Aspect of Contract Law and Negligence for Business Assignment

Aspect of Contract Law and Negligence for Business Assignment

Introduction:

The aspect of contract law and negligence for business assignment is aimed at studying the different types of contracts and terms involved under a contract. The nature of the contract along with the elements required to enter into a contract are to be studied. A contract is the relationship between the parties to the contract for a specific purpose that may be either extended to social relationship or commercial relationship. Under the law of tort the nature of different liabilities arising are to be analyzed with respect to the negligence and vicarious liability. This is further to be differentiated wit the liability so arising under the law of contract from the breach of contract.

Task 1:

1.1: Explain to Peter Abraham how a contract is formed and the importance of the various elements which has to be present to for a contract.

The various elements involved in the formation of the contract are as follows:

• Offer:An offer is referred to as the basic step towards the formation of the contract. It is required for the offer to be clear and precise in understanding. The same shall move from the offeror towards the offeree. There lies a difference between the invitation to offer and offer. An invitation to offer is regarded as the intention to enter into a contract with any prospective buyer interested in entering into the same. The product of transaction is known but not the parties under the invitation to contract. The offer when negotiated gives rise to counter offers. Such offers replace the parties of the their places.
• Acceptance: An acceptance is regarded as when the offeree agrees to enter into the contract for the offer so provided by the offeror. The terms and conditions between the parties is similar and the contract is said to be entered into. The offer may be concluded by many ways such as the counter offer, rejection, lapse of time, death or withdrawal Carlill v Carbolic Smoke Ball Co. If the offer is made to the world the element of acceptance is not important to be followed as the action would be considered to be the acceptance of the offer. (Andrews, 2011)
• Consideration: the amount is exchanged in the contract to create a valued relationship between the parties. Such consideration is the amount of money cost by one party to exchange the value of the product or service in the contract. It is exchanged to replace the detriment so suffered by the parties in a given contract. The consideration shall not be of past nature, move from the promise and not form part of existing contractual duty or social duty.
• Intention: The intention to create a legal contract is important for the purpose of the entering into the contract. The intention to enter into the contract determined the enforceability of the contract under the law. It is assumed that under social contract the enforceability is avoided whereas under the commercial contracts the enforceability is determined even if the same is not mentioned under the contract. (Adams, 2008)
• Capacity: The capacity to enter into the contract refers to the understandability of the contract to the parties so contracting. Thereby, the parties shall be of capacity to be able to enter into the contract. The capacity to contract is judged based on the state of mind, financial status and the age so acquired by the parties to the contract. When entering into the contract the parties should be of capacity and therefore, not be under influence.

1.2: Discuss the impact of forming contracts

• Face-to-Face contracts: Contracts that are entered into by the parties in the presence of each other are known as the face-to-face contracts. Such contracts are valid from the start as they contain the element of meeting of minds and coming together for a particular purpose. The contracts of such type are however difficult to be established as they may most of the times be of oral nature. Therefore, for the lack of evidence of the existence of the contract the same may not be able to be enforced under the  business law  . These are time saving as they are common to the parties to the contract. (Meyer, 2010)
• Written Contracts: Contracts that are entered into in the writing form are known as the written contracts. These are present in the writing form and are easier to be established under the law for having an evidence for the establishment of the contract. Such contracts are generally express in nature and may or may not include the physical existence of the parties when entering into the contract. Written contracts certify the existence of the contract making it easier to establish.
• Distance Selling Contract: Whereby parties enter into the contracts from two different ends of the world then the same is called a distance-selling contract. The purpose of such contracts is for selling and the same is required to be fulfilled by both the parties. Distance Selling Contracts may be either written or verbal. However, according to the provisions of the Distance Selling Regulations 2000 it is essential for the seller to inform the terms of the contract with reference to taxes charged and the product so sold. The delivery details shall be informed when making the sale. (Collins, 2008)

