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Unit 5 ACNB Assignment Copy
Diploma in Business
Unit Number and Title
Unit 5 ACNB
Task 1 Explain the essential elements of a valid contract in a business context
The formation of a contract is the compilation of five basic elements in law. When an offer along with acceptance supported by consideration, by capable parties with legal intention, make mutual exchange of promises, then, a contract is formed between the said parties. So, precisely, a contract requires few elements. The same are:(Allen &Overy 2016)
- Offer: It is an intention which is conveyed by the offeror to the offereeand he specifies the acts/omissions which he expects and offeree to undertake(Blair v. Western Mutual Benefit Association (1972)). An offer can be made in written form or by the words of mouth. (Duhaim 2016)
- Acceptance: The offeree when receives the offer grants his approval which is called acceptance in law. The offeree should not make any deviation to the offer terms while making any offer otherwise it results in counter offer. The promises must be mirror image of each other in order to make a valid contract (Carlill v. Carbolic Smoke Ball Company (1893).
- Consideration: Some benefit or profit which is moved from the offeror to the offeree because an offeree is complying with the offer terms is consideration in law. A consideration makes an offer and acceptance enforceable.
- Capacity: The offeror and the offeree should be major and must be in their senses while decision making a contract. In case the parties are not capable of entering into a contract then the contract
- Intention: The parties when exchange promises with each other should do so with intent to abide by the same legally. Legal intention submits that the parties may approach the court if any dispute arises amid them because of breach of contract.
- When all the elements of contract are combined together then a valid contract is made.
- Importance: The importance of all the contract essentials lies in the facts that all the elements are very necessary for the proper formation of the contract.
The contract is formed when all the contract elements are present. The parties who intent to form contracts can do so in various forms. The same are:
- Face to face contracts: The contracts when are formed when the parties to the contract are seeing each other(Lyndhurst) Limited T/A Entertainment Group v Lombard North Central PLC, 2012). There must be physical presence of the parties who are making face to face contrast. These kinds of contracts are normally verbal or oral in nature. (GlobalLegalPost 2014) The basic significance and impact of these kinds of contracts is that such contracts are very easy to form because they are made orally. But, these contracts have not major impact because they are not easy to prove them in courts because the contracts have no written evidence to support the same.
- Written contracts: When the parties wish to form the contract not by orally exchanging the terms and conditions of the contract but by writing down the terms on paper thereby making written contracts. Some of the major contracts on law are formulated in written form only, such as contracts by deeds, property contracts, sale deeds, etc.(SEQLegal 2016) The major significance is that they are no difficult to prove as are always in writing thus whenever any dispute is raised amid the parties then the parries can easily prove the terms of the contract. Thus, written contracts have a possibility impact o the parties and the parties must prefer to form written contracts wherever possible.
- Distance selling contracts (Telephone and internet): When the parties are not seeing each other by keeping physically presence and the contract is made when the parties are physically apart then such kinds of contracts are called distant selling contracts. The distant selling contracts which are made online through internet are online contracts and the contracts which are made by the parties over telephone are oral distant selling contracts.(The law Teacher 2016)
The major significance and importance of such kinds of contracts is that these contracts are easy to prove only when are not in oral form, such as, through telephonic conversation.
The contract when is made by the parties then it is the terms of the contract that guides the parties and compel them to perform their part of obligations. the terms are bifurcated as follows:(Elawresourceuk 2016)
- Condition: A condition is that term of a contract which is crucial and vital and forms the basis of the contract. A contract can be performed only when such term is present in the contract. If the same is not followed by any party and is breached than in that case the party who suffers due to such breach can claim damages and can also rescind the contract (Poussard v Spiers (1876).
- Warranty: When the term is not the basis of the contract and is required for the validity of the contract then the terms are warranty. Thus in case of non following of warranty by any of the party to the contract, the suffering party can only claim damages and the contract continue (Bettini v Gye (1876).
- In nominate terms: They are those terms which can be classified as warranty as well as condition. Their classification into condition or a warranty depends upon the situation in which they are breached(Hong Kong Fir Shipping v Kawasaki Kisen Kaisha (1962).
- Exemption clauses (including legality): There are certain terms which are inserted in a contract by the parties in order to mitigate or limit/exclude liabilitywith the approval of another party and are called exclusion clauses (Thornton v Shoe Lane Parking (1971). The liability are excluded as per the situations stated in the contract. The clause is only valid provided the same is known to the parties (Olley v Marlborough Court (1949).(InBrief 2016)
Task 2 Apply the elements of a contract in business situations
Case 1 – Agreement
- Issue: Whether there is a concluded contract between Carol and the seller?
