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Unit 5 Aspects Contract & Negligence for Business Assignment solution
Diploma in Business
Unit Number and Title
Unit 5 Aspects Contract & Negligence for Business Assignment solution
The terminology contract can be explained in light of legal implications as an agreement signed between the involved contracting parties who intent to remain obliged towards the contractual terms and conditions. Important to highlight, a legally validated contract is enforceable by principles of civil law. However a contract formed can be either verbal or documented. A written contract is a better safeguard to the breach related cases. ‘Meeting of minds’ is one of the crucial aspects for contract formation. Hence for the formation of a contract, the contracting parties should necessarily bear the capacity and intention to remain legally obliged towards the contractual terms and conditions. An individual above the age of 18 years own the legal capacity to form a contract while individuals below the age of 18 years are prohibited to form a contract. But the mentally challenged and individuals with drug abused conditions who are not capable to independent decision making do not have the capacity to develop a contract. Furthermore the other ingredient required for contract formation includes an agreement wherein all the expressed contractual terms are mentioned. Offer and acceptance to the offer are also mandatory aspects for contract formation (Adams, 2008).
Emphasizing of the elements applicable for contract formation comprise of two major elements namely: agreement and consideration. An agreement in this aspect can be defined as the statement made by one individual to another evincing his or her willingness to enter into the said contract. as offer and acceptance to the offer are the major subsets of a contractual agreement it should be remembered that auctions, advertisement, showcase displays of goods are not offer but are considered as ‘invitation to treat.’ Termination to the contract also being one of the pivotal players in this respect can be executed through revocation, rejection, lapse of time, death of the offeree and failure to meet the condition requirements. Consideration being other major elements of contract can be explained as an act or forbearance of one contracting party on the promise made. Essential to convey contractual considerations must move from the promisee, but be sufficient in nature and should not be a past one. However promise under seals like deeds and doctrines of promissory estoppels are included as exception to the requirements of consideration. The fact that contractual considerations play an evidentiary and cautionary role, maintain equity, recognises the measure of relief in cases of breach and also aid in differentiating equitable remedies are the primary significance behind incorporation of contractual considerations (Adams, 2008). Therefore it can be inferred that Peter Abraham should make himself sufficiently updated with the legal aspects of business contract and its terms (both expressed and implied) prior venturing into a business
- Face to face- A contract can be developed between the contracting parties in a number of ways among which a contract formed by face to face communication is one. This mode of contract formation can be considered as one of the fastest methods wherein meeting of minds is achieved at a much faster pace. Hence a contract formed by face to face communication includes verbal exchange of promises and is dependent on mutual faith (Beatty, 2008). A contract formed by face to face communication is not recommended to Peter Abraham because a contract formed through this mode finds it difficult to counter the breach related issues. Postal rule with respect to contract formation is not applicable in such case.
- Written contract- A written contract is always preferred in comparison to a contract formed verbally by face to face communication or by conversation over the telephone. In a written contract all the contractual terms are conditions should be clearly documented and should be signed by the contracting partied. A written contract is found to eliminate disputed over who promised what. Breach related cases are solved with greater ease in such contract (Beatty, 2008).
- Distance selling (telephone, internet- Distant selling inclusive of communication through telephone or over the web can be identified as one of the frequently practised methods of contract formation. In the present digital era contract are formed between the contracting parties by telephonic conversation, through instant messenger or through exchange of emails. This particular mode of contract formation reflects an instant mode of communication. Postal rule of contract formation cannot be implied in case of a contract formed by exchange of emails. The case of Entores versus Miles Far East Corporation (1955) can be cited in this respect (swarb.co.uk, 2015).
- Condition- The terms and conditions present within a contract can be considered to be closely related to each other. Conditions in a contract can therefore presented as a set of rights and obligations that are imposed over the involved contracting parties. A breach if proved with respect to contractual conditions that is found to result in damages or discharge of the contractual obligations enable the injured party to terminate the said contract (Liuzzo, 2010).
