Delivery in day(s): 5
Diploma in Business
Unit Number and Title
Unit 5 Aspect of Contract in Business
This Unit 5 Aspect of contract in business assignment would entail the facets of elements of contract formation, contractual terms and clauses and its implication, element of liabilities in such contracts, liabilities of negligence and tort and the liabilities that are vicarious in nature. For enabling the gain of knowledge about the intricacies of application the report has included several case studies so that the mentioned aspects can be studied in the context of real life scenarios.
A contract that has validity in the eyes of law requires the fulfilment of the conditions given below which makes it mandatory for Mr. Peter Abraham to keep a strict note of in case of entering into any kind of professional or personal contracts with business enterprise or individuals:
i) Face-to-face Contract- These are also termed as verbal contracts and are entered into on the basis of trust that exists between the contractual parties. As the element of faith is vital between the contractual parties on the eve of contract formation, the contracts that take place face-to-face can also be legally put into practice if there exists strong faith as has been decreed in the case of Rowena Williams (as executor of William Batters) v Gregory Jones (25 February 2014). Lack of good faith and an occurrence of an infringement of clauses in such contracts can be imposed legal charges as was witnessed in the case of Winternitz v. Summit Hills Joint Venture, where the accused was awarded a punishment sentence ( Deakin and Morris., 2012).
ii) Written contract-This is regarded as the most common type of contract with an extensive use across the globe for all kind of personal and professional matters. These contracts contain all information, terms and clauses that are related to the contract in the written form and hence the consequences of infringement remain visible to both the parties to the contract. These contracts are legally enforceable and hence in case of any kind of infringements claims can be brought against the accused in the court of law. There is less risk because of astute documentation of all the terms and is therefore more reliable in nature than other forms of contract (Schmerler., 2008).
iii) Distance Selling (telephone / internet)- The formation of contract over the electronic devices such as internet and telephone are the current styles of forming contractual relationships since a large volume of business dealings take place in form of online transactions. These contracts constitute all the basic elements of a conventional contract and in the occurrence of any kind of breach by any of the parties charges can be imposed on the party under the purview of Electronic Commerce Regulations 2002 that underpins the operational principles of businesses in the domain of e-commerce (Holmes, 2009). As was stated in the case of L’Oreal v. eBay that the companies that do online businesses need to take a certain amount of liability as a part of the information society so that more prudence gets reflected in their dealings to secure the interests of their online consumers ( Zamore., 2015). However contracts entered into over the telephone are treated as face-to-face contracts and in the absence of any kind of documentation remains unenforceable and hence establishments of claims in cases of breach are regarded as invalid in law. Its termination too in the absence of any kind of legality is solely dependent on the fancies or whims of the contractual parties.
i) Condition- At the time of forming the contract the formulation of contingent clauses for gaining knowledge to deal with future crisis are termed as conditions (Poussard v Spiers (1876) 1 QBD 410). The conditions must be fulfilled for the contract to be executed and could be done either in writing or verbally or by the legal process. The contract can be terminated by the aggrieved party on the basis of his suffering due to the reason of condition unfulfilment and the entire contract is considered as infringed even when only one of the conditions has been breached (McMillan and Stone., 2012).
ii) Warranty- This refers to the specific period of time mentioned in contracts of business which if lapses leads to nullification of contract validity thereby making it a void contract (Bettini v Gye 1876 QBD 183). It refers to the informational veracity that is conveyed by the seller to the purchaser at the time of sale of the product. Warranties can be either express or implied in nature. The former connotes that the product producer has made explicit claims and the law has made claims of implicit nature. Warranty if breached does not lead to contract cancellation but gives rise to claim for damages by the sufferer in lieu of the inconveniences (Ayres., 2012).
iii) Innominate Term- The effect of infringement is the focus of innominate term for gaining knowledge about the degree to which the aggrieved party has been deprived of the advantages of the contract (Hong Kong Fir Shipping v. Kawasaki Kisen Kaisha  2 QB 26). The repudiation of the contract can only follow from the fact that the benefit of which the innocent party has been deprived is significant in nature (McMillan and Stone., 2012). As it can mean both a warranty and a condition the parties must draw distinctions in the terms stating them either as warranty or conditions. It has been critiqued often since the element of certainty is compromised. In case the amount of deprivation is not a considerable sum then the innocent party is liable to bear the charges for nullifying the contract in a wrong manner ( Jewel., 2002). Under the declaration of the term by the parties as a condition, it may be declared as a minor term by the court and hence its infringement can lead to contract cancellation.
iv) Clauses of Exemption (including legality)
According to the Contract law of UK, the clauses of exemption are only applicable where the power of the contractual parties is restricted or they are excluded from bearing the liabilities of the contract. The clauses of exemption could be of three types - clause of time limitation, clause of true exclusion and clauses of limitation. The clause of exclusion is applicable when there is an apprehension about the infringement of the contract. The limitation clause is applied for the imposition of restriction on the amount of claim when the contract is infringed ( Smith., 2011). When a claim related action commences within the time set for the action the clause of time limitation finds an application.
