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Unit 5 Aspects of contract law Negligence in Business Assignment 2
In this report we have to discuss the eight business scenarios in the present business situations. We have to discuss the law of contract and the different types of contract like the oral contract, the written contract, express contracts and the implied contracts after that we also have to define different terms like the express, implied and exclusion terms and what is the legal validity of them, we also need to define condition, warranty terms in a contract and what are the consequences of the breach of both in the law of contracts. We have to bring out the difference between the law of contract and tort and how the liability in both differs from each other. We also need to discuss the tort of negligence and different types of negligence and we also are required to discuss the concept of vicarious liability. And we need to bring out the importance of the law of contract and the tort.
P1 The essential elements of a valid contract in a business context
P1.1 1 The importance of the essential elements required for the formation of a valid contract
A contract is agreements entered by two parties where they both promise do an act in exchange of a consideration. There some elements those are required to make a contract legally enforceable. These elements are explained below(NICOLE BUSBY, Bryan Clark, Roderick Paisley and Paul Spink, 2006):
Offer: An offer is formed when a person who is an offeror indicates to the other person who is the offeree his willingness to do or abstain from doing something for example when an employer gives the offer of a job in exchange of a salary.
Counteroffer: Is an offer that is made in exchange of the previous offer, rejecting the same for example if an employer specifies 10,000 pounds and if the employee gives a counter offer to increase the salary to 12,000 pounds.
Acceptance: Is the consent given by the offeree to the terms of the offer given by the offeror for example when the employee accepts the job offer offered to him.
Consideration: Isthe bargain or exchange that is given in lieu of a promise from the other party to the contract for example the salary amount of 10,000 pounds will be the consideration for the job done.
Intention:This means that the parties to the contract must have the objective that they would be legally bound by its terms; only then a contract can be enforced legally, example when the employer and the employee sign the employment agreement then they show their intention to be bound by it.
Capacity:This means that the parties to the contract must have the required legal capacity to enter into a contract which means that both parties should be adult and also mentally sound, example when the employee submits his id proof and educational qualification; it shows that he is capable of entering into a contract.
Meeting of the mind:This means that parties to the contract should have entered in the contract on the same object in the same sense and at the same time, this is known as meeting of the mind, if there is no meeting of the mind then there is a mistake, examplewhen both the employee and the employer have understood the job requirement and sign on the contract, they enter the contract on the same objective (NICOLE BUSBY, Bryan Clark, Roderick Paisley and Paul Spink, 2006).
P1.2 the impact of different types of contract
The various forms of contracts are as follows:
Face to face contract: In this type of contract all the terms of the contract are decided by the parties orally and both the parties are present in front of each other, but still this contract is legally valid(HARTLINE, KAREN T., 2007). Written contract:is a contract in which all the terms of a contract are decided in written and generally on a standard form of contract(THE LAW HANDBOOK, 2013). Implied contract:are those contracts in which there is no written contract but the actions of the parties make it evident that there is a contract present, for example if one goes to shop and takes an article it is implied that one would pay for it. Distant selling contract:is a contract in which there is no face to face contract between the parties to the contract and the contract is completed through a distant mode where a contract can even exist between people in two different parts of the world country (THE OFFICE OF FAIR TRADING, 2006).
P1.3 Analyse terms in contracts with reference to their meaning and effect
Express terms: Terms that are specifically mentioned including terms of offer, acceptance, and consideration in a clear manner in the contract (HILL, Gerald and Kathleen, (n.d.)). Implied terms: are terms that are considered as the part of a contract even when they are not written in the contract and the terms may be implied due to a prevailing custom, or terms implied in fact or terms implied by law. Its breach provides protection to the weaker party. Leading case on implied term is the case of Hutton v Warren (1836). Exclusion terms:are terms that are made to exclude or restrict the liability of one party if they breach a contract and also these terms take away or restrict the right to remedy from the party that suffered due to the breach. Leading case on exclusion clause is the case of Spurling v Bradshaw (1956).
