Unit 5 Aspects of Contract Negligence Business Assignment Copy

Unit 5 Aspects of Contract Negligence Business Assignment Copy

Unit 5 Aspects of Contract Negligence Business Assignment Copy


Diploma in Business

Unit Number and Title

Unit 5 Aspects of Contract Negligence Business

QFC Level

Level 5


The aspects of contract negligence business will be based on the relevance and on the importance of the formation and the adherence to the different business contracts and business agreements. This is because without following the proper guidelines and the pre-requisites of forming of a business contract, it is very difficult to justify and establish the validity of a particular business contract.

Task 1 Case Study of Peter Abraham

1.1 Contract Formation and Importance of contractual elements for formation of Contract

When two or more individuals jointly agree to enter into an agreement bound by marketing  principles a contract is formed. The contract is valid only if there are certain elements which have been included in its formation and the case scenario of Peter Abraham gives a thorough understanding of the same. It is vital that he keeps a note of the following elements discussed underneath in case of entering into valid contract with individuals and business organisations:

Intention to create legal obligations – The parties who are willing to enter into a valid contract which can take place by the enforcement of the law must at the first place possess a willingness to enter into a contract bound by law. Such an understanding makes sense as in case any of the parties fail to meet the legal obligations indicated in the contract one of the parties can sue or be sued by the other (MacLeod, 2011).

Offer – This refers to a person’s willingness to perform an act towards another who readily and without any condition accepts thus ensuring the validation of a contract formation. An offer may or may not be bound by time but offers which are specified by time are preferred so that potential disputes can be avoided between the parties to the contract. In case of silence of the acceptor the party who makes the offer cannot assume acceptance of the offer. An offer cannot be considered as an invitation to treat, since the invitation to treat is merely an invitation to offer and not an offer itself (Jewell, 2002). An invitation to treat is considered as an indication that the party is not closed to offers and an acceptance does not symbolize a agreement but can be considered as a consequent source of a contract to be made in future. As for example, displays in the shop windows, goods available at the auction, goods in catalogues etc.

Acceptance –an offer is usually validated through acceptance and is normally represented orally or in writing unless the simultaneous performance and acceptance of the duties of the contract is specifically indicated in the contract, in which case, acceptance can take place by conduct (Pryor, 2005).  Acceptance must be clear as that is considered as the first step of framing the contract (Entorres v Miles Far East [1955] 2 QB 327 Court of Appeal). The parties to the contract must agree upon the method of acceptance and in case of absence of any such specifications by the party making the offer the following rules are applied:

Postal rule –in case of the reasonable acceptance of postal system as the mode of offer and acceptance, then the contract shall be considered to have formed at the time when the letter of acceptance was posted, irrespective of its status of reaching late or getting lost in transit (Revak., 2011).

Receipt rule – in case an e-mail or fax has been sent as message of acceptance, it shall be deemed valid when it is received by the offeror, even if it means that such a message has not been read by him at the same time. A valid contract cannot be constituted by conditional or partial acceptance and therefore is treated as a counter offer, as for example, if an offeree accepts some of the conditions mentioned in the contract, and makes a new offer with new terms, the contract between the parties does not get validated.

Consideration –in accordance with the law of contract, an agreement between two parties remains unenforceable by law in case a valid consideration is missing (Thomas v Thomas (1842) 2 QB 85), which incidentally is measured in general economic terms, such as goods, money or services that the offeror shall receive from the recipient (Hogg et al. 2008). It however need not be adequate as, if a lower price than the market price is offered by the offeror to sell a good or service industries, the subsequent claim of the shortfall cannot be established against the recipient in the court of law.

Capacity – according to the law of contract a minor person who has not attained the age of 18 years and or is unstable mentally and is under the influence of any sort of intoxication does not qualify as the person having the capacity to enter into a valid contract ((Hermalin et al., 2006). Such contracts as and when are formed shall be treated as null and void and hence neither of the parties shall bear any contractual liabilities for the same. An exception however has been incorporated in case the contract that has been entered into is for necessaries, where the party who makes provision for necessities such as clothing, food items, etc to a minor and is not reimbursed, the minor is liable to get sued for the imbursement of such necessities.

