his superior (THE FREE DICTIONARY, 2014). In the present case Ibrahim was working on the behalf of Pizza Smart therefore Pizza Smart is responsible for the acts of Ibrahim likewise they can also be held liable for the accident and therefore they should pay for the costs of the car repair.
P3.2 how a business can be vicariously liable
Case scenario 7
Peter worked in a stone quarry, where one day he was not wearing his safety glasses provided by the company and a stone injured his eye.
(a) In the present case the company will not be liable because they had provided all the employees with safety glasses for safeguarding health and it was peters mistake that he did not wear the glasses so the company will not be held liable as was also decided in the leading case of (HAUSER v. CHICAGO, 1984)
P4 the principles of liability in negligence
P4.1 elements of tort of negligence defences in different business scenario
Case scenario 8
Johnson family booked a hotel and during lunch in the hotel their son fell in a pit near the hotel and injured himself and they held the hotel liable for it.
(a) In the present case the hotel had been negligent and did not used required safety measures when a dangerous work was being carried out, there should have been a fence or perimeter surrounding it, as higher risk leads to higher duty of care as was decide in the case of (paris v. stepney, 1951).
(b) No the hotel hadn’t done sufficient work by just putting the warning sign because a small kid or an old person may not be able to read or understand the sign, therefore they should have covered the area with some safety fence like stuff to prevent any miss happening as is also given in the occupier liability act 1984.
P4.2 apply elements of vicarious liability in given business situations
Case scenario 9
Stephen booked a hotel Vibrant and from his room a gold watch was stolen, the management claimed that they are not responsible as it was written in the hotel form that the hotel will not be liable for theft.
(a) In the present case Stephen did not had the knowledge about the exclusion clause and it was not even explained by the hotel management, therefore they will be held liable for the theft of the watch, this was also decided in a case with similar case of (Olley v Marlborough Court, 1949).
(b) In the present case the hotel did not do its work well by stating the regulation on the bottom of the page, they should have informed Stephen about the regulation or should have written it in bold letters that would make it noticeable to the person signing it, as was also given in the leading case of (Parker v South Eastern railway, 1877)
We have discussed all the aspects of law of contracts, the types of contracts and what applications they have on different cases of different scenarios and how the law have changed constantly, we also discussed the law of tort which saves a person from negligence and protects him from an injury, this law was made to cater to civil wrongs which did not had any specific legal reliefs, this is a new form of law, which was made to protect civil wrongs injury. We also have discussed the law of negligence and its consequences. We also discussed vicarious liability which makes an employer liable for the act of his employee.