1.3: Give an analysis of the following terms in a contract with references to their meaning and effect as it may apply to Peter Abraham

• Condition: To fulfill the contract it is required for the condition under the contract to be achieved primarily. Conditions are terms based on which the contract is entered into. A condition if goes unperformed then the contract may lose its purpose and the party being affected from the non-performance shall be able to void the contract for the breach so committed. A condition may be of different types such as the condition precedent, condition concurrent and condition subsequent. Such conditions are applicable on different stages of the fulfilling the contract.
• Warranty: A warranty is regarded as the second most important part of the contract. The performance of the warranties is as important as the conditions but the non-performance would not result in voiding the contract. This is because a breach of a warranty could be met with damages, specific performance or injunctions. The warranties that may be availed under the contract are dependent on the nature of the contract. The types of contract so involved may be either, life warranty, specific warranty, full warranty or another warranty. (Finch, 2007)
• Innominate Term: Terms that differ in its purpose depending on the varied situations is known to be an innominate term. Such nature of the terms arises from the effect so arising in the case of breach of the concerning term. This would mean if the breach of a term results in the voiding the contract then it would be a condition and if the same does not void the contract then it would be regarded as the warranty. Therefore, the effect would lead to the determination of the term.
• Exemption Clause: Exclusion clauses are those clauses that exclude the liability under the case of breach for a contract. Such terms are included according to the Unfair Contract Terms Act. The inclusion of such terms is through signatures, notices or previous course of dealings. However, the construction of the clause shall be undertaken according to the narrow or strict approach. The terms shall be fair and should not include the liability for death or injury. (Richards, 2006)

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Task 2:

1: Apply the elements of contract in the given business scenarios below.

Case 1: Case presented here is regarding offer in which Carol is a buyer who is interested in a couch which is being advertised by the seller. Advertisement regarding the couch was posted in a newspaper which will be termed as an invitation to offer and not an offer itself. Advertising in a newspaper means that the seller has a will to attract offer from the potential customers so that they can purchase the advertised product. Invitation to offer is just an intimation that the product is available for  sales and planning  helps in inviting the offers from the potential customers for the terms mentioned in the advertisement regarding the price. These prices are negotiable. An offer could be accepted by the offeree or could be negotiated. Therefore, in this case email sent by Carol would be considered as an offer. To enter into the contract it is necessary that the seller should show the acceptance for the offer made by carol. Hence, according to the case of Carlill v Carbolic Smoke Ball Co. it can be said that the parties had not entered into contract (Vettori, 2007).

Case 2: This case is regarding Devi who wanted a position in the field of cyber-security with a well known company named as George Smith and Fogarty Inc. Devi wanted to get the position on its own and his own but his father wants to help him to get the position. Devi’s father was a known person who can easily help his son to get the position he wants. Devi had gone through the hiring process of the company and cleared all the rounds and got hired for the position on 12^th April. Devi’s father was not having any information regarding his selection for the offer and he called Preston and presented the check of 150,000 Pounds so as to ensure that his son could get hired in the company. This type of consideration provided by Devi’s dad to George is termed as contingent consideration for the event that has already taken place (Adams, 2008). Therefore, consideration made for the event that has already taken place is termed as invalid. In this case George could not enforce the promise as the event has already occurred and any action made on past considerations are termed as invalid case discussed in Mills v Wyman.

2.2: Apply the law on terms in the following contracts

Case 3: Case presented here is regarding a couple who had booked a table in a restaurant on the entrance of which his coat was checked and a slip was provided by the restaurant. Slip that was provided by the restaurant had a clause written on it that restaurant will not be responsible for the valuable provided in the coat which shall be removed at the time of checking with the restaurant as it would not be responsible for theft or missing of any of the items present in coat. After some time man discovered that he forgot his wallet in the coat. Man went to check his coat but was unable to find his wallet as his wallet was stolen in the restaurant (Bell, 2013). Now the man wants a claim from the hotel. It can be determined that the restaurant had already provided the exclusion clause for which man had shown his acceptance by receiving the slip. This slip restricts the right of claim or to remedy the breach in any circumstances. As theft is not a possible event under the control of restaurant and protecting the valuables of the people from theft is not a duty of restaurant therefore exclusion clause made for such things will be termed as valid. Case discussed under L’Estrange v Graucob.

