Unit 5 Aspects of Contract Law Negligence

Introduction

The purpose of this aspects contract law negligence asisgnment report is to analyse different aspects related to two private laws which are the law of contract and the law of negligence. The law of contracts basically governs the relationship between two parties which comes into existence because of a legal agreement which both the parties enter into. The law of negligence deals with the breach of legal duty of care and its consequences. We will also examine the differences and similarities between the law of contracts and the law of negligence. In this report we will also analyse different types of contracts like the unilateral contracts, bilateral contracts, written contracts and the oral contracts, what are the requirements of these contracts and what is the legal validity of these contracts. We will also see that what are the different type and forms of liability and what is their importance in the present business scenario of Miss Linda and her salon.

Task 1: A valid contract in a business context

(a) Describe the basic principles of a contract between Linda Green and a potential employee.

A contract is an agreement which is legally binding in nature (STEINBERGER, JEFFREY, 2007). To be regarded as a valid contract certain elements should be present in the contract, which are

Offer: It is a provisional promise which is made subject to certain conditions by the offeror to the offeree (PATHAK, Akhileshwar, 2010).

Acceptance: Occurs when the offeree gives his unequivocal consent to the offer and communicates his acceptance in a form that is specified by the offeror (PATHAK, Akhileshwar, 2010).

 (PATHAK, Akhileshwar, 2010)

Consideration: It is something which a promisor gets in return for the promisor promise, but it should have some value in the eyes of the law (PATHAK, Akhileshwar, 2010).

Capacity: Every individual cannot enter into a contract, only those people who possess a legal capacity can enter into a contract, legal capacity means that a person should be an adult and he should also not be a lunatic (PATHAK, Akhileshwar, 2010).

Intention: This means that the party to a contract should have the intention to create a legal relationship (PATHAK, Akhileshwar, 2010).

The basic principles of valid contract have been discussed above now we need to see what basic apsects of contract would apply between Linda Green and a potential employee. In the contract firstly as an employee the employee needs to sign a contract accepting the job offer, the salary will be the consideration for the services of the employee and the terms that would be mentioned would be the conditions of the employment, the duration of the employment, and the reasons for the termination.

(b) Identify, and explain any legal terms that should be included in such a contract.

Yes in the present situation there is a requirement of incorporating certain legal terms that are generally considered to be the part of an employee contract; these terms are also known as restrictive terms.

Confidentiality: In this the employee is required to keep the company’s information to himself only and not to disclose it to any third party; this may include trade secrets, company’s financial data and company hidden business strategy. These types of restrictions also extend beyond the termination of the employee.

Privacy: The employee also need to maintain the privacy policy of the company and should not divulge any private information about the company to its competitor or any other third party which may hamper the business of the company. Both these terms should also be included in the employee contract.

(c) Considering the areas of contract law, how would you advise Linda Green to tackle the attitude of the wholesaler?

There are four types of contract which are:

Express Term: are those terms that mention clearly all the elements of a contract like offer acceptance and consideration (GERALD N.HILL, Kathleen T.Hill, 2005).

Implied Term: the terms are not written but are still considered to exist in a contract (NI DIRECT, 2014).

Exclusion Term: are those terms that try to exclude or limit the amount of liability that may arise out of a breach of a contract (FIND LAW TEAM, 2014).

Innominate Term: The terms that are not predefined as a warranty or a condition and the remedy depends upon the consequences of the breach, if the consequence is very significant than it will be considered as a condition and if it of little significance then it will be considered as a warranty (BITS OF LAW, 2013).

In the present scenario Linda Green can terminate the contract with the wholesaler because the contract was about the promotion of new products but the new products are of bad quality and the salon keeps using them, her business would suffer, therefore citing these reasons she can terminate the contract or ask the wholesaler to give another product instead of the colouring agent.

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Task 2:  elements of the contract in business situations

(a) With reference to the Sale of Goods Act, outline the key legal points upon which Linda could build a case against the wholesalers. How likely, in your opinion, is she to succeed?

In the present case Linda purchased twelve hairdryers and all of them were found to be defective, only after a few week and the wholesalers are not replacing them so Linda can take help of the Sale Of Goods act 1979 which provides that the goods should be fit for the purpose which they were bought.

Also the sale of Goods Act amendment of march 2012 provided that if a fault occurs with a product within a period of six months, the consumer is entitled to assume that it was sold to them with the defect already present, therefore Linda is entitled to get a refund, replacement or repair of the defective hairdryers according to the sale of Goods Act 1979 (MARKKITELEY, 2012).

EXPRESS TERMS: The terms that are clearly present in a contract and bring out the true elements of a contract like offer, acceptance and consideration (Bannerman v White , 1861).

IMPLIED TERMS: The terms that are not mentioned in contract, but are still assumed to be a part of a contract are known as implied terms (Liverpool City Council v Irwin , 1977).