P2 Apply the elements of the contract in business situation
P2.1 Apply the elemnts of contract in given business scenario
Business Scenario 1
Facts of the case: In this case Miss Kaur is luxury pen collector and she sees a notice for the auction of theof limited edition pens and then she travels from London to Manchester to bid for a particular limited edition Patronpen but the auction for those pens was cancelled and after that she sees the same pen at a shop and wanted to buy it but the shop assistant Harry and Miss Kaur are not able to agree on the same price later on Miss Kaur says that she will think about the price of the pen over lunch and Harry agrees but when she returns after lunch she sees that Harry has sold the pen to the other customer at a higher price. The issues: now the issue is whether Miss Kaur can take action against the auctioneer for the travel expenses and Harry for not selling her the pen.
Solution:The first issue is whether Miss Kaur can claim for her travel expenses from the auctioneer, the answer is that no an auction is not an offer it is actually an invitationtotreat which means that the party is open for negotiations but the person who gives an invitation to treat is not bound by it, this was held in the leading case of Warlow v Harrison (1859), in this case it was held that an advertisement that an auction will be held is an invitation to treat and no liability arises in contract if the auction is cancelled later on. Therefore Miss Kaur cannot claim for the expenses of her travel. Thesecondissue is can Miss Kaur take an action against Harry for not selling her the pen, the answer is no as goods on display are not offers but only invitationtotreat and the seller is not bound to sell the goods to the customer as invitation to treat is an invitation for negotiation and the seller would sell it to one gives the highest price as Miss Kaur did not agree to buy the product at what Harry was negotiating then he is not bound if he sells it to someone else as was also held in the case of Pharmaceutical Society of Great Britain v Boots (1953), where it was held that a cutomer makes an offer to buy a good an d it is upto the shop keeper whether to accept the offer or not. Similary in the present case there is no contract between Miss Kaur and Harry therefore she cannot bring any action for claim for damages for breach of contract.
Business Scenario 2
Facts of the case: In this case Charles enters into a contract with Murphy to do the renovation work in his building to make it into a guest house and they agree on the fixed price of 50,000 pounds and Charles also gives Murphy an initial payment of 20,000 pounds, later on Murphy demands 10,000 pounds extra for the work and after much discussions Charles agrees to pay the extra 10,000 pounds as he wants the renovation work to get finish on time. After the renovation work is finished Charles refuses to pay Murphy the extra 10,000 pounds.
The issue: The issue at present is whether Murphy has any rights in law to enforce Charles’s promise to pay the extra 10,000 pounds.
Solution: In the present case Murphy cannot enforce Charles to pay the extra 10,000 pounds that was promised by Charles after the contract was formed as Charles was not gaining anything extra from Murphy as performance of a duty owed under an existing contract is not a good consideration as was also held in the case of Stilk v Myrick (1809) where it was held thatthe performance of an act already required under a prior contract cannot be a good consideration for a later promise, therefore that promise is not enforceable by law, similarly Charles is not bound to pay Murphy the extra 10,000 pounds.
Business Scenario 3
Facts of the case: In this case Mia had started a business of a builder and his brother Hakimgavehimthe work of repairing the bathroom and a roof on the promise to pay 2,000 pounds and his friend Jane also gave him some work to do on the promise to pay 1,000 pounds but later on when Mia had completed both works then both Jane and Hakim refused to pay him saying that they only gave him work so that he can gain experience.
The issue: The issue at present is that whether Mia can demand Hakim and Jane to pay the full amount.
Solution: In the present case all the elements of a legally valid contract are present as there was an offer from both Hakim and Jane and there was an acceptance from Mia to both offers, the consideration was 2,000 pounds and 1000 pounds respectively for the work to be done by Mia andthey both intended to be bound by the contract although the contract was an oral contract but still it will be valid as even a social contract which has the elements of a commercial contract will be held legally binding and similarly in this case Mia did some construction work for Hakim and Jane and that was not done out of affection only, therefore Hakim and Jane will be bound to pay Mia the promised amount as was also held in the leading case ofMeritt v Meritt (1970), where an agreement between husband and wife was held to be more than a social arrangement and it was held to be a legally binding contract, similarly in the present case the parties intention was to enter into a commercial contract and Hakim and Jane are liable to pay Mia the promised consideration amount.
P2.2 Apply the law on the terms in different contracts
for this question we have taken the standard form of contract of Ditla Companyand keeping in mind the terms given in this contract we will apply different terms Express terms:those terms that are clearly written in the contract and in the present form the express terms are mentioned in thesection number two of the contract where it says that from what the contract will come into existence and that the contract can be terminated by either party upon a thirty day written notice and section3, 4, and 5 will survive the expiration or termination of this agreement.