Case 4: Case discussed is about a tenant who had carried out a repair work for a warehouse and converted it into a usable condition. After carrying out the repair work landlord agreed with the tenant nit to increase the rent for next five years. After one year landlord died, successor of the increased the rent and when tenant refused to pay he terminated the tenancy. After that tenant has posted the claim for the repair work made by him for which new landlord refused to pay. Increase in the rent was charged due to increase in the value of property because of the repair work made by tenant. According to the tenancy agreement, landlord should carry out the repair work of the property or should compensate the tenant for carrying out the repair work. Therefore, tenant has a right to claim for the amount spends for the repair work as it is an implied term under a standard contract. Claiming for the amount spent for the repair work is an implied term because landlord would reap benefits from the repair works for the life. Case discussed Hutton v Warren (Richards, 2006).

2.3: Evaluate the effect of different terms in the given scenario.

Case 5: Case presented is about misrepresentation of the information by the policy holder. In this case a claim was made by policy holder for his motor vehicle for which policy company had provided the form containing several questions related with the claim. It was asked that whether policy holder made any claim for the modification or theft of the motor vehicle in previous five years. And the answer provided by the policy holder was No (Vettori, 2007). After investigation of Motor Vehicle Policy Company discovered that claim for the policyholder made theft of car in previous five years. These kinds of terms on the proposal form would be considered as a condition. Therefore, in this case condition was breached for which Policy Company could void the contract. Case held under Poussards v Spiers. The facts of the case determine that the contract was formed between Madame Possard and the opera company in the name of Spiers. Madame Poussards became unwell for five days and missed the performance for the opening night and the following four days for which Spiers replaced the singer and voided the contract. As the main purpose of the contract was to perform for the period of three months and was unable to therefore, the contract may be voided for the breach of condition.

Case 6: In this case response to the question regarding the claim and modification made by the policy holder in past five years was given as No. But with the investigation it was found that the policy holder had made two claims in pat five years in which one case was made for the theft of a motor vehicle and another case was rejected by the policy company about which policy holder was not having any information. It was also found by the policy company that there were certain replacements of parts were made in the motor vehicle by the owner. Therefore replacement of the parts could be termed as a breach but this term could be used as a sufficient reason to void the contract as it depends upon the owner of the vehicle whether to replace the parts of motor vehicle or not. Therefore, in this case contract cannot be made as no breach is made. For the second term wife was aware of the claim that was applied in past but she did not disclose it. In this case it would be termed that the wife had misrepresented the information. Therefore, in this case it could be said that policyholder has committed misrepresentation. But in either case breaches made by the policy holder could not be termed as sufficient enough to void the contract. Case held under Bisset v Wilkinson. According to the facts of the case that a farm was purchased by the claimant. At the time of sale the capacity of the land to hold the sheep was asked about. It was told that the same may hold 2000 sheep. On believing the same a contract was formed. It would be stated that the statement so made was an opinion and not a fact. Therefore, no action can be brought for the actual misrepresentation.   (Giliker, 2010).

Task 3:

3.1: Explain the similarities and differences of liability in tort with contractual liability using an example.

There are many similarities and differences between the contractual liability and liability under tort. Therefore, whenever any liability arises under tort or contractual breach then the affected party just needs to create a breach and not the reason for breach.  There is a strict liability with both of them. The liability created in this contract is from the voluntarily acceptance of the duty in this kind of situation.  Such duties are for the society in tort and contractual created under the contracts. (Giliker, 2010)

Thereafter, many differences between two branches of liability i.e. tortuous liability and contractual liability. These are as follows:

3.2: Explain using suitable example how liability for negligence can arise and the conditions needed to be met for ac claimant to successfully prove negligence.

