Elements of Contract law in Business Assignment

Elements of Contract law in Business Assignment

Introduction:

A contract is regarded as the coming together of two or more parties for a similar intention. An offer contains the terms and conditions of the contract that are discussed at the time of entering into the contract. The several aspects related to elements types of terms and the contracts are to be discussed in the given assignment. The meaning effect of each aspect is to be analysed in accordance with the case studies provided. The liability arising in case of breach, under the contract law and law of tort are to be presented by distinguishing the basis. The types of liability arsing under the law of tort such as tort of negligence and vicarious liability are to be discussed along with defences to solve the case studies provided.

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 form a contract

For a contract to be valid it is important that the contract contains the necessary elements such as offer, acceptance, consideration, intention and such other. The contracts are to be entered into by two or more parties for the common terms and conditions. It is important that the offer shall move from the promisor. The offer shall be clear to understand and be express. An offer is different from an invitation to offer. This is because an invitation to offer is concerned as the invitation to make an offer. This would mean that statement so made is for the purpose of letting the prospective buyers know about the offer to be made. Accepting it, rejecting it, withdrawing it lapse of time or death, may suffice the offer. The acceptance so made shall be made once the offer is made. The acceptance is made by the promisee. The contract is formed when the acceptance is made. Sometimes the instead of acceptance a counter offer is made to ensure that the terms are negotiated. For counter offer to be made the original offer is adjusted according to the requirements and then accepted by the final offeree. If the acceptance is being communicated through post it is required that the same comes into existence when the acceptance is posted. (Adams, 2008)

Sometimes the enforceability of the contract is questioned at a larger scale. This is because not all contracts are enforceable under the law. Besides illegal contracts, the social contracts are to mention the extent of enforceability of the contract under the law. If the contract is entered into for commercial purpose it is assumed that the same is enforceable under the law but it is not the case with the social contracts. The contracts are only considered to be valid if they involve a certain amount of consideration. This would mean that for a contract to be called so under the law it should have an exchange of value under the contract to ensure that a contract is formed and the parties are restored for the detriment so caused under the contract. A consideration is considered valid if the same are not of past nature, are of sufficient quantity and not arise from the existing rights or duty of social or contractual nature. (Andrews, 2011)

The parties to the contract shall have a decent capacity to enter into a contract for it to be valid. The capacity of the parties is determined based on the legal age, soundness of mind and the financial status. If the parties at the time of entering into the contracts arenot of sound mind, legal age or bankrupt then the contract would become invalid ab initio. The contract is entered by the minors are only valid if the same are for necessities. Peter Abraham shall consider the circumstances of the business strategy before accepting the same. It should be made sure that the contracts purpose and consideration is discussed while entering in to a contract. If the parties are not of capacity the contract may be deemed void.

1.2: Discuss the impact of forming contracts

• Face to face contracts:Whereby the contracts are entered into by the parties in the presence of each other the contracts are said to be face to face contracts. Such contracts may either be in writing or of oral form. The contract terms of theses contracts are discussed and common between the parties. The contract of such nature may be established under the law if the parties agree to the terms and conditions so entered into at the time of entering into the contract. (Finch, 2007)

• Written Contracts:Contracts that are expressly written and presented to each other are known as the written contracts. The terms and condition of such contracts are presented in the writing and the acceptance is also made in writing through signatures. Such contracts are easier to be established under the law as they are presentable in the written format to establish the extent of terms and conditions so discussed between the parties. (Meyer, 2010)

• Distance Selling Contracts: whereby the parties enter into the contracts from different parts of the world the contracts are regarded as distance selling contracts. Such contracts are regulated by the Distance Selling Regulations of 2000. It is importance for the distance seller to present the terms and conditions of the transaction at the time of sale. Also, if the goods are of replenish nature the validity of the goods is to be determined as well. The details of delivery, quantity and taxes are to be made clear while entering into a contract.

When peter Abraham enters into a contract he should make sure that every contract is duly signed and agreed to between the parties. In case of distance selling contracts he should make sure that the party is an identified party and is eligible to make the transaction.