- Warranty- A warranty in contract can be identified as a contractual statement of fact made by the warrantor to the warrantee that generally contained in a share or asset purchase agreement. Important to convey that warranties in a contract work as a mode of legal assurance and damages for breach of warranty entitle the claimant to claim for compensatory remedies but is not entitled to terminate the entire contract. A warranty in a contract is distinct from an indemnity as the latter is presented as a promise to reimburse the claimant with respect to the loss encountered by the claimant (Liuzzo, 2010).
- Innominate terms- The case of Hong Kong Fir Shipping Co Ltd versus Kawasaki Kisen Kaisha Ltd (1962) is the origin source for the concept of innominate term. According to the English contract law an innominate term can be explained as either a contractual condition or a warranty and is more flexible in nature. Marketing Essentials to convey the remedy for a breach of an innominate term is primarily dependent on the nature of the breach that has occurred. It can be further added that if the claimant has lost the entire benefits he is entitled to treat the contract as repudiated and can claim the damages suffered. However in such case termination of contract is not justified.
- Exemption clauses (including legality)- In a contract exemption clause is applicable to deny or limit the obligations of the contracting parties. The use of exemption clause is made with an intention to cover both exclusion clause and limitation clause. an exclusion clause in applicable in a contract with an objective e to deny all the liabilities that are certain for breaches in a contract while a limitation clause is implemented by a contracting party to limit their liability if cases breach in contract is proved. Implementing the legal doctrines of Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulation 1999, the validity of exemption clause are tested (Lawmentor.co.uk, 2016).
Case 1- Agreement
In order to analyse the given case scenario it is important to understand the preliminary difference between an offer and invitation to treat with respect to formation of a contract. To begin with an offer can be explained as an invitation that is communicated by one of the contracting parties to another with an intention to legally bind to contract in presence of certain and specific contractual terms and conditions. On the other hand invitation to treat can be defined as an invitation initiated by one of the contracting parties with an intention to enter into further negotiation with an underlying objective to create an offer. it is also to be highlighted that for an offer made in a contract it is essential to specify the contractual terms which is not demanded in case of initiating an invitation to treat (Liuzzo, 2010). Advertisements, auctions, display of goods etc are the variants of invitation to treat and should not be confused as an offer. Case 1 can be aligned with the case example of Gibson versus Manchester city council (1979) wherein a council tenant expressed his interest in buying his house. In this case the invitation to treat was made from the council that was misunderstood as an offer by Mr. Gibson who was interested in purchase of the house. Although the claimant proceeded with a legal action but his appeal was ruled out by the House of Lords stating that the council has not made an offer and it was only a n invitation to treat (swarb.co.uk, 2016). Similar situation is evident in case 2 wherein the advertisement published can be identified as an invitation to treat. Hence it can be inferred that the seller has not entered into any contract with carol, who is presented as the claimant of this case.
Case 2 – Consideration
Case 2 can be viewed as a reflection to legal implications of consideration with respect to a contract formed. In this case, the subject named Preston is presented as the defendant while George, Smith & Forgarty inc. can be presented as the claimant. According to the case, a promise was made by Preston to deliver a sum of £150,000 to the claimant provided the company has engaged his son. But it is to be noted that Preston’s son was hired by the said company before the promise was made by Preston. Hence in this case, the claimant cannot legally enforce Preston to keep his promise because consideration cannot be past and should also be sufficient in nature. Furthermore it is to be highlighted that consideration must move from the promisee, but not necessarily to the promisor (MacIntyre, 2007). In this context the case of Coulls versus Bagot’s Executor and Trustee can be reviewed (Australiancontractlaw.com, 2016). Moreover in order to understand that past consideration is not accepted as a good consideration the case of Lampleigh versus Braithwaite can be analysed. The case of White versus Bluett (1853) can be cited as an example in order to understand that consideration is not sufficient with respect to a natural duty has is already owned (Casebrief.me, 2016).
