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Unit 5 Aspect of Valid Contract Law in Business Assignment
Diploma in Business
Unit Number and Title
Unit 5 Aspect of Valid Contract Law in Business
This Unit 5 Aspect of valid contract law in business assignment is focused on the fundamentals which are required to formulate a valid contract.
1.1 Explain the essential elements required for the formation of a valid contract
Initially, an agreement is formed with the help of offer and acceptance and this agreement is when joined with intention, consideration and capacity makes an enforceable contract. An offer is the intention of an offeror transferred to an offeree and is expected to be performed by an offeree (Harvey v Facey . An offer can be communicated to one specific person or group or world at large but must not be vague in nature. (The Law Teacher, 2016) The approval of an offeree to the terms of the offer without bringing any changes is called acceptance in law (Entorres v Miles Far East ). It is complete and binding when reaches to the notion of the offeror. (TA Street, 1999) The parties should have legal intention when an offer and acceptance is made. Legal intention signifies that the contract is enforceable through the court in situation of disputes. Intention is presumed to be present in commercial undertakings and absent in family relations but can be rebutted by laying down evidence. The parties making offer and acceptance should have attained eighteen years of age and must be sound mind. The promises should be accompanied by some kind of benefit/gain called consideration which makes a contract enforceable in law. Lack of consideration results in making the contract gratuitous.
1.2 Explain and discuss the impact of the different types of contract
Compliance of contract fundaments results in making various contracts. The same are:
- Unilateral and bilateral contracts- Business Contract which are made amid an offeror and offeree wherein an offer is made by an offeror but there is no corresponding acceptance which is communicated. Rather, a offeree indulges in come kind of action (express or implied or conduct) which is an expression of acceptance. Thus, there is no exchange of promises, rather, an offer is supported along with an action which is a deem acceptance. ( DiMatteo & Hogg, 2015). When an offeror makes an offer and the offeree makes an acceptance against the offer which reaches within the knowledge of the offeror, then, this exchange of promises results in formation of contract which is bilateral in nature. ( DiMatteo & Hogg, 2015)
- Contracts under Seal (Deed) and simple contracts- The contracts under Deed are those contracts which are written in nature and is signed by witness and attested under seal. These are important contrast which requires a set procedure to be followed in order to make a binding document, such as, sale of property etc. But, when there are no formalities to make a binding contract and a contract can be made by simple acts, conduct, oral, written etc, then such contracts are simple contracts. (Jim Blythe, 2013)
- Written contracts and verbal contracts-The contracts in textual form are written contracts. The terms of these contracts are in written form and thus hold high evidentiary value. But, when the contract are made by words of mouth are verbal or oral in nature, then, such kinds of contracts are verbal contracts. Since the terms are not written in nature thus these contracts have not much evidentiary value when dispute amid the parties arise.
- Face to face and Distance Selling Contract- Contracts made on the face of the parties are face to face contracts. Basically, the parties are next to each other sitting physically communicating the terms of the contracts. These are generally oral in nature and thus are not very easy to prove when any dispute arises. Distance Selling contracts are not made when the parties are face to face with each other. These contracts are made amid the parties when they are geographically apart and communicate with the help of internet or telephone. If the terms of this contract are written then they are very reliable but are not easy to prove when the terms are communicated in oral forms. (Jones & Benson, 2016)
1.3 Explain and analyze the different forms of contractual terms
Numerous terms are exchanged amid the parties when any contract is made. These are:
Express terms and Implied terms-When a contract is made then those terms which are jointly and expressly made part of the contract are express in nature. The parties discuss all the integrities of the contract and then mutually incorporate the express terms. The terms in which the parties have no role to play and are bound to be performed under law, usage or custom are implied. These are equally important as express terms the non-compliance may result in penalties AttorneyGeneral of Belize v. Belize Telecom Ltd. (2009). (R Thomas, 2015)
Conditions, Warranties and In-nominate terms-There are three categories in which the contract terms can be divided depending upon their meaning and effect.
- The terms which are contractroot and because of which a contract can be performed are conditions. They are the soul and heart of the contract. If these conditions are not complied with then the very essence of the contract is violated. The plaintiff can sue the defaulter for compensation and can rescind the contract Poussard v Spiers (1876).
- The terms which are required for contract performance but are not so important that without which a contract cannot be performed at all are warranties. If these warranties are not complied with then the plaintiff can sue the defaulter for compensation only Bettini v Gye (1876).
- When the circumsttbces in which a term is breached decides whether it is a warranty or a condition are in nominate terms. The effect of these terms depends upon whether the term breached is treated as a condition or as a warranty (Hong Kong Fir Shipping v Kawasaki Kisen Kaisha . (Stones & Devenney, 2015)
Exclusion clauses-The clauses which are made part of the contract and which limits/excludes the liability of some party to the contract then such are exclusion clause. The clause is valid when are incorporated at the will of both the parties. If only one party is incorporating then he must make every effort to bring the clause in the awareness of other to make it binding L'Estrange v Graucob .