EXCLUSION TERMS:  the terms that exclude or limit the right of remedy arising out of a breach of contract are known as exclusion terms (Spurling v Bradshaw, 1956).

ECB College Unit 5 Aspects of Contract and Negligence in Business

(b) With reference to the Consumer Credit Act 1974, outline briefly the main issues that Linda must consider before embarking on any future credit agreements with her suppliers.

Consumer credit act 1974 protects the right of the consumers; before embarking any new future credit agreements with her suppliers Linda needs to keep in check that:

  • The goods are not faulty
  • The service is not poor
  • The credit terms are not unreasonable
  • The suppliers are trustworthy
  • The goods are not of poor quality

And if any of the above issue is present then she can take the help of the Consumer credit act 1974, which protects the consumer rights and she may not extend the future credits based on the above mentioned issues.

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Task 3: negligence in business activities

(a) Describe the differences between a sole trader, a partnership and a limited company. Identify the main legal requirements for each category of business.

Sole trader: It means that when only one individual is running a business then that person is known as the sole trader, in this only one person gets to keep all the profits that remains after paying the required taxes. Sole trader means that only one person would be held responsible for the business, but he can keep a staff also (GOV.UK, 2014).

Legal responsibilities:

  • Only one person will be held responsible for the losses of the business.
  • All the bills of related to the business need to be paid by the sole trader only.
  • The sole trader needs to maintain all the business records of his business like sale and purchase (GOV.UK, 2014).

Tax responsibilities:

  • The sole trader needs to send a self-assessment tax return each year.
  • Needs to pay income tax on all the profits of the business.
  • The sole trader also needs to pay the national insurance.
  • If the business turnover is more than £81,000 per year then the sole trader needs to register for Value Added tax (GOV.UK, 2014).

Partnership: In a partnership two or more person shares the responsibility of a business. The partners also share the profits of the business and pay tax on their share of the profit (GOV.UK, 2014).

Legal responsibilities:

  • All the partners are jointly responsible for the losses that the business suffers.
  • All the partners need to make contribution to the expenditure on the business according to the shares that they hold in the business.
  • If the partners do not want to be personally held liable for the business losses, then they can set up a limited liability partnership.
  • A partner may not be a real person but he need to be a legal person like a legal company can also become a partner in a working partnership (GOV.UK, 2014).

Tax responsibilities:

  • To send a partnership self-assessment tax return each year.
  • Also all the partners need to send a personal tax assessment tax return every year
  • The partners need to pay income tax on their share of the partnership profits.
  • Also the partners need to pay the National insurance
  • The partnership will also have to register for value added tax if the partnership turnover is more than £81,000 per year (GOV.UK, 2014).

Limited company: a limited company is an organisation that one can setup to run a business. Its rights, responsibilities and finances are separate from its members (GOV.UK, 2014).

Ownership:

Each limited company has members that can be people or organisations who own certain shares in the company. In a company the directors are responsible for running a company and they do not need to have shares in the company (GOV.UK, 2014).

Legal responsibilities

The directors have certain legal responsibilities while running a company.

The directors have a duty of care towards the company where they have to stop insolvent trading.

The directors should have good decision making for the company benefits and not for their own benefits.

Most limited companies are limited by shares, which represents that the shareholders’ responsibility for the company’s financial liabilities are limited to the worth of share that they own but for which they have not paid for (GOV.UK, 2014).

Tax responsibilities:

  • The company must register for vat if it wants extend its turnover beyond £81,000 per year.

Tax responsibilities of a director:

  • Needs to fill in a self-assessment tax return each year.
  • If the director gets a salary from the company then he needs to pay tax and national insurance through the PAYE system (GOV.UK, 2014).

(b) What considerations should Linda make before selecting the name ‘Scissors Salon’ for her business?

Linda would be starting her salon as a sole proprietor; therefore she needs to complete all the legal necessities of starting up a business a sole proprietor, before selecting the name “Scissors salon” she needs to check that this name is available for registration or not, secondly whether name is appropriate for the salon or not, thirdly she needs to see that there are no salon with similar names as that would create confusion for the customers, after considering all the aspects she needs to register the name with the local government so that she will get the required tax number and a business licence and after that she can start her salon (VOLKER, Michael C., 2007).

(c) Summarise the steps necessary for dissolution of the business should the business fail.

The steps necessary for dissolution of a business:

Linda as a sole proprietor needs to follow the following steps (FIND LAW, 2014):

  1. Close the business:

If the business fails Linda can close her business and she need not consult anyone as she is the sole proprietor of the business

  1. File with the state:

Linda as a sole proprietor does not need to file anything with the state but they need to resolve any outstanding issues with her creditors, customers and suppliers.

  1. Notify the IRS and state and local tax agencies

When Linda ends her business she still needs to pay any prior taxes and the tax for the current financial year and she also needs to fill her final tax forms.