Case 1- The advertisement by Gumtree was not clear and transparent to be considered as an offer by Carol and hence it could be considered as an invitation to treat and not an offer in itself (Harvey v Facey  AC 552 Privy Council). Therefore there was no formation of any kind of contract between Gumtree and Carol. Moreover when Carol replied for acquiring the furniture, in the absence of a former communication between the company and Carol, it would be considered as a counter offer.
Case 2- The case scenario is quite interesting since Devi was hired by the organisation of George just a day before Preston had requested George for the same and Devi had no knowledge that Preston had been requesting George for many weeks. As the company had imposed interest on Preston it in turn reveals the interest of the company making Preston obliged to payment of 150,000 pounds as per his promise. The confusing element in the case gets cleared in the context of the case of Lampleigh v. Braithwaite  EWHC KB J17, which stated that the defendant was responsible for the murder and hence was sentenced to death, however, as the defendant had promised to pay the plaintiff a sum of 100 pounds if the plaintiff could hold back his death sentence, and even on repeated efforts when he was not being given the promised sum, it was adjudged by the court of law that as consideration of the defendant took place before the promise, it is considered as a past consideration, but its validity is constituted by the request thus making the defendant obliged to keep his promise of paying the sum (Beatson et al., 2010). Hence in the given scenario Preston must pay the promised sum to George since the consideration was fulfilled before the request.
Case 3- The supplied case scenario must be studied with due consideration since there is a strong presence of contradictory occurrences. The case mention the presence of the wallet in the coat pocket and when refund was sought the restaurant went forward with the imposition of the clause of exclusion. In the context of the case of Parker v. South Eastern Railway (1877) 2 CPD 416, Parker came to know about the clause of exclusion after the loss of the bag. Therefore if the man at the restaurant had not seen the clause he is entitled to get his lost wallet, but if he did not seem to believe in the clause even after knowing it, there can be defence in favour of the restaurant, since the establishment of the clause is proved by its presence in the receipt, and so the disbelief of the plaintiff cannot be taken into consideration (Hogg et al., 2008). Furthermore citing another case of L'Estrange v Graucob  2 KB 394, where the company defended itself on the grounds that the clause of exclusion was found on the box of contents, it can be concluded that the man in the given case scenario would not be given allowance by the presence of the exclusion clause to impose claim on the restaurant.
Case 4- The given scenario reveals of a verbal contract between the parties based on the mutual trust therefore when Zephara died, the act of Yeti taking possession of the space and also increasing the rent is to be treated as a wrong doing which can be further discussed in the context of the case of Hutton v. Warren  EWHC Exch J61, wherein the receipt of the sum of compensation for the investment of the labour in sowing the seeds and raising the crop was decreed to the aggrieved party before the contract was terminated by the owner of the land. Hence in the given case, customary terms shall be implied on the basis of the fact that there were no glitches in the verbal agreement between Zephara and Aaron as it went forward in accordance to their decisions.
Case 5- A contract is formed when the terms of the contract has been agreed upon by both the parties and there must also be a clear understanding about the presence of the various contractual clauses to both of them ( Scott and Triantis., 2006). In the supplied case scenario, it was clearly stated that the policy holder is not supposed to have any kind of claims such as claims for theft etc, following which such claims were found to be present thus resulting in an infringement of the terms of the contract.
Case 6- After careful consideration of the second event it can be understood that the policy holder had not revealed the truth to the insurer when she was being asked by the latter explicitly, following which it was found to be untrue by the insurer on further investigation. This not only nullifies the claim but also leads to policy cancellation. The claim of the lady on the basis of assumption that the alteration was not in her knowledge and hence she affirmed to the policy clauses would still be held as an infringement of the term of the contract leading to the nullification of the contract and the claim as well.
When a contract is breached or a tort is committed the liability the liability that emerges from the act so committed is considered of civil nature and in both the cases the structure is similar and it fulfils the elements of action illegality, prejudices and guilt and relationship between the causes of guilt, action that is illegal and prejudices ( Kidner., 2008). The primary ideology behind both the forms of liability remains re-instatement of the prejudice that has been the result of an illegal action which the asset has been subjected to, hence the injury caused and the advantages that are receivable gets aptly covered. The economic value of the prejudice is considered in cases where the damages cannot be reimbursed in kind. The business organisations as well as the individuals come under the ambit of the imposition of the both the kind of liabilities. The dual theories that help in the explanation of the basic principle of tort law are given as under:
When a noncompliance of the contractual terms by one party is witnessed in case of a contract between two parties that can be enforced by law, a case of liability due to breach of contract takes place. The following illustration can be helpful in understanding the situation: a contract takes place between X and Y wherein Y is supposed to sell furniture which is priced at $ 22000 and the time within which X was supposed to receive it lapses, causing a liability of contractual breach on Y equivalent to the price of the furniture. In the similar fashion if X would have failed to pay he would have had to bear the liability of breach for the losses incurred by Y.