Leading case on express terms: Is the case of Edwards v Chesterfield Royal Hospital NHS Foundation Trust (2010), in this case there was a breach of the express term of the employment contract and the court held that the employee was liable to be paid the damages as was mentioned in his employment contract. Implied terms:the implied terms that are considered a part of the contract even when they are not written anywhere in the contract. In the present contract the implied termswould be that the photographer will not use the company name or services for his benefit and instead of promoting the company he is not supposed to promote himself.
Leading case on implied terms: Is the case of The Moorcock (1889)in this case the claimant moored his ship at the defendant’s wharf and the ship became damaged when it came in contact with the river bed which had uneven surfaces, the claimant claimed for damages but the defendant said there was no such provision in the contract then the court implied the terms that the river bed would be smooth for mooring and without that term there was no use of the contract in business of such kind.
Exclusion terms: Are those terms that restrict the right of remedy from the party that suffered due to the breach of the contract and saves the other party that breached the contract from the liability that arises from the breach. In the present form insection five the exclusion clauses are mentioned that the company will not be liable to pay any employee benefits to the contractor and the contract cannot terminate this agreement and he will not ask for any injunctive relief from the company. Leading case on exclusion clause:is the leading case of Parker v South Eastern Railway Company (1877), where it was held that a person will be liable if he signs an agreement and it is immaterial that whether he has read the terms or not and he would be bound by the exclusion clause.
P2.3 Evaluate the effects of different terms in given contracts using business scenario 4
Business Scenario 4
Facts of the case: In this case X engaged Y for a period of three years as his assistant at a salary of 25,000 pounds and there was a written agreement in which there were two clauses were there the first one no.6 was that Y needs to dress smartly and she cannot wear trousers and second clause no.7 was that she needs to put in as much hours as were required to complete the work given her. On one such occasion X asked Y to prepare some statistics for a meeting next day Y stays till midnight but is not able to finish her work and the next day she arrives in trousers and X says that her contract is over.
The issue: Is couldY can claim from X for termination?
Solution: To find the answer to the question we need to see that what the different terms of the contract are? These terms have been discussed below:
Condition: Is the most important term of a contract, which goes to the core of a contract. Leading case on the condition term is the case of Poussard v Spiers (1875). If a condition is breached then the parties have the option to end the contract and also claim for damages.
Warranty It is a term which does not play a very significant role in the contract and it a guarantee in a contract. Leading case on warranty is the case of Bettini v Gye (1875). If a warranty is breached then the party who suffered loss due to the breach can claim for damages.
Now coming to the present case we see that the clause number 6 was a warranty as this is not of much importance to the contract and clause number 7 is the condition and if this was breached then X has the right to end the agreement with Y, in the present case Y only breached the clause number 7 which is the a warranty and she worked overtime in accordance with clause 6, therefore X cannot terminate Y on the breach of the warranty as was also held in the leading case of Bettini v Gye (1875), where the employee was dismissed on the breach of the warranty and the court held that the employee cannot be removed on the breach of just a warranty.
P3 Understanding the principles of liability in negligence in business activity
P3.1 Contrast liability in tort with contractual liability
The liability in contract and the liability in law of tort are very different from each other and to bring out the difference we need to discuss the nature of both the private laws.
Tortuousliability: Tort means civil wrong, where there are certain rights that one person has that are not available in contracts. Tortuous liability occurs when one person breaches his legal duty of care and causes an injury to another person. In tortuous liability the party that suffered an injury has to prove that the other party had a legal duty of care which he breached and caused the injury. In tortuous liability the relationship is created by the law where one party breaches his legal duty of care The contractual liability is established when there is a breach to any contractual commitment in a contract. In contractual liability the debtor shall have the proof of burden where he needs to show that he met his contractual commitment. In contractual liability both the parties themselves enter into a legal agreement which makes it binding on them (NAHAS, Salaheldin Al, 2013).
P3.2 Explain the nature of liability in negligence
Negligence is the lack or breach of duty of care which a person owes towards another person. In law negligence is the legal duty of care that was breached. To be made liable under the law of negligence there needs to be the presence of certain elements; basically there are five elements that are necessary to be present to make a person liable under the law of negligence, they are as followings:
Duty: Is a responsibility that one person has towards the other person, that duty arises from the society norms and customs which are later adopted by the legal system. To show that a person is liable in negligence, there needs to be the presence of a duty of care which the defendant had towards the plaintiff.