1.3: Analyse the terms in contract with reference to their meaning and effect

• Conditions:When a term is not performed and the non-performance affects the nature of the contract then such a contract is regarded as a condition. For a condition to have that effect it should be directly related to the nature and the purpose of the contract so entered into by the parties. Conditions are important part of the contract and need to be performed firstly to realise the meaning of the contract. Conditions may be performed at different stages o f a contract such has the condition precedent, condition concurrent and the condition subsequent.(Andrews, 2011)
• Warranties:A warranty is regarded as that element of the contract that comes second to performance and without which the contract may not be voided. If the warranties are breached the damaged party may claim for damages, get an injunction or file for specific performance. The warranties may be of different types such as the lifetime warranty and the performance warranty. If the warranty is breached the discontinuance of the contract is not allowed.
• Innominate Terms:Whereby the nature of the terms is not clear such terms are known as innominate terms. These terms are generally categorised on the non-performance of the same. This would mean if the non-performance of the term results in affecting the nature of the contract then it would be considered as a condition and if not then it would be a warranty. Therefore, the affect of the breach may surely determine the nature of the term so concerned. (Adams, 2008)
• Exclusion Clauses:When a term restricts or limits the liability under a certain situation then such clauses are regarded as exclusion clauses. Exclusion clauses are to be inserted in the contract either through notice, signatures or previous course of dealings. The same shall only limit the liability but not in the case of death or injury according to the Unfair Contract Terms Act. The exclusion clauses are to be constructed in reference with the least affected party.

Peter Abraham should know the difference between the different types of terms such as condition, warranty, innominate and exclusion and be able to apply the effects of the same in the case of breach of a contract. The meaning and effect of the same shall determine his knowledge regarding the contracts so entered into by him.

Task 2:

2.1:  Apply the elements of contract in the given business scenarios below

Case 1:

According to the facts of the case a couch was available for sale that was advertised for in the newspaper. Carol was interested in purchasing the same for herself and she decided to e-mail the seller to by the same. The advertisement posted in the newspaper would be regarded as an invitation to offer. This is because the seller advertised for the availability of the couch so that the prospective buyers can make offers. However, when Carol did not hear back from the seller it might be said that no contract was formed for the same. (Collins, 2008)

Case 2:

Under the present case Devi was interested to work for the cyber-security company. Devi’s father was a powerful businessman and was asked to keep away from the interview process. The Devi on giving the interview was selected and made an offer of employment that was expected by him on 12^th April. However, on 13^th April, Devi’s father writes to the company offering 150,000 Pounds for hiring his son. It may be concluded that the offer so made may be invalid. This is because the consideration so made is for an event already taken place making it a past consideration that considered invalid. Therefore, the contract cannot be entered into for being void ab initio and the company may make no claim for the same. (Vettori, 2007)

2.2: Apply the law on terms in the following contracts

Case 3:

In the present case it may be determined that a couple had gone to a restaurant for a dinner. At the entrance the couple were made to check in their coats and on checking in they were handed over with a slip containing a clause that the restaurant would not be responsible for the loss of coat or the belongings from theft or other causes. After finishing the dinner the couple had to pay for the meal but didn’t have the wallet. When the coat was checked the same was not found for which the couple wanted to sue the restaurant for damages. The clause so present on the slip is that of exclusion of liability in case of theft or other such losses. However, the clause is valid according to the Unfair Contract Terms Act, 1977, the clause was presented after the contract was already made such as checking in of coats. As the same was not notified it wouldn’t be considered a part of the contract. Therefore, as the loss had occurred on the premises of the restaurant, the restaurant would be liable to pay for the damages so arising from the theft of the wallet. (Andrews, 2011)

Case 4:

Under the case study it is determined that the tenant had invested into the improvements of the premises rented by him. The landlord in exchange of it decided not to increase the rent for the next five years. When the landlord died the person inheriting the property decided to increase the price and not reimburse for the improvements so made to the property. According to the tenancy agreement the implied term for the tenant is to claim for the improvements so made during the stay that result in increasing the value of the property. Therefore, the tenant would be entitled to claim the cost so put in by him during the stay at the property in question. In the case of Hutton v Warren it was determined that the claimant was employed as a farmer at the defendant’s farm field. The seeds for corn and barley were planted by the claimant. The tenancy was terminated before the harvest was made. Claimant posted a claim for the cost and labour invested by him. This claim was customary to be fulfilled in the farming tenancies. However, the defendant refused to do the same as it was not present under the contract. The court held that the claim of the expenses and costs was an implied term for the purpose of growing crops. It was an implied term in custom for the farming tenancies. (Meyer, 2010)

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

Case 5:

Under the present case study it is required to analyse the importance of the terms under a breach of contract. Whereby policyholder was asked regarding the previous claims for the theft of the motor vehicles the same was denied. When the actual claim was filed an investigation was undertaken and it was found that a policy claim was made for theft in the previous five years. The policyholder would be said to have misinformed regarding the condition to acquire the policy. Therefore, the condition having being breached the contract would be regarded as voiding the contract ab initio. The breach of term is considered for the breach of condition because it is directly related to the purpose of the contract. (Andrews, 2011)

Case 6:

Under the present case study the policyholder was presented with a form containing the terms related to the policy to be undertaken. The questions so asked regarding the previous claims for theft and the condition of the car with respect to the original parts, the policyholder denied regarding the claims and the change of original parts with reasoning. It may be said that the policyholder had denied the conditions terms that were not true as found on conducting an investigation. This would mean that the conditions were misrepresented. As the misrepresentation took place while acquiring the policy it would be considered as an important part of the contract having being breached. Therefore, the breach of the condition term would render the contract void ab initio and the company may void the contract. (Richards, 2006)

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Task 3:

3.1: Explain the similarities and difference of liability under tort and contractual liability using an example.

Liability is regarded as that obligation which arises from non-performance of certain act that was expected to be performed. The liabilities under contract and tort are for the non-performance of the established duties.  Under contract the duty is of contractual nature whereas under tort the duty is of social nature. When the liabilities arise the damaged party may claim without establishing the reason behind it. Such types of liabilities are regarded as the strict liabilities. However, these liabilities may differ based on the following criteria:

• The liability arising under the tort is for the breach of right in rem whereas the right beached under contract is that of right in personam.
• The damages under the law of tort are quantifiable based on the situation whereas the damages under the law of contract are based on the consideration.
• The motive is considered under the tort whereas the motive is not considered under the contract. (Vettori, 2007)
• The causation is considered under the law of tort whereas it not considered under the law elements of contract.
• The remedies so available under he law of tort are compensation whereas the contract law offers restitution, restoration and damages. (Bell, 2013)
• The elements t be considered under law of tort are that of causation, remoteness of damage, or proximity whereas the elements to be considered under contract are that of offer, acceptance, consideration and such other.
• The parties under the tort don’t have an existing relationship whereas the parties under the contract have a relationship

3.2: Explain the nature of liability

The nature of liability under tort is that of several types. The nature of liability for negligence arises from the duty of care. A duty of care is such a duty that is to be undertaken with each person in the society for the well being of the others in the society. The duty of care is to be realised by performance. If the duty of care is breached it would be said to have been on the account of negligence originating from the ignorance, carelessness or forgetfulness. The duty of care when breached should be result in physical, psychological or economic loss. This could be explained with an example of reckless driving on the roads. The duty of care for safety against the fellow drivers and pedestrians is breached and it may be considered as negligence.

In the case of Donoghue v Stevenson it has been decided that the duty of care should exist not directly but indirectly as well. This would mean that the actions should be considered while taking into consideration not only the person involved but those that may be involved at a certain step in the future. This case established the universal standard of responsibility of the manufacturers for direct as well as indirect consumers at the time of sale so made. (TAN, 2008)

In the case of Caparo Industries the three rules to determine the extent of negligence were established. These rules are proximity and foreseeability, causation and remoteness of damage. The causation would mean that the cause and effect of an action should be directly related. The remoteness of damage shall involve the remoteness of the action and the effect of the action. If the breach could have been foreseen at the time of performance then the duty of care would arise.

The possible defences applicable under the tort of negligence are that of minor negligence, comparative negligence, or volenti non-fit injuria. The negligence may be excused if the minor commits the same because it is assumed under the law that the minors are unaware of causing a breach, as they don’t know the implications of the actions. The defence of comparative negligence determines that each party is involved for negligence to a certain extent and therefore will be responsible for the extent of involvement. Whereby the party commits a breach when the party already knew that the duty was being breached then the same would be regarded as the volenti non-fit injuria and the damaging party would not be responsible to pay for the damages so caused. (Cooke, 2007)

3.3: Explain how a business can be vicariously liable

The liability of vicarious nature amounts to being responsible for someone else’s actions. This would mean that when one party commits the wrong the other party would pay for it. Such a liability arises because the wrong so committed is while performance of the action is so derived by the party paying for the damage. The actions are said to be delegated and the delegation gives rise to the vicarious liability. Such a liability is mostly recognised under the employer-employee relationship. It is to be noted that the wrong so committed shall be while performing the duties so delegated and not the personal duties. (Morgan, 2011)

According to the Health and Safety at Work etc. Act, it is required that the employer maintains the safety of the premises for the benefit of the employees. The sanitation ad water facilities shall be clean. The working equipment shall be according to the working standards. The disposal system shall be functioning and standardised. According to the Occupier’s Liability Act, the occupier or the employer is expected to maintain the safety of the premises for the visitors and non-visitors. These visitors and non-visitors may or may not be of permanent nature. The occupier’s are expected to put up warning signs at a place visible to a reasonable person to be notified of the dangers so present on the premises.