The tortuous liability is utilised when the person has infringed the commitment of not causing damage to the other by actions that are considered unlawful in nature and on the other hand the occurrence of contractual liability is taken into consideration when contractual commitments remains unfulfilled from the end of the creditor ( Routledge-Cavendish., 2008). The liability arising out of infringement of contracts is a voluntary commitment by either of the two parties who has come together vide a contract whereas the liability of tort pulls two persons together by accident. In case of contractual liability the guilt is presumed to be from the debtor’s end while liability of tort is in requirement of the evidences from the sufferer, in favour of the injurious act committed by the offender. The compensatory perspective of cases of tortuous liability states that both the indirect, direct, unpredictable and predictable costs must be paid by the offender but in liability arising out of infringement of contracts the debtor is supposed to account for the damages that could be foreseen at the time when the contract was getting formed ( Bishop., 2005). When there are more than one offender who has committed the unlawful act, then the principle of liability of torts considers it as a single liability whereas in case of contractual infringements the multiple offenders must share the liability among themselves.
The nature of Liabilities of Negligence can be discussed in consideration of the following conditions:
The determination of the limitation of the care duty out of negligence was the result of Lord Atkin’s articulation of the principle of duty of care in the context of the 20th century case of Donoghue v Stevenson (1932) AC 562. The ginger beer that had caused harm was brought by Mrs. Donoghue’s friend and hence claims of compensation could be imposed by the friend on the owner of the cafe under the existing contract. Such an imposition was seconded by the House of Lords stating it as valid since a possibility of absence of care duty has been witnessed in the actions of the owner towards the victim. The limitations of the care duty suggest that there must be a presence of reasonable degree of care to avoid specific acts that could result in harm or injury to the neighbour. The term neighbour denotes how close the person is so that the cause of the effect of a negligent act towards such person seen much before the act has been committed ( Cooke., 2009). The defendant must therefore face the damage claim arising out of the liability resulting from an infringement of care duty towards the claimant.
This form of liability is reflective of a situation where tort is committed by one of the parties to the other, of which the other had no knowledge and hence, the party committing the tort does not stand to be held liable or responsible for his act of wrong to the other (Giliker., 2010). In the case of Twine v. Bean’s Express Ltd (1946) 62 TLR 155, the facts revealed that the owner of the company had no knowledge that his employee had given left to a third party in the company’s vehicle and out of his negligent action has caused accidental injury to the individual. Hence the company in no way could be held responsible for the negligent action of his employee since the employer had also imposed explicit prohibition to such acts at the time of his appointment. The incident as had occurred outside his employment orbit does not hold the owner vicariously liable for the committed act. The driver had also ignored the instructions of his employer which furthermore establishes no liability on the owner in case of damages caused during the deliverance of the business activities.
Case 8- Considering the given scenario in the context of the case of Lynch v. Binnacle Ltd. t/a Cavan Co-op Mart, (2011), the facts that get highlighted are that there was acute shortage of care duty and extreme show of negligence in the actions of the driver thereby causing bodily damages to the victim. The claimant in the case has the lawful right to claim damages that he suffered physically from the employer of the driver since the event was caused during the tenure of the driver’s employment in that enterprise. Thus such an action reflecting gross negligence on the part of the driver during his employment tenure can hold the employer vicariously liable to the party who has suffered from the consequences of such negligence by his employee ( Dobbs et al., 2009).
Case 9- In the given scenario, citing the case of Glasgow Corporation v. Taylor (1992), the most significant fact that has to be taken into consideration is whether the responsibility of supervising the health and safety issues of the supermarket was delegated to a third party enterprise. In such a case there cannot be any direct claims of vicarious liability on the supermarket in the event of an injury to Mr. Jones’ colleague. However if the negligence of the supermarket in monitoring the level of competency of the supervising organisation in delivering the safety and health at the stores can be established then charges of vicarious liability can be imposed on the supermarket (Giliker., 2010).
In the course of the preparation of the above report a detailed knowledge could be gained through the detailed study of the elements required for the formation of a valid contract as well as its real life implications through several case scenarios, along with an insight into the laws related to tortuous liability, vicarious liability and that of negligence by any of the contractual parties.
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