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Unit 5 Aspects of Contract and Negligence Assignment Solution
Diploma in Business
Unit Number and Title
Unit 5 Aspects of Contract and Negligence
A Contract can be termed as an agreement which is enforceable by law. Contract law can be considered as one of the oldest law. We can find the impact of a contract at every point of our daily lives. A contract is a legally binding agreement concerning a bargain which is essentially commercial in its nature and involves the sale or hire of goods, services or land.
LO1.1 Essential elements of a Valid Contract
According to Adams (2010), a contract is a legally binding agreement concerning a bargain which is essentially commercial in its nature and involves the sale or hire of goods, services or land.
A valid contract contains the following three important key elements:
Offer and Acceptance (The Agreement)
Intention to create a legally binding contract. (Burton, 2008)
An offeris the first element in a valid contract. It is an unequivocal statement of willingness to be bound on specified terms without further negotiation. An offer or a promise needs to be in a contract because if there is no offer than there will be no contract. An offer may be of these forms: oral, written or by conduct.
Acceptance is essential for the creation of a aspects of legal contract. The offeree must accept the offer terms of offeror. If the offer is accepted than it would constitutes to a legally valid contract. Acceptance may be in words, written or spoken.
Consideration is an act when the person giving back something in return. Consideration involves the exchange of money for goods or service. One party gives money (consideration) and in return the party gives goods or service. To make a legally binding contract, a promise must be exchanged for adequate consideration. (Chloros, 1968)
Intention to create a legally binding contract.It is a necessity of the intention to create legal relations. Both parties must intend to enter into a legal relationship. In other words, if two parties have signed a contract and one party does not fulfil the contractual provisions it is a breach of contract.
An agreement must have these essential elements to be regarded as a contract.
These things make a contract valid. If any one of them missing, the contract will not be legally binding.
LO1.2. Discuss the impact of different types of contract
Contract is an official agreement between two parties. It could be either in written form or oral agreements. Types of aspects of legal contract :
An oral contract is an agreement made with spoken words. There can be written or other physical evidence, of an oral contract – but the contract itself is not a written one. Oral agreements are more difficult to prove and to sue for breach of contract.
Written contracts are preferred due to the following reasons:
Provides evidence that the agreement does exist.
To keep for long time.
Less opportunity for conflicting assumptions.
Some contracts are required by the law to be in writing. Examples of written contracts are the legal assignment of a debt, a consume credit agreement, sale of interest in land, a bill of exchange. (Kov\'acs, 2004)
Distance selling is process when buying and selling goods and services on the internet or by the phone. There are many acts governing by law on distance selling (The Distance Selling Regulation). The laws on distance selling covers any purchases made: telephone, mail, website.
Human face-to-face interaction is one of the most effective form of communication. The contract may be made directly. Where parties negotiate face to face, communication of the acceptance is unlikely to be a problem; any difficulties tend to arise where the parties are communicating at a distance, for example by post, telephone, telegram.
LO1.3 Analyze terms in contract with reference to their meaning and effect
Terms can find their way into contracts in one of two ways: may be expressed in speech or writing or they can be implied.
Express terms: these are contract terms that are expressly agreed by the parties to a contract (oral or written).
Implied terms:these are terms that are not expressly stated in the contract, but they are part of contract because there is an implication that they are terms in the contract.
Implied terms may be implied by: (law, custom, statute)
A contract is made up of terms which offered by one party and accepted by the other. The terms of a contract fall into three categories: conditions, warranties and innominate terms. (McAvoy, 1972)
A conditionis one of the most important term which form the main structure of the contract. If one party is in breach of a condition, the injured party has the right:
Terminate the contract and refuse to carry out his obligation under the terms of contract.
Continue with the agreements and sue for breach of contract (to claim compensation).
Poussard v Spiers & Pond (1876)An actress was employed for a season, but was delayed by illness from taking up her role until a week after the opening night.
Held:her employers were entitled to terminate the contract: her presence on the opening night was crucial to the contract.
Warranties are minor terms of a contract which are not central to the existence of the contract. If a warranty is breached the injured party may claim compensation but can not end the contract.
Bettini v Gye (1876)A singer, engaged for a season, failed to turn up for the first three of the six prescribed rehearsal days. Held: given the length of the contract and because no performances were missed this amounted only to a minor breach; the employer was not entitled to repudiate.