- Relevant law: As per the law of contract, an agreement is sum of an offer and an acceptance. But to make a contract there must be capacity of the parties entering into contract, consideration to support the promise and intention of the contracting parties. So contract must have all the above features then only it can be formulated.
- An offer is an intention of a party (offeror) to make contract with an offeree but sometimes it is misunderstood with a concept which is invitation (Blair v. Western Mutual Benefit Association (1972). In case of invitation to an offer the invitation is made by the person to get offers from the prospective buyers and upon their making offer, if the person inviting the offer accepts the same, then, there is a contract between the parties (Partridge v Crittenden (1968). For instance, advertisement, auction etc. are invitation to offers. (The Law Teacher 2016)
- Application and conclusion: As per facts, Carol saw an online ad for sale of couch and emailed that she wanted to buy. Thus, it is clear that the ad was an invitation to treat and Carol made her offer. But the same was not accepted by the seller so there was no contract. In case seller would had reverted with acceptance then there would had been a contract.There was no contract between Carol and the seller so Carol cannot force the seller to sell the couch to her in this case.
Case 2 – Consideration
- Issue: Whether the letter written by Preston cane be enforced by George?
- Relevant Law: In law, every agreement (offer and acceptance) should be holdedby a consideration to make a valid contract.
- Basically, some benefit or profit which is moved from the offeror to the offeree because an offeree is complying with the offer terms is consideration in law. A consideration makes an offer and acceptance enforceable. But, a consideration must support promises which are performing or yet to be performed(Pao On v Lau You Long (1980). Promises which are of past nature are not valid.(Aboy 2012)
- Application of law and conclusion: Devi was looking for a job at George, Smith & Fogarty, Inc. he was selected and offered for the job on 12th April 2015. Preston, who was the father of Devi, is unaware of the same and on 13th April he promised George that if the company will offer job to Devi then he will pay them £150,000. However, this promise of Preston is for an act which was already performed, that is, on 12th. Thus, the consideration is past and invalid.
So George has no right to enforce the letter written by George.
Case 3 – Exclusion clause
- Issue: Whether the couple can recover their lost money from Restaurant?
- Relevant Law: When a contract is formulated then there are many clauses which can as condition, warranty, innominate and exclusion clause.
- An Exclusion clause is that clause which is inserted by the parties to exclude/limit the liability. The benefit of an exclusion clause can be availed by the benefiting party when the clause is within the knowledge of both the parties. The suffering party must have the knowledge of the exclusion clause at the time of execution of the contract then only the liability upon him can be fastened(Olley v Marlborough Court (1949).In case the clause is not within the knowledge then the suffering party is not liable. Moreover the benefitting party can avail the benefit if it is able to prove that all efforts had been made by it to brought exclusion clause into the knowledge of the suffering party.(InBrief 2016)
- Application and conclusion: The Man left his coat with money i at the entrance of the hotel. He was given a receipt and on its back it was stated that “all valuables must be removed from the jacket pockets as the restaurant will not be held responsible for items missing or stolen”.
When he got back his coat then the money was missing. The restaurant tried to took benefit of the above exclusion clause.But the restaurant cannot rely on the clause as the clause was not within the knowledge of the man and also no efforts were made by the restaurant to bring the clause within his knowledge. So the restaurant will be liable to man.
Case 4 – Implied term
- Issue: Can compensation can be claimed by Aaron
- Relevant law: The terms can be express terms and implied terms.
- Those terms which are expressly decided by the parties and made part of the contract are express terms. However when the terms are not express in nature and the parties are obligated to comply with the same under law, custom, usage etc then such terms are implied in nature and are valid in the eyes of law. (Worksmart 2016)
- Application and conclusion: It is submitted that an express undertaking is established amid Aaron and Zehphra (when Aaron took a warehouse on rent from Zehphra) that Zehphra will not raise the amount of rent at least for next five years because repairs were carried out by Aaron on the property. But, Zehphra died and the property moved to Yeti. However, Yeti increased the value of the rent. It is submitted that the express clause which was entered amid Aaron and Zehphra which was the basis of the contract will also be binding upon Yeti. This is an implied understating in law that the contract when is inherited by any person then he is obligated for all profits and losses.
