Unit 5 Aspects of valid Contract law for Business Assignment

Unit 5 Aspects of valid Contract law for Business Assignment

Unit 5 Aspects of valid Contract law for Business Assignment


Diploma in Business

Unit Number and Title

Unit 5 Aspects of valid Contract law for Business

QFC Level

Level 5

This Unit 5 Aspects of valid Contract law for Business Assignment is regarding the legal aspects of contract law required intends to start a construction related business.

Unit 5 Aspects of valid Contract law for Business Assignment

Assignment title: Aspects of Contract & Negligence for Business

Task 1


Peter Abraham is the subject concerned who has to be informed regarding the legal aspects of contract law as he intends to start a construction related business. Hence it is a advisable to him that prior entering into a contract he should have a thorough knowledge about how to legally validate a contract. The first essential element for contract formation is meeting of minds which are an absolute necessity for contract formation. Offer and acceptance to the offer made in presence of clear communication is the next important element for formation of a contract. Furthermore a contract may be either unilateral or bilateral wherein the key difference is between the parties who are bound to obey the contractual terms and conditions. Another important this that Mr. Abraham should not miss is ‘invitation to treat’ do not indicate a contract is formed between the parties but is merely an initiative made by the offeror to invite for contract formation. Advertisements, display of goods, action etc are examples to such. Additionally if it is observed that any one of the contracting party do not bear the capacity to enter into a contract the said contract cannot be formed. Hence Peter Abraham should not sign any business contract with an individual below the age of 18 year or with an individual who is in a mentally challenged situation unable to take any independent decision. Consideration in contract indicates the legal value of the contract made and it is anything of value promised to another contracting part while making a contract. However this promise can be money, material object services, promised action, abstinence from a future action etc to which the contracting party should remain obliged (Andrews, 2011).

Termination of contract is another essential aspect that can be related with breach of contract. Rejection to the offer made, counter-offer and demise of the offeror, revocation and breach in contract are the subsequent causes leading to termination of contract. On the contrary an offer remains valid for a specified time frame that is considered as the longevity of the offer made. Apart from this Peter Abraham should also have a thorough understanding about the contractual terms particularly regarding the implied contractual terms. In this context it is important for him to understand that compared to expressed contractual terms that are clearly documented in the contract paper, implied contractual terms are not documented in the paper although such terms own legal implications (Taylor and Taylor, 2009). Breach in contract being another important aspect of contract formation occur when any one of the involved contracting party fails to perform the contractual obligations. However it is essential to investigate whether the breach incident is minor or major and depending on the severity of breach termination rights are endowed on the injured party. In case of material breach, the judiciary body usually permit the injured party to terminate performance of the contract. Therefore discharge by frustration and inability to perform are the other examples that can lead to termination of contract (Andrews, 2011). Hence it is recommended that Peter Abraham should understand the pros and cons of contract formation before signing a business contract.

1.2 Face to face

  • Communication: Communication is the key ingredient of contract formation that plays a pivotal role when a contract is developed by face to face communication. One of the greatest advantages of this mode of contract formation is both the party are able to clearly communicate their contractual terms and conditions and meeting of minds is also reflected through the spontaneous response of the contracting parties. on the contrary breach related incidents in case of contract formed by  face to face communication is complicate to solve as the documented copy of contract is missing. Hence for developing a contract through face to face communication Peter Abraham must have complete faith of the other contracting party (Taylor and Taylor, 2009).
  • Written contract:A contract formed in writing can be considered as one of the best mode of contract formation wherein both the parties are given the opportunity to specify their respective contractual terms and conditions. However similar to the contract formed by face to face communication,  meeting of minds is also essential in case of written contract. The signed consent of intention to   enter into the contract is also a part of written contract. A written contract is enforceable by the legal guidelines of  business contract law  and breach related incidents are comparatively easier to handle. Important to mention that postal rule cannot be applied in a written contract. A breach if proved enable the injured party to terminate the contract and can also claim for remedy -to the loss suffered by the injured party as a result of breach (Taylor and Taylor, 2009).
  • Distance selling (telephone, internet):In the present age of electronic communication, formation of contract over the telephone or through internet connectivity options is a frequent practice is this respect. However Peter Abraham should remain aware that postal rule is not applicable in a contract formed by telephonic conversation or through the exchange of emails. This particular mode of contract formation wherein electronic medium is used as a mode of communication is also identified as distance selling that enables two contracting parties distantly located to develop a contract. Also a contract formed by this above mentioned approach is considered as an instantaneous mode of contract formation. Business expansion is greatly favoured through contracts formed by the practise of distant selling (Taylor and Taylor, 2009). Hence Mr. Abraham may consider practicing distance selling for contract formation if he desires to do business with distantly located clients.