There are various factors to be considered in the liability under law of tort with regards to negligence. Several factors are considered while determining the tort of negligence that are of the duty of care, and avoiding the duty leads to damage that can be in monetary, physical and psychological. The main thing which must be considered is the existence of duty which is considered while committing negligence. The duty of care pre- existent shall be avoided so that it amount into a tort of negligence. The negligence leads to harm or damage to a party through injuries, as it can be so grave. Injuries can be calculated in monetary terms, physical terms or psychological terms. These damages should be clear from the breach of the duty. (TAN, 2008)

Some elements which need to be considered while studying the tort of negligence are-

Donoghue v Stevenson- In this case, Mrs Stevenson went to a café with her friend. Her friend brought her and ice cream and a drink. She started having it and when she consumed half of it, she poured the rest half. She comes to know about a decomposed snail which resulted in causing her psychological loss and stomach infection. She blamed the manufacturer for this. It was held by Lord Atkin in this case and some other cases related to consumer that the manufacturer is responsible for whole society and not just the consumer only. This means that every product shall be prepared with proper care so that the immediate user may not be affected in any way by any defects in the product. This has created a universal burden on all the producers. (Morgan, 2011)

Caparo industries plc v Dickman- Some principles of classification related to the tort of negligence mentioned by the court are-

• Remoteness of damage- The damages which are arising must have least relation with the causation.
• Proximity and forcibility- The damage arising and the breach that occurred must be in same area.
• The cause and the damage must have a direct relationship to be a tort of negligence.

The basic things which are studied under the tort of negligence are of comparative negligence, volenti- non- fit injurial or minor negligence. Under comparative negligence which is also called as contributory negligence, both the damaging party and damaged party are responsible for the tort of negligence to a certain extent. In these cases, the party causing damage only pays the amount that is responsible to the affected party. The defense of volenti- non-fit injuria means a situation where the damaged party let goes of the duty of care intentionally to maintain the other duties. These are excusable situations, as party is keeping with important duties other that the one that is compiled with against the society. One another thing in this is that is the ignorance is committed by a minor person. If the age of a person is less than 18 years, then his punishment for the act is according to his age and the presumable level of understanding of the party while committing the negligence. The main reason for this is that it is assumed that children are not able to understand the consequence of different acts so they are unable to undertake the duty of care.

3.3: Explain what the vicarious liability means and how a business such as your organization can become vicariously liable giving example:

Under the law of tort, vicarious liability is considerable as the party is responsible for the other party related to driving the benefits out of the work so it is fulfilled by the party which is responsible for performing the work. This means that if one party derives the benefit of the other party then the liability of former party towards the latter which arises. This is known as vicarious liability. It basically means the responsibility towards other party. It can be seen in employer- employee relationship asemployee has the duty to work for the benefit of employer in any situation. Such duty arises out of the employer’s delegation.

However employer will be responsible if duty is breached within the scope of employment. This breach shall be from professional obligation only. Other arrangement of this type where vicarious liability applies is of master servant, agency and partnership. It is because of the relationships, parties are bound to perform for the benefits of other party which results in vicarious liability. According to the Health and Safety at Work Act of 1974, it is the responsibility of employer to maintain a safe atmosphere at workplace. He should ensure proper water, equipment so that the chances of any damages or injuries can be minimized. As an occupier under the Occupier’s Liability Act, it is the duty of employer to maintain safety for visitors and non-visitors in the premises and set up signs to put across the danger message in case it can happen on the premises.

