Unit 5 Aspects of Contract Negligence Business Assignment
Diploma in Business
Unit Number and Title
Unit 5 Aspects of Contract Negligence Business
LO 1: Understand the essential elements of a valid contract in a business context
Elements of contract
Any contract which is intended to be formulated by two or more parties can be formed when they comply with all the contract essentials. The same are summarized herein below:
- Offer – An offeror when wants to form a contract with another person called offeree then the same can be done when an offer is made. An offer is the statement which comprises of all terms and conditions, which an offeror expects to be undertaken by an offeree (Carlill v Carbolic Smoke Ball Co (1893). It is the intention of an offeror. An offer can be made in oral or written form but must reach an offeree to be valid. (The Law Teacher 2016)
- Acceptance – The approval which is given by an offeree to the offer is called an acceptance. An acceptance can be oral or written in form but must be made by an offeree and should reach an offeror to be valid in law (Payn v Case (1789). Communication of acceptance is essential for its validly. (The Law Teacher 2016)
- Consideration - It is one of the most significant elements in the formation of contract. When the promises are exchanged between an offeror and an offeree then it is necessary that these promises should be joined along with some kind of gain or benefit which must move from an offeror to an offeree against the performance of an offeree as per the terms of an offer ((Currie v Misa (1875). This gain or benefit is called consideration which makes the promises enforceable in law. (MacMillan & Stone 2012)
- Legal intention – The promises which are exchanged amid an offeror and the offeree should be made by them with legal intention. Legal intention signifies that the parties are ready to settle their disputes in the court of law ((Edmonds v Lawson (2000). No legal intention makes the contract unenforceable in law. (MacMillan & Stone 2012)
- Capacity – The offeror and offeree both must be of sound mind and have attained 18 years of age prior making any contract. This capacity of the parties is required to make a valid contract law. (MacMillan & Stone 2012)
- Importance – The importance of these entire element lies in the fact that absence of one element makes a contract void in nature and is unenforceable in law. So, parties must make all efforts that all contract elements must be comply with adequacy.
Different kinds of contracts
The various kinds of contracts that exist by complying with all contract essentials are valid in law. The strengths and weakness of all of them are analyzed herein under:
- Face to face – when the parties sit in front of each other and communicate the contract terms, make offer and acceptance in front of each other and makes a contract there and then, then, the contract are face to face (Phillips v Brooks (1919).
- Strength – These contract can be made instantaneously by making offer and acceptance and the terms are very clear. For example when a contract is made by a consumer and the vegetable seller, the terms of sales planning and purchase are settled there an then. Thus, there is less confusion.
- Weakness – Since all the terms are oral in nature, thus, it is very difficult to prove these terms when any dispute arose amid the parties. Thus, the impact of such kinds of contract are very weak. (ElawresourceUK 2016)
- Written – When the term of any contract are discussed and written down on the piece of paper then such contact are written in nature and are called written contracts. For example, the sale and purchase of property is normally in written form of contracts.
- Strength – All the terms of these kinds of contract are on the piece of paper, thus, the same are very clear and can be settled at the time of dispute. Thus, the impact of these kinds of contract is very strong.
- Weakness – It is very cumbersome task to prepare a written counteract and requires lots of efforts and money. Thus, it is a tedious task to form a written contract. (ElawresourceUK 2016)
- Distance selling – When the contract are made by those parties who cannot see each other and are physically apart then the contract are distant selling ((Cundy v Lindsay (1878 ). For example, when the contact are made online or on telephone then such kinds of contract are distant selling contracts.
- Strength – When these contracts are made in written form, then the impact is very strong as the written terms can be lay down in evidence to settle the dispute.
- Weakness – When the contract is oral in nature then the impact is very weak as the terms are not very easy to prove in court.
Analysis of contract terms
In any contract, the terms of that contract can be divided into three broad categories, depending upon their meaning, nature and effect. The same are summarized herein under:
- Condition – In any contract, the terms which are the root of such contract without which the contract cannot be performed by either of the parties, then, such terms are called conditions. These terms are contract sole (The Mihalis Angelos (1970).If such contract terms are not performed by the parties, then the party who is not at fault has the right in law to cancel the contract there and then and is also eligible to claim and damages and compensation from such party who is at fault. (Weitzenböck 2012)
- Warranty – When the terms which are not very significant in a contract and the contract can be performed even when such terms are violated, then these are warranties in nature (Bettini v Gye (1876)The main impact of such contract terms is that only compensation by the non-defaulting party can be claimed and the contract cannot be canceled.
- In-nominate terms – whenever, the terns of the contract gets their status of condition or warranty depending upon how they are treated in any given situation, then such terms are called in-nominate terms. (The Naxos (1990).The main effect of such in-nominate terms is that if the terms are conditions then the contract can be canceled and damages can be asked for but if treated as warranty then only damages can be asked for.
LO 2: Be able to apply the elements of a contract in business situations
Whether there exists a valid contract between Johnson and Mark?