1.2 Impact of different types of contract formations

Face-to-face: This kind of contracts has no legal validity therefore it is vital for Mr. Peter Abraham to establish contractual relation with any individual or business concern vide proper documentation. In this kind of contract the details of the contract that the parties are agreeing to enter into remains largely obscure since details of the contract may be in the mind of the parties and thus in case of any kind of breach of terms, none of the parties to the contract would be able to establish claim on the other in the absence of evidential documents (Holmes., 2009).

Written Contract: The contracts that are written are far more certain as the agreed matters are set out with details of the payments, time limits, and the process that is followed for resolution of disputes (Schmerler, 2008). The formation also reduces the risk because of its being secure and therefore more reliant than mere words. It can be enforced lawfully and the parties can establish claims against each other in case of breach of any of the terms mentioned in such contracts.

Distance selling (telephone / Internet): In the present age of technological evolution in the field of communication, most of the contracts take the form of distance selling agreements that is brought into effect over the internet or telephonic conversation and such contract are treated on the same line as the face-to-face contracts. These kinds of contracts being devoid of the primary documentation lacks legal validity and also fails to provide adequate support to the aggrieved parties in case of any kind of breach (Ward., 2012). Then absence of a signed document displaying the consent of both the contractual parties makes it invalid in the eyes of law. It can therefore be said that such contracts are formed on the grounds of mutual trust between the contractual parties and as such is devoid of legal bindings and can be terminated at the mere whim or fancy of the involved parties.

1.3 Analysis of Contractual terms with meaning and effect

Condition:The contract formation clauses with a view of the future probable contingencies and its subsequent handling are referred to as Conditions (Poussard v Spiers (1876) 1 QBD 410). For contract execution the conditions must be fulfilled either orally or through writing within the ambit of law. The party who suffers from the unfulfillment of the condition of the contract may terminate the contract and the breach of one of the conditions shall be regarded as the breach of the entire contract (Ayres., 2012).

Warranty: Warranties refer to the stipulated time limit of the business contract after the lapse of which the contract becomes null and void (Bettini v Gye 1876 QBD 183). It is the truthfulness of the information received by the buyer from the seller during the sale about the product. There are two kind of warranties-express or implied. Express means the explicit claim made by the producer of the product and implicit claims are legal in nature. In case of a warranty infringements the contract cannot be terminated but the party that suffers can claim damages for the occurrences of any inconveniences (McMillan and Stone., 2012).

Innominate Term:The approach of the innominate term highlights on the infringement effect so that an the extent of the infringement of the benefits of the contract suffered by the claimant can be understood (Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26). In case benefits have been deprived to a large extent to the claimant, the contract can be terminated (Jewel., 2002). This term thus could be either a warranty or a condition which makes it mandatory for the contractual parties to separate them either as warranty or condition. The criticism of this approach is rooted in its compromise of certainty. The liability of wrongful nullification of the contract can also fall on the aggrieved party in case of an insubstantial deprivation of the contractual benefits (Posner., 2006). In certain cases the term is considered as minor term by the courts on the basis of its declaration of being a condition by the parties stating that its infringement leads to its cancellation.

Exemption Clauses: The Contract Law in UK confers the application of the Exemption Clause in cases where the  Contractual parties has limited power or are not included to bear the contractual liabilities. The three kinds of Exemption clauses are time limitation clause, true exclusion clause and limitation clause. In cases of contractual breaches restrictions on the claimed amount can be imposed through the application of limitation clause and exclusion clause is applied when a contractual breach of contract can be apprehended (Smith., 2011). The time limitation clause on the other hand is applied when an action related to claim is commenced within the time specified for the act.