2.1 Apply the law on essential elements to the scenario
In business law, an offer is the intention of an offeror transferred to an offeree and is expected to be performed by an offeree (Harvey v Facey ). But, instead of an offer when a person tries to invite offers then it is called invitation to treat. Offers are then received which when approved by the inviter results in contract. In Partridge v Crittenden(1968) an advertisement is an invitation. Thus, can the advertisement by City Car Dealers (CCD) is treated like an invitation. The answer is No, because in contract law, an invitation is different from a unilateral offer. In Unilateral offers, an offer is made with specification of how it is accepted. The conduct as per the requirements of an offer by an accepter is a deem acceptance and such kind of offers are unilateral in nature. In Carlill v Carbolic Smoke Ball Company , an advertisement specifying the made of acceptance is unilateral. In the given case, a unilateral offer is made by CCD. The offer is unilateral because CCD has specifies the mode of acceptance and as also the cars are displayed to shoe the genuinely of the intention of CCD. Abel reacted on the advertisement acted accordingly, that is, he visited City Mountain on November 1, get a ticket and within three hours he returned to the showroom. Thus, his actions are an acceptance by conduct to the unilateral offer by CCD. Thus, an offer by CCD is accepted by Abel by conduct, so there is a binding contract between the two parties.
2.2 Apply the law on terms to the scenario
Whenever a contract is made then one of the significant terms that are made part of the contract is called an exclusion clause. The term which are made part of the contract either by signature, notice or by course of dealing and which excludes the obligations of one party to the contractwhen any particular event take place which is approved by both the parties to the contract, then, such clauses are called exclusion clause (Wilton v Farnworth (1948). When a clause is made part of the contract and is imposed upon the party because the contract is signed by him, then, such exclusion clauses is binding upon the parties even when the same is read by them or not. However, no exclusion clause is applicable which tries to exclude any liability for death or personal injury. Also, only such liability is excluded which is made part of the exclusion clause. Also, any clause which excludes liability for personal damages/death because of negligence cannkt be excluded as per section 2 of the UCTA 1977. Now, Rani offers to sell a car @ 50% of the market price. Eric buys the car and signs a contract which comprises of an exclusion clause which excludes the liability for ‘death, personal injury, damage to property or consequential loss arising from driving a car which is purchased from the show room.’ The contract is signed by Eric without reading but since the contract is a signed document then the clause is binding irrespective whether the same is read or not as held in............................. Eric met with an accident while driving the car (the breaks were faulty) and Rani tries to rely on the exclusion clause. However, as per section 2 of 1977 Act, Rani cannot exclude her liability for death or personal damages. So, Eric can easily sue Rani for his losses.
2.3 Evaluate what remedies are available to Eric
In law, the contract terms depending upon their meaning and effect are conditions, warranties and in-nominate terms.
As per the law, when the circumsttbces in which a term is breached decides whether it is a warranty or a condition are in nominate terms. The effect of these terms depends upon whether the term breached is treated as a condition or as a warranty. So, the terms which are contract root are conditions and if not complied with then plaintiff can sue the defaulter for compensation and can rescind the contract (Poussard v Spiers (1876). But, when the terms are not contract roots then they are warranties and if not complied with then the plaintiff can sue the defaulter for compensation only (Bettini v Gye (1876). Now, the car provided by Rani has breaks which are faulty. This breakage has resulted in the non-performance of the car and is thus a very essential requirement in any car. So, a condition is violated. So, Eric can claim compensation by rescinding the contract.
3.1 Contrast liability in tort with contractual liability
The liability in tort and contract are both civil liabilities as both have originated from civil laws. Yet, the impact and effect of the liabilities of both the laws is different. (Bar et al, 2004).
- The contractual liability is pre decides by the parties though the terms of the contract but the tortuous liability is determined by the court depending upon the gravity of the offence committed.
- In contractual liability, the parties are held liable when the terms are breached, thus, the fault of the parties has no relevance making the contractual liability strict in nature. But, in tortuous liability, it is only when the defendant is at fault of not complying his legal duty results in imposing liability upon him, so the liability is no strict.
The liability in contract is amid the parties who are not strangers but the parties are unknown to each other in the law of tortuous liability, Thus, these are some of the significant difference amid the two.
3.2 Explain the nature of liability in negligence
The law of negligence is a civil law which imposes burden on the defendant who fails in fulfilling his duties which are imposed upon him under law and which causes harm to a plaintiff because of such breach. There are three basic principles which must be followed in law to make any defendant to be held negligent.