Not all terms are immediately identifiable as conditions or warranties. Some described by the court as ‘innominate terms’, are worded broadly to cover a variety of possible breaches. With an innominate term, the rights of the injured party in the event of the breach of contract depend on the circumstances of the breach.
LO2.1 Apply the elements of contract in given business scenarios
Business Scenario 1
Miss Kaur can not take action against the auctioneer because they had not made an offer; a notice for an auction of Montblanc, Catherine the Great, Limited Edition Patron of the Art's Series fountain pen in the July edition of Antiques Newswas just invitation to treat and not an offer.
An invitation to treat is a mere declaration of willingness to enter into negotiations; it is not an offer, and can not be cannot be accepted so as to form a binding contract.
But Miss Kaur can take action against Harry for not selling the fountain pen to her. Kaur entered into a contract with Harry who agreed not to sell the fountain pen (a fixed price £950) before returned. (Ferson, 1955)
Business scenario 2
Charles (offeror) entered into a aspects of contractwith Murphy (offeree) in October 2011 to do all the necessary renovations for a fixed price of £50,000. Offeree accepted the offer terms of offeror. Both parties have provided consideration because Murphy received initial payments of 20,000 and agreed to have the work completed on 1 March 2012, as the guest house had to be ready for its opening on 1 April. Therefore both parties entered into a legal relationship.
At the end of January, Murphy wrote to Charles that he would not complete the renovation in time unless he agreed to increase his payment by a further £10,000. Charles agreed to pay the increased sum in order to ensure that the job was done on time. Therefore, Charles entered into a new contract with Murphy. A legal contract must have these elements: an offer, acceptance and consideration. Offeror could not consider the terms of a contract because he had not any choice and agreed.
Murphy has not any rights in law to enforce Charles’s promise to pay the extra £10,000. They had to write a full contract. (Collins, 2008)
Business scenario 3
Mia (offeree) entered into a contract with his brother Hakim (offeror), who ran a retail estate agency business, said he would give him £2,000 if he repairs the bathroom and a roof in one his properties. At the same time, Mia made a contract with brothers friend Jane (offeror), who asked him to do work for her business for a fixed price of £1,000. Offeree accepted the offers of offerors. They created a legally binding contract.
However, after completing the two projects offerors have failed to pay for the work they had commissioned.
Mia can demand Hakim and Jane to pay the full amounts of their initial promises. It is a commercial or not domestic agreement because Mia started a business as a self employed.
LO2.2 Apply the law on terms in different contracts
The components present in a contract in the form of terms and conditions gives us a clear idea about the nature of the contract the basic matter of the agreement can be better explained by the terms and conditions present in the contract and they are also capable in explaining the nature of consideration involved there in. the provisions of a given contract can be presented by two different types of terms , they are as:
Expressed terms are those terms existent in a contract which are presented in a direct and precise way by means of words which are either spoken or written, so that the parties entering into the contract get a clear view regarding the provisions of the contract and the consequences of default. (Lawson, 2005)
For example, John made an offer to Jack to sell his apartment for two thousand pounds and Jack accepted the offer of John, this is a clear instance of an express contract.
There are some contracts whose terms are not framed by the parties rather they are imposed by the courts and statutes upon the parties to the contract. The implied terms can b of two different types:
Implied by fact: these are made as a result of the situation
Implied fact of law it is an law or a set of rules and regulations imposed by the government upon any person without his assent or decent.
LO2.3 evaluate the effect of different terms in given contracts
Every type of contract conveys us some meaning about its nature and which is entirely dependent of the terms of the contract, the terms and provisions present in a contract should be written in a direct manner that will help an individual to get a clear meaning about the contract
Express Terms of the Contract
Expressed terms are those terms existent in a contract which are presented in a direct and precise way by means of words which are either spoken or written, so that the parties entering into the contract get a clear view regarding the provisions of the contract and the consequences of default.
The Parole Evidence Rule
“A rule of contractual construction which states that extrinsic evidence cannot be used to vary the terms of a written contract. However, this rule is little more than a presumption that the written contract contains the entire agreement between the parties. The presumption can be rebutted and the rule does not apply where rectification is being sought in which case extrinsic evidence relating to the alleged error in the contract can be adduced”. (UK Practical Law, 2014)
The role of the parole evidence is to discover the element of a contract. Where the evidence present previously formed oral contract contradicts with that of a written contract formed subsequently in that case parole evidence puts a bar on the evidence of the oral contract as the parties to the contract may not remember what they told in the past.