Law: In law, when one person (offeror) intends to make a contract with another (offeree) then he makes an offer to such person. An offer is the transfer of the intention of an offeror through which he guides an offeree to do or not to do any act. An offer should reach the offeree to be binding and valid (Carlill v Carbolic Smoke Ball Co (1893). When the offer is received by an offeree then the approval of such an offer is acceptance in law (Payn v Case (1789). (The Law Teacher 2016)However, when an acceptance is made via instant mode of communications, such as, through email, then the acceptance is complete when the mail comes within the knowledge of the offeror, that is, on the mail box of the offeror irrespective of the fact whether the same is read by the offeror or not (Thomas & anr v BPE Solicitors .When no acceptance is made but variations are brought to the terms of the offer then it is counter offer which cancels the offer (Hyde v Wrench (1840). But, mere enquiry is not a counter offer in law (Stevenson v McLean (1880). (The Law Teacher, 2016)Also, when any offers are invited with the help of advertisement then it is an invitation to treat where the inviter offeree) invites offers from people and upon receipt any accept the same in order to make a binding contract.
Application: Now, Johnson has advertised to sell his BMW @ £16,000. An advertisement is an invitation as per Partridge v crittenden (1968), so, Johnson is an inviter and must act and an offeree.Mark on Thursday through email has made an offer to Johnson. Now, a valid contract can only be made when an acceptance is made by Johnson against the offer of Mark.But, instead of accepting the offer of Mark, Johnson has not confirmed the offer of Mark but instead made enquiries of when he can come and how he can pay. Mark again enquired whether he can come on Saturday to pay by cash. No response is made by Johnson to the mail of Mark.So, after the offer of Mark, there is no acceptance which is made by Johnson. So, there is no binding contract amid the two.
LO 3: Understand principles of liability in negligence in business activities
Contrast between liability of tort and contract
A contrast is drawn between the liability that originates in contract and the liability that originates in tort. Both the laws are civil law but there is significant number of difference that exists between the two. (EssayUK 2016)
- The parties in contract are forced to perform the terms of the contract and the non-compliance of which results in the imposing liabilities upon them. Thus, the liability in contract is very strict.But, the liability in tort is imposed upon the defendant when he fails to perform his legal duty. Thus, the liability in tort is fault based and is not strict in nature.
- The parties already decide the amount of liability that is imposed upon a party when there is breach of contract term. Thus, the liability is liquidated in nature.But, the liability is decided by law when any defendant fails to comply with his legal obligations. Thus, the liability is un-liquidated in nature.
- The liabilities in contract are raised amid the parties who are aware of each other.But, the liabilities that are imposed upon the parties are totally strangers to each other. Thus, these are some of the significant differences that arose amid the two laws.
Key elements to prove negligence
The law of negligence was derived from the landmark case of Donoghue v Stevenson (1932).The case law is summarized and the key elements are discussed which are required to prove a claim of negligence.
In Donoghue case, the manufacturer prepared a ginger beer which is to be consumed by his consumer. The plaintiff consumed the beer which comprises of a decomposed snail. The plaintiff saw the snail and become ill. It was held by the court that the every defendant must undertake his actions in such manner so that no harm is caused to his neighbor. If any loss is caused which injures ones neighbor then compensation must given by the defaulter. A neighbor is the person who is directly affected by a defendant action. Thus, from the leading case, there are three essentials which originate which must be proved in order to establish negligence on the part of the defendant.
- Duty of care – The law submits that the defendant must act in such a manner so that his acts does not cause any injury to any person who is his neighbor, that is, who is directly affected by the actions of the defendant (Caparo Industries plc v Dickman (1990). But, the defendant has a duty provided the plaintiff is his neighbor and the loss which may be caused to the plaintiff is reasonably foreseeable (Junior Books v Veitchi (1983).
- Breach- when the duty of care is not followed by the defendant then it is breach in law. A breach exists when the level and standard that the defendant has to maintain is not catered with. The level of care varies with person to person. For example, the care in case of aged or child is high when compared with others (Nettleship v Weston (1971).
- Damages – The violation of duty must result in causing some harm to the plaintiff which is called damages in law. But, the damages which have resulted should be directly from the acts of the defendant and must be reasonably expected by the defendant. Too remote damages are not within the scope of negligence (McFarlane v Tayside Health Board (1999).
Thus, all the essentials must be present to prove negligence.
The Law of Vicarious Liability
A small business can be vicariously liable only when the employee is undertaking actions on behalf of the employer provided the actions are carried on within the employment course and some kind of loss is caused to third party and the acts of the employee are not of personal nature. Thus, the main elements to prove vicarious liability are: (LawMentor 2016)
- The relationship is of employer and employee.
- The employee is acting within employment course.
- The employee’s actions are not of personal nature.
- Some loss is caused to a third party because of employees action.
For example, in Performing Rights Society v Mitchell & Booker Ltd (1924), the band breached the copyright. The plaintiff was able to sue the defendant for the actions of the band as it was held that the band was directly controlled by the defendant and there exists the relationship of employer and employee.
In Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance (1968), the court held that an employee can be held liable only when the wrong is carried out within the course of employment.
LO 4: Be able to apply principles of liability in negligence in business situations
Application of the law of negligence
As per the law of negligence , every defendant is under a legal duty to carry out his actions in such manner so that no loss is caused to any plaintiff, who is his neighbor (the defendant and plaintiff are proximity connected with each other) because of his actions. And if loss does occur then the defendant is obligated to compensate the plaintiff for his loss. Thus, there is presence of duty of care, breach of duty of care and damages in order to make any defendant liable under the law of negligence Donoghue v Stevenson (1932).
Also, whenever any invitee comes within the premises of any occupier, then it is his duty in law that he makes his premises safe for any intended invitees. The occupier must make the premises safe for any kind of foreseeable damager and if no actions are undertaken and if any loss is caused to the invitee, then, the occupier is held to be negligent in his actions.
Now, Christie visits an internet café to catch up on some emails. Thus, Christie is an invitee at the premises of the cafe owner. So the owner has the legal duty to provide the café in such manner is that it is safe for the visitor. This duty must be reasonably cater by the owner against all reasonably foreseeable damager.
On the floor of the café, there is water which was not removed by the café owner. It is foreseeable that of any person will slip then he might face injury because of the same. However, no actions were undertaken by him to prevent such damage because of which Christie slipped and broke her left foot.
Thus, the duty to provide care was not cater by the owner causing harm to Christie. Also, Christie and the owner are proximately connected with each other and are neighbors of each other.
So, the café owner must compensate for the loss that is suffered by Christies.
Application of Vicarious Liability
In the law of vicarious liability, an employer is answerable to the actions of his employee provided the actions are undertaken by an employee is during the employment course and within such employment course the actions of the employee has caused damage to some third party (Imperial Chemical Industries v Shatwell ). In such scenario, the damage so caused must be compensated by the employer considering that the damage is caused by him (Lister v Romford Ice and Cold Storage (1957).
Now, as per the facts, Royal Mail Plc is the employer of James. Thus, Royal Mail Plc is only liable for the acts of James provided the loss caused by James must be undertaken within the employment of Royal Mail Plc. However, when carrying out deliveries for the company he takes a detour to go and see his girlfriend. As he leaves his girlfriend’s house to continue with his deliveries he negligently crashes in to a parked Benz car. Thus, the accident caused by James is incurred when he is not within the course of employment.
So, Royal Mail Plc is not libel for the actions of James and is not obligated to compensate for the loss.
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Since, the offer of Mark was never received by Johnson, so there is no contract amid the two.
- An exclusion clause is a clause that excludes the liability of one party in a contract when the clause is made part of the contract by mutual consent of the parties (Hollier v Rambler Motors (1972). If a contract is made part of the contract by signature, then, the clause is valid irrespective of the fact whether the parties are aware of the same. (Inbrief 2016)So, a written contract was signed by Sam. The contract has an exclusion clause ‘“We accept no liability for any injuries or damages to property while on its premises or for any breaches of any contractual terms.”This clause is applicable on Sam irrespective of the fact whether the same is read by him or not. so, the clause is applicable against Sam.
- When online contracts are made then when any customer clicks the ‘I agree’ button on the internet then there is a binding contact amid the customer ad the seller provided there is no misrepresentation or fraud on the part of the seller (L’Estrange v Graucob (1934). The sellers must notify that by clicking the agree’ button a valid contract is established with the customer (Thornton v Shoe Lane Parking (1970) and then the parties are abide by the terms and conditions of the contract. (Macdonald E, 2011)Now, Janet has agreed to the terms and conditions prior purchasing the dress. So there is a binding contract with the company and Janet must abode by the same.
- When any written contract is signed amid the parties then the parties are abide by the same whether they have read the terms or not. However, if any term is not part of the contract and one of the party wasn’t to rely on some another term then it is necessary that some reasonable notice of the same given which must bring the term within the knowledge of the other party. If no reasonable notice is provided then the term is not binding ((Olley v Marlborough Court (1949). So, Tony signed the contract then he must abide by all the written term of the contract.However, the term “Lights must be switched off after 12 midnight regardless” at the back of the room is not made part of the contract and was also not reasonably brought within the notice of Tony. So, the same is not binding upon Tony.
Allen & Overy (2010) Email acceptance of offer: when is it effective?. Publications, Litigation Review.
EssayUK (2016) Differences and similarities between rights and obligations in contract and tort.
MacMillan & Stone (2012) Elements of the law of contract, University of London, International Programmes.
Macdonald E (2011), “Incorporation of Standard Terms in Website Contracting – ‘Clicking I Agree’ Journal of Contract Law, 198, 199-210.
Weitzenböck EM (2012) English Law of Contract: Terms of contract.
Bettini v Gye (1876)
Carlill v Carbolic Smoke Ball Co (1893).
Caparo Industries plc v Dickman (1990).