- The defendant should act in such manner so that no harm is caused to any plaintiff because of such actions. It is not all acts that the defendant should act a duty of care. But, those actions come in the preview of negligence which may harm the plaintiff and such harm is reasonably foreseeable by the defendant (Anns v Merton London Borough (1978). Also, it is not all the persons absent whom the duty is imposed, but, the duty is against those plaintiff who are so connected with the plaintiff that the actions of the defendant has a direct effect on the plaintiff, so there must be proximity amid the plaintiff and the defendant.
- The defendant is obligated to comply with his duty of care and when this duty is violated by not complying with the level of standard which must be met in a particular situation, then the duty is said to be violated ((Nettleship v Weston (1971). The level of care varies upon the situation, for example, the degree of care for a child and old is much when compared with an adult.
- The violation of care must result in cau sing harm to the plaintiff to make the defendant negligent. The harm should be the direct result of the defendants breach and the harm should also be reasonably foreseeable. When all essentials are met then the defendant is considered to be negligent in his actions.
3.3 Explain how a business can be vicariously liable
When the acts of the servant which resulted in causing harm to an outsider is compensated by his employer then it is called vicarious liability. in vicarious liability, it is necessary that the acts which are undertaken by an employee should be carried out within the course of employment. In such employment course when the acts of employees causes harm to the outsider then the employer should deal with the same. It is necessary that the employee is acting as per the wishes of the employer and is not acting as per his own whims and fancies. (InBrief, 2016). Thus, Vicarious liability deals with the shift in the liability from the employee towards his employers.
4.1 Apply the elements of the tort of negligence and possible defences which could be used by the defendants
As per the law of negligence, a defendant can be held liable only when the duty of care which is imposed upon him under law is not met by him causing harm to the plaintiff (Donoghue v Stevenson (1932). It is not all acts that the defendant should in careful manner, but, only those actions must be safely undertaken which may harm the plaintiff (who is in proximity with the defendant) against those harm which are reasonably foreseeable by the defendant. When the defendant does not comply with his duty of care causing harm to the plaintiff (Nettleship v Weston (1971), then the defendant is held to be negligent. Now, the restaurant is serving food to his customers. The restaurant and his customers are in proximate relationship with each other because the food safety by the restaurant wills directly impact his customers.
Now, the restaurant has served food to Denis and Emma which was stale as the same was prepared by using expired food stuff. The restaurant is aware that if such food is consumed by the customers then harm may be caused to them. Thus, the loss which may be caused to the customers is reasonably foreseeable. In such situation, there is duty of care which is imposed upon the restaurant. This, duty is not cater with by the restaurant. The management of the restaurant though has warned the chef not to use the stale food, but the level of care that is required to be met in the given scenario is not met by him. So, there is breach of duty of care. This breach of duty of care has resulted in causing loss to Emma as she started feeling sick and throwing up. So, there is duty of care violated by restaurant causing harm to Emma. So, Denis can easily sue the restaurant under the law of negligence. However, the restaurant can take the defense that it has already warned the chef not to use the stale material for the preparation of food however, this defense cannot be held valid as no warning notices has been issued by the restaurant.
4.2 Apply the law on vicarious liability to the scenario
In vicarious liability, an employer is liable for the acts of the employee which are undertaken by him in the employment course and some third party has suffered damages because of such actions of the employees. But, if an employee is acting within his course and not within the employment of the employer then the employer is not liable. (InBrief, 2016)
Now, the Chef of the restaurant was using stale food for the preparation of food despite many warnings that are issued by the business management of the restaurant. But, it is submitted that though many warning notices are issued to him but still the chef is working within the employment of the restaurant when the foodis served by the restaurant to Emma and Dennis because of which Emma felt sick. Further no warning is issued by the restaurant to his customers specifying that the restaurant is not answerable to the conducts of the chef. Thus, since the Chef is acting within the employment course, so the loss which is caused to Emma must be compensated by the restaurant under the law of vicarious liability. Thus, Restaurant is liable under the law of vicarious liability.
Bar et al (2004) The Interaction of Contract Law and Tort and Property Law in Europe: A Comparative Study. sellier. european law publ., 2004
DiMatteo & Hogg, 2015, Comparative Contract Law: British and American Perspectives.
Jim Blythe (2013) Principles and Practice of Marketing. SAGE, 01-Nov-2013 - Business & Economics
Jones & Benson (2016) Publishing Law. Routledge, 22-Mar-2016.
R Thomas, 2015, The Modern Law of Marine Insurance: Volume Four. CRC Press, 14-Oct-2015.
Stones & Devenney, 2015, The Modern Law of Contract, 11th Edition.
The Law Teacher, 2016, Cases on the formation of law.
TA Street, 1999, The History and Theory of English Contract Law, Beard Books, 01-Dec-1999.
Anns v Merton London Borough (1978).
Bettini v Gye (1876).
Carlill v Carbolic Smoke Ball Company Currie v Misa (1875)