Breach: The second important element of tort of negligence in business that there is some misconduct or careless act on the part of the defendant which is known as breach of duty of care, the standard of care should be reasonable in nature. A person will be held liable only when there is a breach of duty by him.
Proximate cause: Means a close cause, which means that the breach should cause immediate injury to the plaintiff and that injury should not be remote in nature, as such that it was not foreseeable by the defendant, if the cause of injury is not proximate then the defendant will not be held liable.
Harm: Is the damage which the plaintiff suffers due to the negligence of the defendant, when all the four elements are present then this is the last element which should be present as all the breaches do not cause injury so the plaintiff needs to prove that he suffered injury due to the breach of duty by the defendant (OWEN, David G., 2007).
P3.3 How a business can be vicariously liable
It a liability in which the employer is held liable for the wrongs committed by theemployee and this liability occurs because the employer is said to have the control over the actions of the employee and similar liability is held in the relationship of principle-agent, master-servant.This control test was applied in the leading case ofMersey Docks and Harbour Board Ltd v Coggins and Griffith (Liverpool) Ltd (1946) Facts of the case:The board owned and hired out mobile cranes driven by skilled operators who were employees of the Board. Coggins & Griffiths, who were stevedores, hired one of the Board’s cranes and an operator, Mr Newell, to unload a ship. In the course of unloading the ship, a person was injured because of Mr Newell’ negligence and the court had to decide whether the Board of Coggins & Griffiths were vicariously liable along with Mr Newell for the latter negligence. The matter was one of control because the Board was quite clearly the general employer. Actually, the answers given by Mr Newell to questions put before him by the counsel in court were highly important. At one point he said: ‘I take no orders from anybody’. Since he was not truly employed by Coggins & Griffiths and since he did not, so he said, take order from them, there was no way in which he could be regarded as under their control. Therefore his true employer, the Board, was vicariously liable for Mr Newell’s negligence. So a person or a business will be held vicariously liable if the employee or agent commits a wrong in course of his employment and in the range of his employment terms and also if that act was not a personal act, a person will be held vicariously liable even if the employee was not authorised to do a work.
P4 Apply the priciples of liability in negligence in business situations
P4.1 Apply the elements of tort of negligence and defences in different business scenario
Business Scenario 5
Facts of the case: In this case A UK ship was taking on oil and that oil spilled in the water it drifted to a wharf 200 yards away where welding work was going on a spar then fell on the piece of cotton that was floating in the oil and started a fire that damaged the wharf.
The issue:Could the Wharfowner sue the chatterers of the ship?
Solution: Sointhe present case the Wharf owner wants to sue the Chatterers of the ship on the grounds of negligence but to held liable under negligence it is required that the defendant should owe a duty of care, and they should have breached that duty of care, the cause of the breach should be foreseeable in nature and the breach should have caused an injury to the plaintiff. In the present case the cause of the breach is too remote in nature and thus was not foreseeable by the Chatterers of the ship, so they could have not prevented it, therefore the wharf owner cannot sue the Chatterers of the ship as was also held in a similar case ofThe Wagon Mound no 1(1961), so according to this case the wharf owner cannot claim for negligence from the chatterers of the ship.
Business Scenario 6
Facts of the case: Bell was employed by Shell on vehicle maintenance. Bell had only one eye and it was not generally in practise to provide protective goggles to the employee as the risk was small but a metal chip flew into Bell’s eye and blinded him completely.
The issue: Could Shell be held liable for the injury caused to Bell?
Solution: In the present case although it was not a general practise to provide safety glasses to the employees as the risk was small but still the risk was there and looking at the special condition of Bell who had only one eye, shell should have been more careful and due to his negligence Bell lost his one eye also and had become blind therefore Shell can be held liable under negligence and Bell can claim for damages for his injury as was held in a case with similar facts where the plaintiff had only one eye and lost another eye due to the negligence of the employer in the case of Paris v Stepney Borough council(1950).
P4.2 Apply the elements of tort of negligence and defences in different business scenario
Business Scenario 7
Facts of the case: In this case Alf was employed by Safe care homes ltd as a warden and during the course of his employment Alf sexually abused the boys of the care homes.