The vicariously liable may exist under relationships beyond employer-employee. This would include the relationship of a master-servant, partnership and agency. The master-servant have vicarious liability because according to the Salmond’s Test the servant performs the tasks for the benefit of the master for most part of the day for the master to be vicariously liable towards the servant. The partners perform for the partnership while being involved for the profits and losses towards each other. This would give rise to being responsible for the actions of each other giving rise to the vicarious liability. The agent under an agency is authorised by the principal to undertake actions and responsibilities in the name of the principal. Therefore, as the agent is working in the best interest of the principal the principal is expected to be liable for the actions of the agent for having delegated the same. (TAN, 2008)

Task 4:

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

Case 7:

The given case study illustrates that a patient suffering from the chest pains and breathing difficulties approaches the hospital to get him checked. Being a busy day the doctor asks the nurse to give the over the counter medicines fro the pains so suffered. Later the next ay it is found that the patient had passed away. On investigation it was found that the death so caused was because of the pneumonia and not due to the medicines so prescribed. It may be observed that the doctor when prescribed the medicines did not perform a regular check up for sever pains of serious nature. The same was the duty of the doctor that went unperformed. The doctor because of the non-performance would be accused of professional negligence. (Giliker, 2010)

The professional negligence is regarded as neglect or wrong committed during the course of the profession for having a certain expertise. In the present case the but-for test under tort of negligence may be applied. The but-for test derives the relationship between the damage so caused and the affect of such damages. The cause of damage and the affect of the damage areto be direct in order to give rise to the liability. As in the present case the medicines prescribed by the doctor were not the cause of the death the hospital may not be held liable for the neglect so undertaken. (Cooke, 2007)

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

Case 8:

The case study provided studies the vicarious liability of the company and the driver who is an employee of the company. The driver had the duty of picking up a client from the airport. As the flight got delayed the driver decided to stop fro a few drinks before picking up the client. When the client arrived the driver was still drunk and decided to drive back with the client. On his way back the driver was negligent in driving and caused an accident damaging the car as well as the client. The damages so arising in the present circumstance arise from performance of the official duties. The scope of official duties is related to the breach of duties and therefore, the company would be held liable towards the damages so caused. The factors that may considered while determined the liability may be that of foreseeability and causation. The negligence led to the accident and the same damage was foreseeable by the driver for driving and drinking. Therefore this gives rise to a duty of care leading to a breach of duty. (Morgan, 2011)

Case 9:

Under the present case it is determined that the Supermarket had delegated the responsibility for health and safety standards to another company. The employees were regulated by two authorities that is the Supermarket and the other company. While loading, unloading the pallets from the truck an employee slipped then and the pallets fell onto another employee causing him serious injuries. In such a case the planks when fell over to another employee it took place on the premises of the Supermarket. The Supermarket denies the responsibility of such actions of the employee causing injury. In the case of Ready Mix Concrete (South East) V MPNI it was derived that whereby more than one employee the employer having the direct control over the employee at the time of committing the wrong governs the employee would have the responsibility of the vicarious liability. As in the present case the Supermarket had the direct control over the employees it would be held liable for the damages. (Bell, 2013)

Conclusion:

In the given assignment the different types of contracts have been studied in regards wit the meaning and effect. The types of contract are presented in reference with the elements of enforceability under the law. The effect of the terms under a contract has been analysed to ensure the case studies have been answered as required. Furthermore, an elaborative distinction is presented between the breach of contract and duty of care under tort to realise the difference between the two. The liability under tort such as negligence and vicarious liability is illustrated to ensure that the case studies as answered.

References:

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.
Collins, H. (2008). Standard contract terms in Europe. Alphen Aan Den Rijn: Kluwer Law International.
Vettori, S. (2007). The employment contract and the changed world of work. Burlington, VT: Ashgate Pub.Giliker, P. (2010). Vicarious
liability in tort. Cambridge, UK: Cambridge University Press.
Cooke, P. (2007). Law of tort. Harlow: Longman.

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.