  • Condition: In alignment with the English contract law, a condition in a contract can be defined as an act or event that exerts an impact over a party’s contractual duty. Hence contractual condition can be presented as a qualification that is placed on an obligation. The contracting parties are legally enforced to remain obliged towards their respective contractual conditions failing which can be presented as a breach in contract (Stone and Devenney, 2014).
  • Warranty: In comparison to the legal implications of contractual conditions, the warranty in a contract bear less imperative value with respect to the legal implications of breach in contract.  Hence a breach in warranty is often not considered to be sufficient giving the injured party right to terminate the said contract. However the injured party can definitely claim for remedy to the damages suffered as a result of breach in contract from the accused party. Therefore a warranty can be presented as the legal protection that a buyer seeks from the seller (Stone and Devenney, 2014).
  • Innominate terms: An innominate term in a contract can be defined as a term that may be identified as a condition but its breach will not affect the injured party to a significant extent. This particular contractual term holds an intermediate position between contractual condition and warranty in a contract. Furthermore, if breach is established in innominate terms lead to rescission provided the breach occurred is sufficiently serious. However if the seriousness of breach is not established, damages due to breach is the only consequence (Stone and Devenney, 2014). The case of Koompahtoo local aboriginal land council versus Sanpine Pty Ltd (2007) can be cited to understand the above mentioned topic in a better manner (Unilex.info, 2016).
  • Exemption clauses (including legality): The utilization of an exemption clause is to legally exclude one of the contracting parties to bear the liabilities to a damage caused.  Proper communication is   very the deciding factor with respect to implication of an exemption clause. However if not properly investigated, an exemption clause can be unfairly implemented causing a disadvantage to the opponent contracting party. Important to convey that there exist a number of restrictions with respect to the use of this clause and prior application of exemption clause it is ensured that the implication of exemption clause is beneficial to the injured party and also the involved contracting parties should have complete freedom in making their own terms to safeguard their respective rights. Hence in order to restore both fairness and effectiveness of this exemption clause the Unfair Contract Terms Acts 1977 was emergent owning the responsibility of restrict unfair application of this clause. Reasonability is the key factor considered in order to evaluate the fairness of application of exemption clause (Stone and Devenney, 2014).

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Task 2


Case 1- Agreement

Reviewing the information of case 1 it can be considered as a case example wherein an invitation to treat has been presented. Invitation to treat and offer does not bear similar legal implication as the former is an indication of an individual’s willingness to enter into further contractual negotiation. Therefore invitation to treat can be better presented as a pre-offer communication.  In case 1 carols the subject individual interested to enter into a contrast is the buyer while the advertisement that was given by the seller. Hence the advertisement mentioning the sale of furniture at a quoted price can be identified as the invitation to treat that clearly presented the seller’s willingness to enter into a sale contract (Kuhnel-Fitchen and Hough, 2014). The case of Harvey versus Facey can be cited wherein an indication was given by the owner of a property showing his willingness to sell the said property (E-lawresources.co.uk, 2016). The statement ‘may be prepared to sell’ as evident in the case of Gibson versus Manchester City Council can be reviewed that exemplified as invitation of treat (swarb.co.uk, 2016). Hence Carol has only responded to the invitation to treat made by the seller. She has not entered into any contract with the concerned seller. The case of Pharmaceutical Society of Great British medical  Bootys Cash Chemists’ Ltd (1953) can be cited wherein displayed items were presented as invitation to treat (E-lawresources.co.uk, 2016). Worthy to mention that the case of Harris versus Nickerson (1893) presented a case wherein an advertisement providing the details of the forthcoming auction was not an offer but was an invitation to treat (Netk.net.au, 2016).

 Case 2 – Consideration

In alignment with the situation presented in case 2 the case of Roscorla versus Thomas (1842) can be analysed wherein it was observed that d promised claimant that the horse bought by the claimant was sound and free from vice. The decision in this case stated that as the promise was made after the sale of horse was accomplished, there is was valid consideration (Casebrief.me, 2016). Another case of Re Mc Ardle can be cited in this context. In this cited case a dying mother was evident to make her 4 children sign an agreement to reimburse her daughter-in-law for money invested on up keeping the house. However the jury declared as the consideration was given before the reimbursement agreement was signed; it is a past consideration that is not valid (E-lawresources.co.uk, 2016). The scenario presented in case -2 bear certain relevancy with the above two cited case example. Hence in case 2 Preston’s promise was evident after his son was appointed by George, Smith & Forgarty Inc and hence the promise cannot be considered as a valid consideration. Therefore George, Smith & Forgarty Inc. cannot enforce Preston to keep his promise and hence not entitled to claim any compensatory amount from Preston. However the case of Re Casey’s patents (1892) can be cited as a case example that depicted an exception to the past-consideration rule (Netk.net.au, 2016).