  1. Cancel Business Licenses:

Linda needs to file for the cancellation of her business licenses and permits.

  1. Notification to creditors:

Linda needs to inform all her creditors, suppliers, vendors and wholesalers about the termination of the business through an official notice or through an ad in the newspaper

  1. Setting creditors’ claims:

Linda needs to see all the creditors’ claims and accept and reject them accordingly and then she needs to clear all the claims.

  1. Collecting Money owed to business:

Linda should collect all the money that other people or wholesalers or suppliers owe to her.

  1. Other people who are needed to be informed:

Linda needs to inform her landlord and customers about the closing of the business.

  1. Selling and distributing assets:

After all the creditors’ claims have been settled Linda needs to sell her assets which will include all the salon furniture and equipment (FIND LAW, 2014).

Task 4: Priciples of liability in negligence in business situations

(a) Identify the statutory provisions regarding employees of which Linda Green should be aware. State clearly from which legislation sources they have come.

Statuary provisions regarding the employees:

Equal pay act 1970(amendment 2003): provides that there should be equal pay for equal work and there should be equitable pay with comparator.

The Equality Act 2010: This law provides protection against discrimination on the basis of race, age, religion, sex and disability and an employee cannot be discriminated on the basis of all the mentioned criteria.

The Employment Relations Act 1999: This act provides protection against unfair dismissals and recognises rights for pay, hours and holiday.

Employment Rights act 1996: This act provides protection of wages, maternity rights, and protection from suffering detriment in employment and unfair dismissals and remedies.

Employment Act 2002: it provides dispute resolutions, adoption leave and pay.

(b) Linda has decided to dismiss the stylist. Discuss what grounds she has for any possible dismissal, and also list the steps she must take if she wishes to carry this out.

In the present case we can see that the junior staff member is not doing her work properly and she also does not listen to Linda’s commands, she has been irregular in her working hours and leaves before completing the work also because of her she is losing her customers. So yes Linda can dismiss the junior stylist on the grounds that are above mentioned.

Before the dismissal Linda should give warnings to the junior stylist, so that she can mend her ways and does her work with more sincerity, otherwise she can dismiss her if even after the warnings she does not does her work properly.

Linda can dismiss the junior stylist on the basis that she has breached the terms of her contracts and she has breached many terms which are also the conditions of her employment, therefore she can be dismissed on the basis of the breach as was also decided in a leading case of the (Poussard v Spiers , 1876).

Conclusion

In conclusion we can say that the whole concept of law of contract, law of tort and law of negligence have been discussed in the present case. All the different aspects of law of contract, law of tort and law of negligence have been applied to the present case of Miss Linda who wants to open a new salon; we have discussed all the remedies available to Miss Linda regarding her wholesalers and employees. In this aspects contract law negligence asisgnment we have also discussed what the legal requirements of starting a business as a sole trader, in a partnership and also as a limited company are. After discussing all the aspects of these laws we see that all the three laws play an important role in the business scenario at present.

References

  1. Bannerman v White 10 CBNS 844.
  2. BITS OF LAW. 2013. contract formation terms classification. . . Available from World Wide Web: <http://www.bitsoflaw.org/contract/formation/study-note/degree/terms-conditions-warranties-innominate>
  3. FIND LAW. 2014. necessary steps to dissolve your company. . . Available from World Wide Web: <http://smallbusiness.findlaw.com/closing-a-business/necessary-steps-to-dissolve-your-company.html>
  4. FIND LAW TEAM. 2014. consumer contracts: Are exclusion and limitation clause allowed? . . Available from World Wide Web: <http://www.findlaw.com.au/articles/4463/consumer-contracts-are-exclusion-and-limitation-cl.aspx>
  5. GERALD N.HILL, Kathleen T.Hill. 2005. express term. . . Available from World Wide Web: <http://legal-dictionary.thefreedictionary.com/express+contract>
  6. UK. 2014. Choose a legal structure for a new business. . . Available from World Wide Web: <https://www.gov.uk/business-legal-structures/sole-trader>
  7. UK. 2014. Choose a legal structure for a new business. . . Available from World Wide Web: <https://www.gov.uk/business-legal-structures/ordinary-business-partnership>
  8. Liverpool City Council v Irwin AC 239.
  9. 2012. A brief overview to The Sales of Goods Act 1979. kiteleys, 18 october, p.1.
  10. NI DIRECT. 2014. the terms of a contract. . . Available from World Wide Web: <http://www.nidirect.gov.uk/contracts-of-employment>
  11. PATHAK, Akhileshwar. 2010. Legal Aspects of Business. Tata mcgraw hill.
  12. Poussard v Spiers 1 QBD 410.
  13. Spurling v Bradshaw 2 All ER 121.
  14. STEINBERGER, JEFFREY. 2007. Is This Contract Valid? Entrepreneur, 28 february, p.1.
  15. VOLKER, Michael C. 2007. starting a business. canada.
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