Thus, if there is enhancement of rent by Yeti then Aaron has full right to deny the same and if Yeti does not adhere to the same then Aaron can sue yeti for the compensation for the repairs undertaken by him.
- Issue: Whether the insurance company has any right in law to avoid the policy?
- Relevant Law: In law, the contract terms can be divided into three broad categories, the same are conditions, warranties, and in nominate terms
- A condition is that term of a contract which is crucial and vital and forms the basis of the contract. A contract can be performed only when such term is present in the contract. If the term is breached then suffers can claim damages and rescind the contract. But, a warranty is that term which is part of contract but is not the basis of the contract(Poussard v Spiers (1876).If breached the suffering party can only claim damages and the contract continue. (Elawresourceuk 2016)
- Application and conclusion: Now, before the insurance contract was made between the parties, that is, the insurance company and the holder, a question was asked by the company, that is, "Have you or anyone who will drive been involved in any motor accidents or made a claim (fault or non-fault including thefts) during the last five years-" which was denied by the holder and the same was not true.
This question was very vital in insurance contract and is the basis of the contract and is thus a condition.
This condition was violated by the holder so the company has right to cancel the contract.
- Issue: Whether the insurance company has any right in law to avoid the policy?
- Relevant Law: Every contract term is divided into three broad categories on the basis of the importance and remedies. The same are condition, warranty and in nominate term.
- Innominate terms are those terms which can be classified as warranty as well as condition. Their classification into condition or a warranty depends upon the situation in which they are breached (Hong Kong Fir Shipping v Kawasaki Kisen Kaisha (1962).A condition is a term which is very vital in a contract and if not followed then the suffer can sue for breach and can claim damages and rescind the contract. But, a warranty is a term which is not the basis of the contract and only damages can be claimed. (Elawresourceuk 2016)
- Application and conclusion: When a contract was made between the insurance and the holder, then, the two questions are asked which are wrongfully answered by the holder. The first question was regarding the modification of the car and the second question was regarding any accident which was met by the car in last five years.
The first question is not the essence of any insurance contract and thus is a warranty. But, the second question is the basis of the insurance contract and thus is a condition. Violation of warranty will only result in claim of damages. But the insurance company can cancel the contract since a condition was also breached.
Thus, the company has full right to terminate the contract.
Task 3 Explain the principles of liability in negligence in business activities
When any oblation arises from the terms of the contract then the liability is contractual but when any liability that arises because of breaches of any legal oblation then the liability is tortuous. These contractual and tortuous liability have various contrasting features such as, first, the parties are aware of each other on contract but are unknown in tort; second, the liability is strict in tort but is faulty in tort; third, the liability is pre-determined in contract but is not liquidated in tort; forth, the contractual liability is self originated by the parties but the tortuous liability is originated in law. (The Law Teacher 2016)
Thus, these are some of the contrasting features amid the two laws.
The law of tort has various kinds of laws, such as defamation, battery negligence. The law of negligence is a very significant kind of law that prevails in today’s time. When a legal obligation is imposed upon a defendant not to cause loss to plaintiff and if any loss is caused then the defendant is negligent provided the parties are neighbors of each other. The plaintiff can make a successful claim against the defendant if three basic essentials can be proved. The same are:(Leeds 1998)
- Duty of care- The duty of care arises when the defendant actions may result in causing harm to the plaintiff. If the harm is reasonably foreseeable by the defendant then he must not undertake such actions (Anns v Merton London Borough Council (1978) & (Topp v London Country Bus (1993).But, the plaintiff against whom such harm may be caused should be in proximate relationship with the defendant so that the acts of the defendant would have been falling directly upon the plaintiff. (ELawresourceUK 2016)
- Breach- the duty when is not properly performed by the defendant then there is breach of duty. The breach occurs when the quantum of care is not carried out by the defendant as expected(Condon v Basi (1985).
- Damages- some loss should be caused to the plaintiff because of breach of duty by the defendant. The loss must be direct and should be reasonably foreseeable(Allied Maples Group v Simmons & Simmons (a firm) (1995).
Thus, these are the basic elements which must be proved by a plaintiff to make any defendant liable under the law of negligence.
When people are employer-employee then the loss caused because of employee’s negligence may be imposed upon the employer provided the occurrence of the loss took place within the course of employment. This rule is established in the law of vicarious liability(Merseyside Docks &Harbour Board v Coggins and Griffiths (1946). Thus, the basic features for the establishment of vicarious liability are that the defaulter is the employee of the employer and is working within the employment. Further, the loss is incurred during employment by the defaulter and under the directions of the employer and some third party sustained injuries because of the acts of the defaulter. (The Law Teacher 2016)
Task 4 Apply the principles of liability in negligence in business situations
- Issue: Can the hospital be held negligent for the death of Mr Brown and if yes then are there any defense under which the hospital cannot be held liable under the law of negligence.