Case 3 – Exclusion clause

A party involved in a contract willing to rely on an exclusion clause should essentially prove that the exclusion clause or term was properly incorporated into the contract in the first place and also the exclusion clause covers the liability in question in the case. Additionally the exclusion clause should not be made ineffective by virtue of either the Unfair Contract Terms Act 1977 or the Unfair Terms in Consumer Contracts Regulations 1999 (Kuhnel-Fitchen and Hough, 2014). As observed in case 3 there was not proper incorporation of the exclusion clause and also no  marketing communication  was made with the claimant party regarding the term considered as exclusion cause. In this context the case of White versus John Warwick (1953) being a case example of exclusion clause case can be reviewed in this respect (Cases.Legal, 2016). Furthermore the decision of jury in the case of Thornton versus Shoe Land Parking stated that the ticket was dispensed after the acceptance occurred and hence exclusion clause was not incorporate into the contract. (Casebrief.me, 2016) Therefore in light of the above cited case example it can be inferred that the restaurant owner cannot rely on the exclusion clause with an intention to limit bearing liabilities and the damages suffered by the claimant.                                       

Case 4 – Implied term

The case of Zephra and Aaron can be considered as a reflection to the legal implication of implied contractual terms. In this case, although the contrast signed between Zephra and Aaron was terminated by the unexpected death of Zephra, but the turning point of this case is the fact that heavy investment was made by Aaron on Zephra’s house that he rented. Important to mention although the contractual tenure was five years but Zephra died within one year of the contract and the house of inherited by his son Yeti. Case 4 can be considered as a case example presenting implied term by fact and the officious bystander test is applicable in this respect.  The primary objective to conduct this test is to investigate whether an officious bystander been present during the formation of contract and has suggested that such a term should be included (Austen-Baker, 2011). The case of Shirlaw versus Southern Foundries (1939)   can be cited that   has depicted the applicability of the above mentioned test (E-lawresources.co.uk, 2016).   On the concluding ground it can be stated that Aaron is entitled for compensation as it can be implied that Aaron having invested heavily on the rented property demand has suffered a financial loss that need to be compensated.

Case -5

An insurance policy particularly an automobile insurance policy can be voided by the insurance company under a number of reasons. Firstly if it is evident that the information provided to the insurance company while taking out the policy is incorrect or mis-presented the insurance agent has right to void the policy refusing to party the policy claim. Furthermore an insurance policy can also be voided if something is altered in the mid way through the policy and has not been informed during the policy renewal time. The insurance agent is entitled to void a policy if it is established that the concerned policy holder has not remained obliged to the terms and conditions of the policy (www.policyassist.co.uk, 2016). In case 5 the policy holder has not mentioned the fact that he has made a policy claim within the last five year that subsequently indicated non-disclosure of information or mis-presentation of information. Hence based on this it can be inferred that the insurance agent has right to void the car insurance policy.

Case – 6

Similar to the scenario of case 5, in case 6 non-disclosures of material information with respect to the technical details of the insured vehicle is evident. More precisely the policy holder has ma de certain alteration in the vehicle mid way to the policy and has not informed regarding this during renewal of the same policy (www.policyassist.co.uk, 2016).  However before voiding the policy from the starting date it is mandatory for the insurance company to investigate whether the non-disclosure of material information pursued by the policy holder was fraudulent or unintentional. If found that the practice of non-disclosure of material information was a part of hi fraudulent activity, the insurance agent own the legal right of void the said policy from the starting date.

Task 3

Trespass against an individual, assault, false imprisonment and nuisance are all the major types of tort that further give rise to tortious liabilities. Hence this particular form of liability emerges as a result of breach of a duty that is to recover the damages caused legal implications is essential. Negligence is also found to be closely connected with tortious liabilities. On the contrary the liabilities are arising when a contract is formed between the two parties can be identified as contractual liability. Considering the government liability with respect to contractual liability no public officer can be held personally liable and the statutory body is bound by the contract entered into. The main similarity between the above mentioned forms of liabilities is both are connected to civil wrong and the accused individual if found guilty   is legally enforced to compensate the damages caused or to serve the legal penalties (Edwards et al., 2012). However both contractual liability and tortious liability are also distinct to a certain extent. In tortious claim it is not mandatory for the defendant to bear any previous or present association with the claimant which is a deciding factor in case of contractual liability. Furthermore in order to make contractual liability claim it is essential for the defendant to be a part of a contract that is not a requirement for making a tortious liability claim. Presence of a legally validated contractual agreement is a must with respect to contractual liability whereas no contract agreement is required to exist between the defendant and the claimant for addressing a tortious liability. With respect to the nature of duty of care in case of contractual liability the duties are specified within the contract while in case of tortious liability the duties in torts are fixed by law (Edwards et al., 2012).