Task 4:

4.1: Apply the elements of the tort of negligence and defenses in the given business scenarios below:

Case 7:In this case study, it is mentioned that a patient approached the hospital due to some chest and breathing related problem. Next day, it comes to know that the patient has died due to pneumonia by a toxic mold present in his house. The doctor resolved the issue by prescribing over the counter medicines. It is noted that doctor had not checked the patient before prescribing him. He did it by hearing the words of the nurse. It is the duty of the doctor to check the reasons for such pains, as it could be an indication of a heart attack. A doctor is a professional person and he cannot afford to ignore the same. Therefore, the negligence he committed under this case is the negligence wherein professional duties were ignored. (Morgan, 2011)

Further, it needs to be checked that the cause and effect relationship was direct ad if it is concerning the damages which occurred. It was said that the patient died of pneumonia and not by any heart attack or chest pain. The test is to be applied in such kind of situation for the case of negligence which is also called as the but- for test. The but- for test determines the reason behind the damage occurred. In this case, doctor was responsible for professional negligence but the reason behind the death is different. The hospital may not be held responsible for the death of the patient but can be held responsible for the professional negligence. This is because the negligence had no direct relationship with the cause of death and held no involvemtn of the hospital or the doctor for the same. So, the doctor cannot be sued for the damages caused to the patient by the toxic mould as was the case in. (Cooke, 2007)

4.2: Apply the elements of vicarious liability in given business situations below:

Case 8: This case study describes that a driver who works in a company, was asked for a pick up from the airport. When he reached the airport, he came to know that the flight has been delayed so he decided to have some drinks in his spare time. When he came back to the airport, the client arrived. He was still in drunk condition and lost all his senses that resulted in an accident in which the client and the car both were damaged. It was a case of drink and driving. It could be noted that the duties were so relevant in the formal nature were not breached in the given case. That time, the driver was performing official duties and the resulting damage would be the employer’s responsibilityas the act was within the scope of employment and comes within official duties. Although, the company had not asked driver to do drink at the time of duty but he did the same. So was discussed under the case of Lister v Hesley Hall Ltd. (Giliker, 2010)

Case 9: In this case, the situation is the result of vicarious liability. According to the given case, accident took place in the supermarket and it had happened while performing official duties. It was determined by the supermarket that the accident which was happened, affects the health and safety measures that were delegated to another company and due to this supermarket has no responsibility towards any damages.It is analysed that in case of Ready Mix concrete (South East) V MPNI, The judgement says that in a situation when there are more than one employer present at the time it takes place, then in such situation the employer have a direct control over the situation and he would be responsible. The accident was happened at the time of loading the pallets to the truck in the supermarket. This duty is the official duty which is involved and needs to be performed at the premises and the damages arising forms the performance of the professional duty. So, as the supermarket had direct control over the situation, when the accident happened, it would be considered responsible to regulate some standards in these cases. Hence, the supermarket would bear the vicarious liability in the given case. (TAN, 2008)

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Conclusion:

A contract is the formation of a  employee relationship  between parties to fulfil the determined motive under a contract. Such motive may be socially or commercially driven. The different elements of the contract and the types of terms are studied in the present assignment. The different types of contracts are further analysed to study the case scenarios so provided and determine a solution. The breach arising under the contract law and tort are distinguished on different basis. Under the law of tort two key liabilities that is the vicarious liability and negligence are studied to analyse the case studies so provided.

References:

Cases:
Carlill v Carbolic Smoke Ball Co.
Mills v Wyman
L’Estrange v Graucob
Hutton v Warren
Poussards v Spiers
Books:
Andrews, N. (2011). Contract law. Cambridge: Cambridge University Press.
Meyer, L. (2010). Non-performance and remedies under international contract law principles and Indian contract law. Frankfurt am Main: P. Lang.
Journals:
TAN, S. (2008). Vicarious Liability. Internal Medicine News, 41(24), pp.36-37.
Morgan, P. (2011). Distorting Vicarious Liability. Mod. L. Rev., 74(6), pp.932-946.
Bell, J. (2013). THE BASIS OF VICARIOUS LIABILITY. C.L.J., 72(01), pp.17-20.