- Relevant Law: In the law of negligence, every defendant has an obligation that he must carry his actions without causing injury to plaintiff(Bolam V Friern Hospitality Management Committee(1957). The three basic essentials of the law of negligence are that the defendant must carry out his actions so that no reasonably foreseeable harm can be caused to the plaintiff who is his neighbor and if the duty is breached causing harm to the plaintiff then there is negligence on the part of the defendant.(BitsofLaw 2016) But, if a defendant is held to be negligent the also he can protect himself if he can prove that the loss which is caused to the plaintiff has resulted because the plaintiff has also contributed in the wrongful acts along with the defendant which has ultimately caused loss to the plaintiff.
- Application and conclusion: Mr Brown was no well as he was suffering pneumonia which is caused to him from toxic mould in his house. But, the doctor at the hospital has recommended him with some pain killers without checking when Mr Brown complained of chest pain and breathing.
Thus, the doctor has prescribed the medicines without checking the patient which is not right as the doctors has a duty to check the patient prior giving any medicine. This duty of care is breached. Mr Brown is directly affected by the actions of the doctor and is thus the neighbor of each other. Hence, the hospital is clear in violation of his legal duties and is negligent.
But, the hospital can claim that Mr Brown has complained of breathing problem and chest pain and thus the medicines were adequate. Mr Brown did not specify his exact condition and thusthe hospital can take the defense of contributory negligence.
The basic question arise is whether the loss which is incurred because of the drivers negligence will be imposed upon the executive chauffeur company.
When people are employer- employee then the loss caused because of employee’s negligence may be imposed upon the employer provided the occurrence of the loss took place within the course of employment. This rule is established in the law of vicarious liability. The basic justification behind the vicarious liability is that if an employer can earn money from the labor of his employee then the loss must also be borne by an employer only. But, an employer is answerable to the loss caused by an employee only when the acts are as per the guidelines of the employer and the loss is caused within employment course.
Thus, the basic features for the establishment of vicarious liability are:
- The defaulter is the employee of the employer;
- The defaulter is working with the employment(Lister v Hesley Hall (2001)
- The loss is incurred during employment by the defaulter;
- The act was as per the employers directions.
- Some third party sustained injuries because of the acts of the defaulter.
Once all the ingredients are established then the third party who has sustained injuries may sue the employer for his loss which is caused because of the actions of the employee.
Now, The executive chauffeur company has appointed the driver and was assigned with the task of picking its client from the airport. The driver when was waiting for the client has consumed alcohol which is above the driving limit. While driving back, the driver crashed into a lamp post and serious injuries are sustained by the client. Since, the driver was performing his official duties when the loss is incurred by his because of his negligence and the acts are not outside his authority, then, the law of vicarious liability is fully applicable and the client of the executive chauffeur company can sue the company beachside of the negligent acts of the driver.
The basic question that is raised after understating the given case study is Can the supermarket will be held liable for the acts of Mr Jones which ahs ultimately resulted in the loss to one of his colleagues.
The law of vicarious liability is applied. In vicarious liability, the acts of the employee which has caused loss to any third party should be carried out by such an employee within the course of hi employment ((Lister v Hesley Hall (2001). If the acts of the employee are such which are not authorized to him by the employer and are not carried by him within the course of employment then, the law of vicarious liability will not apply and the employer will not be held liable. (The Law Teacher 2016)
Thus, it is submitted that Mr Jones was the delivery driver of the supermarket. Once his acts has resulted in causing harm to one of his colleagues. But, when the act which has caused the injury was undertaken by Mr Jones, at that time the health and safety responsibility was assigned to some other company and is not within the scope of the supermarket.
Thus, the supermarket was not the employer of Mr Jones when the accident took place. Thus, there is no application of vicarious liability and the colleague cannot sue the supermarket for his losses.
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Allied Maples Group v Simmons & Simmons (a firm) (1995)
Anns v Merton London Borough Council (1978).
Bettini v Gye 1876
Blair v. Western Mutual Benefit Association (1972).
BOLAM V FRIERN HOSPITAL MANAGEMENT COMMITTEE (1957)
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Edwards v Skyways Ltd (1964)
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