The issue: Could Safe care homes be held vicariously liable for the torts of Alf.
Solution: The concept of vicarious liability holds the employer liable for the torts of the employee because he is said to have some sense of control over the actions of the employee and in the present case the safe care company should have shown more care in assigning a person the job of a warden where small children are living, and in the present case the Safe care company I would suggest that the company will be held vicariously liable because Alf committed the tort in course of his employment and this was also held in the case of Lister v Hesley hall ltd(2001) where an employer was held vicaroulsy liable for the sexual offences committed by the employee.
Business Scenario 8
Facts of the case: Amos was an employee of AB and Sons garage ltd and he had an argument with a customer who he believed wanted to go away without paying for the diesel and in this argument he hits the customer Mr. Alex khan. The issue:isthe AB garage vicariously liable for the acts of Amos?
Solution: To be held vicariously liable it needs to be proved that the employee was acting in his professional nature and his wrong committed during the course of employment and the act was not a personal act. In the present case all these elements are present as Amos was at duty and he had an argument with Mr. Khan when he believed that Mr. Khan will not pay for the diesel so there is a close connection between the employment of Amos and the injury caused to Mr. Khan and this was also held in the case of Gravil v Carroll (2008) where the emloyer was held vicariously liable although was the act of the employee was not exactly in due course of his employment, so according to me similarly AB and Sons garage will also be held vicariously liable for the wrongs of Amos.
In this report we have discussed eight business scenarios in the present business situations. We have thoroughly tried to discuss the law of contract and the different types of contract like the oral contract, the written contract, express contracts and the implied contracts after that we have also defined different terms like the express, implied and exclusion terms and what is the legal validity of them, we also discussed the condition, warranty terms in a contract what are the consequences of the breach of both in the law of contracts. We have seen the difference between the law of contract and tort and how the liability in both differs from each other. We have also discussed the tort of negligence and different types of negligence and we have also discussed the concept ofvicarious liability. So to conclude we can say that the law of contract and the tort are very important laws in the present business scenarios.
1. Bettini v Gye  L.R. 1 QBD 183.
2. Edwards v Chesterfield Royal Hospital NHS Foundation Trust  EWCA Civ 571.
3. Gravil v Carroll  All Er (D) 234.
4. HARTLINE, KAREN T. 2007. Oral Contracts: Do they carry any weight? legal zoom, (n.d.) september, p.1.
5. HILL, Gerald and Kathleen. (n.d.). express contract. [online]. [Accessed 21 may 2014]. Available from World Wide Web:
6. Hutton v Warren  EWHC Exch J61.
7. Lister v Hesley hall ltd  UKHL 22.
8. Meritt v Meritt  1 WLR 1211.
9. Mersey Docks and Harbour Board Ltd v Coggins and Griffith (Liverpool) Ltd  2 All ER 345 HL.
10. NAHAS, Salaheldin Al. 2013. Criminal liability and civil liability. [online]. [Accessed 3 june 2014]. Available from World Wide Web: 11. NICOLE BUSBY, Bryan Clark, Roderick Paisley and Paul Spink. 2006. chapter 4-contract. In: Scots Law: A Student Guide, 3rd Edition, SCOTLAND: BLOOMSBURY PROFESSIONAL BOOK.
12. OWEN, david G. 2007. THE FIVE ELEMENTS OF NEGLIGENCE. HOFSTRA LAW REVIEW. 35(4), pp.1671-1686.
13. Paris v Stepney Borough council  UKHL 3.
14. Parker v South Eastern Railway Company  2 CPD 416.
16. Pharmaceutical Society of Great Britain v Boots  1 QB 401.
17. Poussard v Spiers  L.R.1 QBD 410.
18. Spurling v Bradshaw  2 All ER 121.
19. Stilk v Myrick  2 Camp 317.
20. THE LAW HANDBOOK. 2013. WHAT IS A CONTRACT. [online]. [Accessed 20 MAY 2014]. Available from World Wide Web:
21. The Moorcock  14 PD 64.
22. THE OFFICE OF FAIR TRADING. 2006. A guide for businesses on distance selling. [online]. [Accessed 27 may 2014]. Available from World Wide Web: 23. The Wagon Mound no 1  AC 388 House of Lords. 24. Warlow v Harrison  1 E & E 309.