Exceptions of Parole Evidence rule
- The parole evidence acts as an indicator of inoperativeness of a contract
- The main objective of the contracting parties includes simplification of the confusing provisions present in a contract
- If the agreement relating to a contract based on which the parties have formed the contract does not cover the whole contract, parole evidence is admitted at that time.
Business Scenario 4
In this contract there are a few express terms such as prohibition in wearing trousers inside the office premises and regarding working hours. The clause regarding the working hours is not clear as it does not mention a definite time span. Hence this is not a valid term. The same cannot form a part of the contract. Hence the employer was just is dismissing her on the grounds of wearing a trouser to office. (Lawson, 2005)
LO3.1 Contrast liability in tort with contractual liability
Tort as in general sense means any misdeed. done to the society by any person and as a consequence of that he becomes liable legally for such misdeed done to the society. On the other hand when two or more parson form an agreement between them they get legally bound to each other and a result of which a liability arises which is called contractual liability. Liability of tort falls under the purview of torts law and contractual liability is governed by the contract act and both these laws covers individuals and companies. However tort law affects the relevant party where contract law affects all the related parties to a contract. Torts liability arises as a consequence of application of law whereas an agreement creates contractual liability. (Garber and Edwards, 1963)
LO3.2 Explain the nature of liability in negligence
When it is found that the act of an individual has caused harm to any person or property, who has not or has failed to act in a manner which is considered reasonable. The law’s main features can be considered as:
- duty to show reasonable care
- there is a breach of duty
- harm has been caused to any individual or property
- there is a direct link between the act and the damage occurred.
It is the responsibility of the driver of the train to wait for the green flag or signal for proceeding. And if the train is found to have crossed the juncture without waiting for the green signal and have eventually caused harm to anyone then the driver will be held liable for breaking the law relating to reasonable care. So accordingly the driver will be held responsible for his irresponsible behaviour if any accident has been caused to someone or any damage occurred to any property. (Walton et al., 2001)
Tort negligence is considered as most common part of torts law and covers a number of situations. This region is very spacious as it covers numerous situations. Negligence takes into account the acts of omissions.
Criminal negligence takes into account offences which are of dangerous nature like causing death to anyone. This law takes effect when it is found that a person has renounced the standard of care of another person. This law takes its action in case the standards regarding reasonable care has been violated and it does not take into account any civil lawsuit. The most common instance of criminal negligence can be considered as criminal homicide and criminal endangerment of a child. Negligent homicide can be termed as a death that has been caused as result of wilful but meaningless behaviour. (Ferguson, 1929)
LO3.3 Explain how a business can be vicariously liable
Vicarious liability is a type of liability that occurs due to the fault of a third party. The owner of a business should be quite aware about the law in order to protect the business interest as because the employer of the business will be held liable for the misdeeds of his employees, however the employer can be held liable when it is found that the employee who has committed the wrong is still in the employment of that employer. And in order to prove the liability there must be a direct link between the wrong done and the employment. (Hodge, 1986)
An employer’s conduct of vicariously liability can be:
- Managerial personnel like directors, managers supervisors etc.
- People working together but under different employer
- Workers under employment contract
- Harm caused by one partner on another of an organization
LO4.1 Apply the elements of the tort of negligence and defenses in different business situations
Law finds a person liable of negligence when he is believed to have caused damage to any person or property as a result of his act of negligence. The main thing which must be noticed while ascertaining whether he is liable or not is whether he has acted in a manner which is rational. This type of misdeeds that has caused harm to any person or property are termed as TORTS. An employer must acquire an in-depth knowledge of tort laws in order to protect his business interest. Negligence has some features, they are:
- The action taken
- The action un-intentionally taken
- The action
A person is considered negligent who has caused harm to any person or property due to acting in a careless manner. The three essential features of negligence are:
- The action is un-intentional.
- Occurrence of any kind of injury
- The action is not a planned one.