Case 3 – Exclusion clause
True exclusion clause, limitation clause and time limitation clause are the major categories of exclusion clause. However it should be noted that for proper application of the exclusion cluse with an intention to limit bearing liabilities, proper incorporation of terms is mandatory. It can be further added that the judiciary body is evident to traditionally hold the exclusion clause provided they are actually a part of the said contract. Hence the terms with respect to implementation of exclusion clause can be incorporated by signature, by notice and through the previous course of dealings. The case of Parker versus SE Railway (1877) can be cited in order to understand how the terms in exclusion clause have been incorporated by notice (swarb.co.uk, 2015). In context of the topic of discussion it should be also conveyed that the contractual terms should be properly communicated and brought under the attention of the other party for proper and justified implication of the exclusion clause. Coming to the given case situation it is clearly evident that the terms although incorporated has not been properly communicated to the claimant. It can be further stated that the restaurant authority has also failed to bring the terms under the attention of the claimant. Hence mere passing the contractual terms by printing it behind the receipt cannot be considered as a proper and justified incorporation of the contractual terms for application of exclusion clause (Burrows, 2011). Therefore the concerned restaurant cannot rely on the exclusion clause contained on the back of the receipt for limiting with liability with respect to the missing valuables of the claimant. In this context the case of La Rosa versus Nudrill Pty Ltd can be cited that reflected the perennial issues related with the implication of exclusion clause.
Case 4 – Implied term
An insight into the contractual terms indicate the presence of both expressed and implied terms and the latter are not found to be expressly or explicitly stated within the contract. Hence in contrast to the implied contractual terms, the expressed contractual terms are clearly mentioned in the said contract. The rationale behind implementation of implied term is the fact that according to the English contract law the practice of setting down default rules for contract are preferred when the expressed terms are found to be run out. The case of Moorcock (1889) is one of the renowned cases in the history of English contract law that has formulated the ‘business efficacy’ test applicable for common law implied terms. It is through this test evaluation of the implied contractual terms are performed in order to understand whether such terms are ‘obvious and necessary’ (swarb.co.uk, 2016). In case 4 it is observed that an initial contract was developed between Aaron and Zephra and during the contractual tenure death of the offeree occurred (MacIntyre, 2007). Although Aaron has made a number on investment on the house that was under the contract but he cannot be entitled to any compensation through the application of implied term because the original contract has already been terminated with death of Zephra. In this connection the case of Shell UK versus Lostock Garage Limited (1976) can be cited (E-lawresources.co.uk, 2016). However for better understanding of the fact that whether implied terms are applicable for the given case the business environment efficacy test can be conducted.
In order to safeguard the interest of the insurance policy agent and also to protect them from claims supported by fraudulent activity of the insurance holder, the agent are given the power to void a policy claim in a justified manner. Also it is to be noted that an insurance policy without legal authentication or verification cannot be voided. the situation depicted in case 5 has clearly indicated an act of non-disclosure of information wherein the concerned policy holder has already made a theft claim that was within the five year period of making a policy claim (Liuzzo, 2010). Since non-disclosure of information is evident in this case, the concerned insurance agent has the legal right to void or cancel the policy with subsequent rejection of the present policy claim made by the concerned policy holder.
Case – 6
Non-disclosure of information or material fact renders a car insurance policy to be voidable. In this context it can be further added that non-disclosure of information or material fact can be either fraudulent or innocent in nature. In cases where it is proved that non-disclosure of material information was done deliberately or with an intention to fraud, the insurance agent has the right to void the insurance policy rejecting the policy claims. Under such situation, the insurance agent also has the right to decline returning the premiums and may seek recovery money as compensation. On the contrary if the non-disclosure of material fact by the policy holder was found to be on innocent ground, the policy cannot be voided and also the policy claims should be addressed. In case-6 it is observed that a non-disclosure of material information by the policy holder, but whether this activity is deliberate or innocent should be proved before voiding the policy (Liuzzo, 2010). However if it is proved that non-disclosure of material fact was deliberately done by the policy holder, the concerned insurance agent has the legal right to void the policy from the starting date.