Task 2 Case Studies

2.1 Application of contractual elements

Case-1 Agreement: The offer which was advertised by Gumtree was not an offer but an invitation to treat as it lacked clarity and transparency for Carol to consider it as an offer (Harvey v Facey [1893] AC 552 Privy Council, hence there was no formation of any kind of contract between Carol and the company, furthermore the reply of Carol to acquire the furniture from the company is to be treated as a counter offer as there was no former communication between the parties.

Case-2 Consideration: The given case of Devi is quite interesting in a way since although the request was made by Preston on the following day i.e., on the 13th of April, 2015, who was completely unaware of deliberation which continued for weeks, George’s company hired Devi a day before on the 12th of April, 2015. Hence the interest of the company stands can be seen quite clearly by its imposition of the interest on Preston, however it becomes obligatory for Preston to pay the company the promised sum of 150,000 pounds. The element of confusion can be clarified in the light of the case of Lampleigh v. Braithwaite [1615] EWHC KB J17, where the accusation of murder and a subsequent penalty for death was accorded to the defendant, while the defendant had pleaded to the plaintiff that he would be given 100 pounds if he can successfully save him from being executed, which incidentally was not fulfilled by the defendant even when the claimant did all possible actions to earn the defendant a pardon from the death sentence. The court decreed that as the defendant’s consideration preceded the promise hence it would be treated as a past consideration however the request that followed it makes such a consideration valid and makes it obligatory for the defendant to pay the amount he had promised ( Beatson et al., 2010). Therefore the case of Preston in this light brings forth the fact that on the company’s fulfilment of the consideration had preceded the request, the amount promised by Preston must be paid to George.

2.2 Legal Application on contractual terms

Case-3 Exclusion Clause: The aspects of the given case scenario have to be considered carefully since it is laced with a lot of contradictions.  It has been mentioned that the individual carried a wallet in his coat pocket, and the restaurant is imposing the exclusion clause when refund is sought by the man. The facts of the case can be highlighted in the backdrop of the Parker v. South Eastern Railway (1877) 2 CPD 416 case, where the exclusion clause came to Parker’s view after the bag was lost. Hence if we examine the given case scenario it can be said that if the exclusion clause has escaped the vision of the man that entitles him to get back his lost wallet in the restaurant, he would have no knowledge of such a clause, whereas if his belief on the clause dwindles even after he is fully aware of such an exclusion clause, the restaurant can defend itself on the ground that the existence of such clauses in the receipt states establishment of the clauses even if the there is disbelief on the part of the plaintiff (Scott & Triantis, 2006). The case of L'Estrange v Graucob [1934] 2 KB 394, states furthermore that the case can be fought by the company if there is mention of the exclusion clause on the content box. Hence, the laws on exclusion clause would not allow the man to claim money from the restaurant.

Case-4 Implied Term: In the given case Aaron and Zephara had a verbal contract and they trusted each other and had accordingly agreed about the rent verbally hence after the death of Zephara, it was wrongful act by Yeti to take possession of the place and follow it up with an increased rental sum. In the light of the case of Hutton v. Warren [1836] EWHC Exch J61, where the plaintiff had accepted the compensatory sum in lieu of the labour that he had invested in acquiring seeds and grow crop before the termination of the contract by the landlord the court in the present case shall imply terms that are customary citing the fact that the fulfilment of the verbal terms between Aaron and Zephara went on quiet smoothly as had been decided between them.

2.3 Effect of Contractual Terms

Case-5: The formation of a contract is based on the basic premise of agreement of certain terms that are a part of the contract between the parties also having clarity about the presence of the different clauses in such a contract (Hogg et al., 2008). The given case scenario reflects breach of contract since the insurance had clarified that the claimant must be free from all kinds of claims such as claims of theft etc and at a later stage such a claim was found against the claimant.

Case-6: In the second instance, in answering both the clauses the policy holder had concealed the truth from the insurer which were later found out to be untrue in the course of investigation by the insurer and hence it not only resulted in refusal of claim but also in cancellation of the policy. Although the lady claimed that she had no knowledge about the modifications and hence on the basis of the assumption of considering the modifications as a part of the product she had answered in affirmative to the clauses of the policy the court would still hold it as a breach of contractual terms thus nullifying the claim as well as the contract between the parties.