There are certain criteria to prove negligence, which are:
- Burden ofproof
- The reasonable person
- Duty of care
Business Scenario 5
In order to reach a decision the judgment given in the case ofOverseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd or "Wagon Mound (No 1),"  must be considered, where in the Sydney harbor a UK ship was stationed dropped a barrel of oil accidently. Necessary precautions were taken accurately. The UK ship authority advised the owner of the wharf that the chances that the oil could catch fire are less. A piece of cotton waste was floating near the wharf and a molten piece of metal fall on the piece of cotton waste and as a result if what the wharf caught fire and got damaged and for that reason the wharf authorities sued the owners of the UK ship. In this case the judge emphasized on forseeability rather than directness, according to him it is hard for any rational person to foresee such damage, hence, the UK ship owners were not held liable for the incident. So with the application of the above judgment in the present scenario it can be said that the wharf authority cannot sue the UK ship owners for the damage caused to the wharf. (Hodge, 1986)
Business Scenario 6
As per the judgment issued in case of Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd or "Wagon Mound (No 1)," , where it was stated that emphasis should be put on forseeability rather than directness. Taking the facts in consideration as stated above it can be said that the employer was in a position to count the risk related to the job and accordingly he should have taken safety measures to minimize the risk. And as the injury suffered by bill has a direct connection with the job so the employer will be held liable for such injury.
LO4.2 Apply the elements of vicarious liability in given business situations
The law of Torts includes the vicarious liability as a part of it. Vicarious liability states that as result of misdeeds in the part of the employee the employer will be held liable, in simple terms it is a liability occurred due to the misdeeds of third person. Many employees take this advantage and get away as the employer will be held liable for their wrongs. So, the employer is required to get a deeper view of this law in order to safe guard the business interest. In order to establish the liability of the employee certain things are need to be noticed and those are,the employee will be continuing his employment while he committed the wrong and there must be a direct relationship between the wrong done and the job itself.
Vicarious liability “in the course of employment”
In case ofLister v. Hesley Ltd it was held that even if the employer has no connection with the wrong done by the employee but then also he will be held liable for the misdeed. The employer will be held liable for the misdeeds of his employee even if the injured party is a third party. And a third party will have full authority to sue the employer if any wrong has been done to him by his employees while the injured party was walking through the parking lot of the employer, if it can be proven by the injured party that the wrong done has a link with the employment.
Business Scenario 7
In order to make the employer liable for any misdeeds dine by his employee it must be checked that the employee must be still in employment at the time the wrong was done and also the misdeed committed by the employee has a link with the employment. In the present scenario it is found that the wrong committed by the employee has a direct link with the job, as it was for his employment he got the opportunity. Hence , in this case we can say that the employer can be held liable as because the misdeeds committed by the employee has a direct link with the employment. It is immaterial that whether the employer was aware about the commission of the act. (James Jr, 1953)
Business Scenario 8
As per the judgment given in case of Warren v Henlys Ltd , where a consumer was abused by a petrol pump attendant, who thought that the consumer was to leave the gas station without making the payment. For that reason the customer git angry and tried to complain against the attendant to the employer. In order to stop the customer from complaining the attendant assaulted him. Afterwards the customer filed a suit against the owner of the petrol pump for the damages he suffered due to the attendant. Later the court held that the wrong done by the employee has no link with the employment and he committed the wring just out of vengeance. The court held that the employer cannot be held liable for the wring dine by the attendant as the act has no connection with the employment. So taking the above judgment in consideration it can be said that the employer cannot be held liable for the damages suffered by the customer as the nature of the acts were personal. (James Jr, 1953)
The English contract law is very vast. The contract laws in many other countries is based on this law. An understanding of the same is very important as it is an integral part of our lives.
Burton, S. (2008). Elements of contract interpretation. Oxford University Press.
Chloros, A. (1968). The Doctrine of Consideration and the Reform of the Law of Contract. International and Comparative Law Quarterly, 17(1968).
Collins, H. (2008). Standard contract terms in Europe. 1st ed. Alphen Aan Den Rijn: Kluwer Law International.
Ferguson, P. (1929). Negligence. 1st ed.
Ferson, M. (1955). Breach of Contract: Elements, Degrees and Effect. U. Cin. L. Rev., 24, p.1.
Garber, L. and Edwards, N. (1963). Tort and contractual liability of school districts and school boards. 1st ed. Danville, Ill.: The Interstate.
Hodge, J. (1986). Vicarious liability, or, Liability for the acts of others. 1st ed. London: Witherby.
James Jr, F. (1953). Vicarious Liability. Tul. L. Rev., 28, p.161.