In light of the legal principles of English contract law, contractual liability has been elaborated as the obligation to repair the prejudice that is incident as a result of failure to properly accomplish the contractual duties and responsibilities. Important to highlight the subsequent effects of contractual liabilities are imposed over the creditor and contractual liability is the obligation of the debtor who is also entitled to compensate for the resultant damages. Therefore contractual liability can be considered as a special, derogatory liability provided that the parties’ have concluded the said contract. In contrast to contractual liability, tort liability can be presented as a mandatory legal association that is emergent from an illegal act resulting prejudice. In this case, the offender is entitled to compensate for the damages done. Furthermore, in case of contractual liability, the involved parties should be within a said contract while in case of tort liability, the involved parties are not required to be a part of any contract (Bussani and Palmer, 2004). One of the key similarity between these two aspects is both the cases are dominated by the idea of repairing the prejudice caused by an illegal act and compensation for the damages done is also compulsory. a tort liability is applicable provided an individual in involved in a breach and the obligations are not to harm the rights of others while in case of contractual liability it is applicable provided the creditor is found to suffer a prejudice due to the failure of accomplishing the contractual duties. Henceforth both the forms are different forms of liabilities bearing certain similarities and differences.
The concept of negligence has been well emphasized in the legal principle of tort law and it has been presented as harm caused due to carelessness which is not mandatory to be an intentional harm. The term negligence has emerged from the Latin word ‘negligentia’ that literally means ‘not to pick up something’. Furthermore, an individual who has suffered significant damage due a negligent action if proved is entitled to sue the opponent seeking compensation for the damages. However in order to successfully establish a negligent claim it is required to prove all the elements of negligent. Hence duty, breach to duty, cause in fact, proximate cause and damages are the key elements in this respect (Adams, 2008). On simpler term it can be stated that plaintiff can successfully place a negligent claim provided that it is proved that the plaintiff owned a duty of care and a breach has occurred caused damage to the plaintiff’s interest. Furthermore ‘but-for’ causation test is applicable in this respect. The proximate cause being another potential element in this respect is found to be related to the scope of a defendant’s liability in a case where negligence has been indicated. The case of Caparo Industries Plc versus Dickman (1990) can be cited to understand the significance of duty of care in proving negligence and this case has also introduced a ‘threefold test’ for duty of care (E-lawresources.co.uk, 2016). Moreover the case of Bolton versus Stone (1951) can be reviewed wherein remoteness to the damages caused to the plaintiff was established ruling out the negligent claim by the plaintiff (Casebriefs.com, 2016). For understanding what is legal meant by nominal damages the case of Constantine versus Imperial Hotels Ltd (1944) is a god example to review.
The legal implications of vicariously liability is a potential form of organizational liability wherein the employer held responsible for a acts or omission of its employees provided as the incident has occurred in course of the employment tenure of the concerned employee. It is to be noted that is majority of case the employers are not informed about the legal consequences that may arise as a result of organizational vicariously liability. Hence an employer can be held vicariously liable for workplace bullying, harassments, sexual assaults, discriminatory acts and also for breach in copyright. However in context of vicarious liability it is to be investigated that whether the concerned employee was acting in a personal capacity or in course of his employment which is often a tedious job to establish (Brennan, 2011). A number of investigative procedures like control test, integration test, economic reality test and Salmond test are applicable for affirming whether it is legally justified to held an organization vicariously responsible. The case of Stevenson, Jordan & Harrison Ltd versus MacDonald and Evans can be cited in order to understand the significance of integration test (swarb.co.uk, 2015). On the contrary the case of Ready Mixed Concrete (South East) ltd versus MPNI can be studied to understand how economic reality test can be conducted (Webstroke.co.uk, 2016). The case of Hollis versus Vabu (2001) can be cited to have an insight regarding the ‘employer-employee’ relationship that can be presently evaluated by conducting the ‘sufficient relationship’ test (Charteredaccountants.com.au, 2016).