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Task 3 Vocational Scenario

3.1 Differences and Similarities between Tort and Contractual Liability with Examples

The liability arising out of breach of contracts and that of any tortuous action is essentially civil in nature and is identically structured requiring the fulfilment of the elements of guilt and prejudices, illegality of the action, causal relation between prejudice and guilt and that of illegal action (Shapo and Shapo, 2003). The idea that dominates both the form of liabilities is restoration of the prejudice caused by the illegality of action on the asset and thus the benefits that remains to be received and the damage that has been caused in the course of such action must get covered. In case the damage cannot be refurbished in kind then the monetary value of the prejudice is taken into account. Both the form of liabilities can be imposed on organisations as well as individuals.         

The basic liability principle in Tort Law can be generally explained by the help of dual theories that are given below:

  • Wider and narrower theory – only if the act is justified and recognized by law would it be exempted otherwise all kinds of injuries inflicted by one person to the other would be regarded as torts (Schmerler, 2008).
  • Pigeon-hole theory – the liability in tort principle is applied to a definite number of torts outside the purview of which no tort exists (Kidner., 2008).

In case of an valid contract between more than one two individuals, if one of the parties fail to fulfil the terms of the contract, the occurrence of contractual liability happens, which can be illustrated by an example where S contracts with T to acquire a furniture costing $15,000, which T fails to deliver at the time leading to the breach of the contract and subjected to a contractual liability worth the amount of the furniture. Similarly if X fails to pay he would also incur a contractual liability for the loss sustained by Y.

The tort liability is put into use in case of a person who is in breach of the obligation of not inflicting harm on others by undertaking illegal actions while in case of a liability arising out of contracts takes place when the suffering from the unfulfillment of the obligations of the contract falls on the creditor (Routledge-Cavendish., 2008). People who have united voluntarily commit contractual liability whereas the event of tortuous liability brings the people together by chance. The presumption of guilt falls on the debtor in case of liability arising out of contracts while in the case of a tortuous liability the person harmed is required to prove the guilt of the offender. From the viewpoint of compensation, the offender must cover direct and indirect as well as predictable and unpredictable costs but in the case of contractual liability only the foreseeable damages at the time of contract formation is payable by the debtor (Bishop., 2005). In case of illegal action being committed by several offenders’ tortuous liability holds solitary liability of the offenders but in case of contractual liability the obligation is divided among the offenders.

3.2 Conditions for Liability for Negligence with example

In cases of negligence the nature of liabilities can be enumerated under the following heads:

  • Direct Cause: - The direct cause refers to the consequence occurring to the individual or the business entity out of negligence which can arise with or without the violation of the terms and conditions of the business contract (Kappeler, 2006).
  • Duty of Care: -The duty of care denotes the repentance level and the responsibility level that the individual who has been accused must go through as a part of the duty of the individual who has been accused so that he can ask for apology and confesses when he is subjected to personal or public accusation (Owen, 2006).
  • Legal Causation: - This is kept separate from the factual or direct causation since the former has its basis on laws and legal rules.
  • Breach of Duty: - it is required that a certain amount of reimbursement be given to the person who has been harmed for infringement of duty that has been negligently committed.

In the case of Donoghue v Stevenson (1932) AC 562 in the 20th century, Lord Atkin  had articulated a principle that determined the limitations  of the duty of care in negligence. Mrs. Donoghue’s friend had purchased the drink that caused her injury and therefore under the contract the cafe owner could be sued by her friend and the House of Lords resolved the case by imposition of a liability of negligence that specified a possible case of lack of duty of care towards the victim. The suggestion of the limitations of care duty stated that care must be reasonably taken so that certain acts can be avoided which could be injurious to the neighbour where the term neighbour implies the closeness of the person or persons who could get affected by a negligent act or decision that is visible before hand and considered prior to the happening of the incident (Cooke.,2009). The liability for an infringement in the care duty towards the sufferer and a subsequent claim of damages has to be therefore faced by the defendant.

3.3 Conditions for Vicarious Liability in business with example

It is a form of liability which arises in cases where there are two parties and one of them commits a tort on the other without the former’s knowledge of any such act by the latter and therefore the former cannot be held liable or responsible for any such wrongful act by the latter. The case of Twine v. Bean’s Express Ltd (1946) 62 TLR 155 stated that the company’s employee had given lift to a stranded person on the van owned by the company without informing the company’s owner and the person was injured in an accident where the employer could not be held responsible for the negligent act of the employee as it was done without the knowledge of the employer and also as it fell outside the purview of the express instructions of the employer at the time of appointing the employee prohibiting him from any such acts in the course of business strategy. As the incident was not connected to business hence the owner could not be held vicariously liable for the act. If the employer has instructed the employee explicitly the employer cannot be held liable in case the actions of the employee cause any kind of damages in the course of his employment (Dobbs et al., 2009).

Task 4 Case Studies

4.1 Case Scenarios of Tort of Negligence

Case-7: The given case scenario reveals that Mr. Brown’s demise took place at his residence out of a pneumonic infection from the toxic mould present at his residence it is indeed possible for his widow to hold the hospital responsible on certain grounds such as if death had happened after his arrival at the hospital or if any kind of negligence in duty of care was evident in the actions of the doctors on duty towards Mr. Brown. It is important that an intervening cause must be present following the act of the one who commits a tort thereby causing damages to the subject in question (Owen., 2006). Hence for the hospital to be held liable for negligence causing Mr. Brown’s death the conveyance of a lack of duty of care must be established, evidences supporting the establishment of duty of care must be present and a relation between the results of the breach and the cause of the damage must get established (Cooke., 2009).

It is vital to understand that the evidential details of the death of Mt. Brown points at the toxic mould present at his home as the factor that caused his death. As there are no evidences of any kind of breach of duty of care by the hospital so no responsibility can be imposed on the hospital authority on legal grounds. A balance is also evident in case the court looks into the probability of injury which is highlighted by the fact of over the counter prescription of a medicine to Mr. Brown thereby judging the gravity of the risk that reflected sufficient level of care which could be given to the man (Dobbs et al., 2009). The claim for compensation can be defended on the grounds of the damage being caused by a remote cause which can be argued in the backdrop of the case of Lamb v. London Borough of Camden LBC [1981] 2 All ER 408. Therefore there cannot be any kind of legal claim made on the hospital authority for the death of Mr. Brown.

4.2 Case scenarios of Vicarious Liability

Case-8:The given case scenario in the light of the case of Lynch v. Binnacle Ltd. t/a Cavan Co-op Mart, (2011), brings up certain facts such as the driver was lacking in duty of care and was highly negligent which had caused physical injury to the claimant. Since the injury was caused during the tenure of his employment the aggrieved party has the legal claiming rights for harm caused by the enterprise. Therefore the enterprise can be held vicariously liable for the driver’s negligent action which caused injury to the aggrieved party in the tenure of his service in the company (Giliker., 2010).

Case-9: It must be considered that the supermarket store shall not be held vicariously liable for the injury caused to Mr. Jones’s colleague since in case the organisation delegates the safety and health issues related to workplace to any other company, the supermarket owner cannot be held directly responsible for such an incident. However the supermarket can be held vicariously liable if it can be proved that it was negligent in monitoring the level of competency of the delegated organizations and behavior in delivering the delegated duties of health and safety at the store. The case of Glasgow Corporation v. Taylor (1992) is apt to be deliberated and cited in connection to the above case scenario.

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The above discussion entailed a detailed study of the contractual elements along with liabilities for breach of the same in the context of various given business scenarios. In addition the aspects of vicarious liability, tort of negligence, duty of care and its applicability in the practical business scenarios has also found a place in the above discussion.


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