Task – 4
Case – 7
- In context of the provided case scenario it is important to understand the basic concept of remoteness of damage with respect to contract law. Hence according to English law remoteness has been explained as a set of legal guidelines applicable in both tort and contract that is associated with limiting the amount of compensatory damages for a tort. Important to highlight a tort or a negligent action cannot be established if the damage caused is proved to be not foreseeable in nature hence remote (Edwards et al., 2012). The case of Hadley versus Baxendale can be cited that formulated a test for evaluation of remoteness of contractual damage. The case of Sylvia shipping co limited versus Progress Bulk Carriers Limited can also be a good example in this respect (Nortonrosefulbright.com, 2016). Referring to the first question of case-7 it can be stated that the Goodmayes hospital authority can be held responsible for death of Mr. Brown provided it is established that the damage suffered was foreseeable in nature and hence not remote. To establish the above mentioned fact execution of wagon mound test is recommended. Furthermore in order to make the concerned hospital liable for the incident it is also mandatory to investigate whether a greater extent of care was essential as the risk of injury was considerably high. The ‘but for’ test can also be conducted to investigate whether the concerned hospital is responsible for the death of the concerned subject (Edwards et al., 2012).
- This particular segment shall attempt to understand under what circumstances the Goodmayes hospital cannot be held liable for the death of Mr. Brown. In this context it can be stated that if it is legally established that the damage suffered was too remote and not foreseeable in nature the hospital cannot be accused. Essential to convey that is negligent or tort related cases where remoteness is established the defendant cannot be held legally responsible. However a Caparo test can be conducted in order to analyse the duty of care that was required in eliminating the personal injury suffered (in this case death of Mr. Brown can be equated with the personal injury suffered by the widow of the concerned subject). The case of Smith versus Leech Brain & Co (1962) can be cited in this context where the judiciary body was found to award damages based on to what extent the consequence of the act is foreseeable (E-lawresources.co.uk, 2016). The case of Balfour Beatty versus Scottish Power Plc (1994) can also be considered wherein the remoteness of damage was established (swarb.co.uk, 2016).
As discussed in the previous segment, an employer can be held vicariously responsible for the acts or omission of its employee during its course of employment if proved. Exploring the circumstantial scenario of case-8, an indication towards vicarious liability of the chauffeur company is evident. In this case although the concerned driver has performed a negligent driving with lack of duty of care, but as the accident occurred in course of his employment, the injured party can reasonable hold the company responsible and claim compensation. Important to note that depending upon the severity of the physical injury suffered, the compensation can be decided. Hence this particular case can be connected with torts to employment (Brennan, 2011). The case of Limpus versus London General Omnibus Company can be cited wherein the employer of the bus company was held vicariously responsible for the negligent driving of its employed driver (European Encyclopedia of Law (BETA), 2013). On the contrary the case of Century Insurance Co. versus Northern Ireland Road Transport Board can be reviewed wherein the tort incident was found to be during the course of his employment.
Case – 9
The legal implications of vicariously liability although appearing to be straightforward but often appear to be complicated while investigating whether the employee was doing his or her job in an unauthorised manner or in the way that was expressly forbidden by the employer. The situation provided in case 9 can be aligned with the above mentioned statement. In this case, although the responsibility of the employee safety was delegated to another organization, but it was the responsibility of the supermarket owner to monitor whether the delegated duty was being performed properly or not. In this context, the marketing principles can be held vicariously liable for a workplace accident that has occurred. However for proper justice it is essential to conduct the Salmond test to ascertain that the wrongful act was actually authorised by the employer or when the wrongful ways of doing the acts was authorised by the employer (Beatty, 2008). Economic reality test is also suggested in order to investigate whether the employee safety service was given to an independent contractor and integration test to understand whether the concerned individual’s work was an integral part of the supermarket business. The case of Honeywell and Stein Ltd versus Larkin Brothers Ltd can be reviewed in this context (swarb.co.uk, 2015).
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