The phenomena of negligence can be presented as wrong action wherein failure to address the duty of care is lacking. The practise of negligence is viewed as a tort as the harm or damages suffered is not unintentional but indeed intentional. The popular case of Donoghue versus Stevenson (1932) also known as the ‘snail in the bottle’ case was the origin point of modern law of negligence (lawgovpol.com, 2016). Hence in order to successfully establish a negligent claim it is mandatory to prove that the defendant of the concerned case owned the claimant a duty of care and also a breach was incident with respect to the duty of care. Importantly the breach resulted in duty of care should caused damage provided that the damage or injury suffered is not remote and was foreseeable in nature (Neyers, Chamberlain and Pitel, 2007). Moreover several tests or investigative procedures has been developed aiding the claimant to properly establish a negligent claim. Depending on the type of damages suffered a number of legal investigative procedures are applicable to test absence of duty of care due to negligence. The Caparo test, Alcock test and test to establish pure economic loss policy consideration and liability due to an omission are applicable in this respect. An objective test is usually undertaken to investigate whether breach in duty of care was evident (Elliott and Quinn, 2001). The case of Vaughan versus Menlove (1837) is an example to cite (Casebriefs.com, 2016). The ‘but for test’ is mandatory to investigate whether damages is caused due to the negligent action of the defendant wherein the case of Chester versus Afsar (2004) can be referred (E-lawresources.co.uk, 2016). Another crucial aspect for a successful negligent claim is to ensure that the negligent action caused was not remote and the defendant could foresee the damages suffered. The Wagon Mound is applicable for this purpose wherein the case of Jolly versus Sutton (2000) can be considered as a reference (Mullis and Oliphant, 2011). The egg-skull role is applicable in cases if it is established that injury caused was foreseeable (Elliott and Quinn, 2001).

The popular case of Lister versus Hesley Hall Ltd (2001) was the foundation stone with respect to the legal implications how an employer can be held vicariously accountable for the torts committed by its work force. According to the decision given in the above cited case ‘relative closeness’ was connected with the tort and the nature of   the defendant’s employment (Scribd, 2016). On the contrary the case of T versus North Yorkshire CC wherein a headmaster was found guilty of sexual abusing a child, the organization was not held vicariously responsible as the committed act was not within the scope of the defendant’s employment. In light of the above cited case it can be further added that the main concern of vicarious liability is whether the employee was acting in a personal capacity or the act committed was a part of his employment (Geistfeld, 2008). The case of Nahhas versus Pier House Management (1984) can be reviewed wherein the employer was held vicariously responsible for a theft. Poor employee selection was considered as the primary factor with respect of holding the concerned organization vicariously responsible in the cited case (swarb.co.uk, 2016).

Task – 4


Case – 7

  1. In response to the situation depicted in case 7 it is important to analyse the case in light of the fact that reasonable care is the main issue in negligence related incidents. Medical cases are found to indicate this factor more prominently. Hence the case of Bolam versus Frien Hospital Management committee (1957) can be cited that is a popular case in connection to the English tort law and has also given a new direction to assessing the proper standard of reasonable care requirement in   case of patients (E-lawresources.co.uk, 2016). Therefore in order to legally hold the Goodmayes hospital responsible for the fatal consequence faced by Mr. Brown Bolam test can be conducted. It is through this investigative procedure it can be assured that whether the attending doctor and nurses has reached a standard of a responsible body of medical opinion and therefore do negligent (Geistfeld, 2008). If proved otherwise, the Goodmayes hospital doctor and nurses can be held accountable for the damages suffered to the claimant. Under such a situation the Goodmayes hospital shall also be held vicariously responsible provided it is proved that the duty performed by the attending doctor was a part of his employment and his negligent act was during the course of his employment. 
  1.  Referring to the same situation that has been considered in the immediately previously segment an attempt shall be undertaken to find out on what ground the Goodmayes hospital cannot be held responsible for the demise of  Mr. Brown. In this context it is important to convey that apart from issues related with duty of care it is also important to judge the seriousness of the risk. The degree of care given should be increased provided the claimant is in a medically more vulnerable position (Geistfeld, 2008). Hence extra care should be provided to young and elderly individuals. Case 7 which is a reflection to a medical case can be aligned with the case of Roe versus Ministry of  Health and care (1954). In this cited case the doctor was not held for breach of duty as he had no way to detect presence of contamination in the injection he injected to his patient (E-lawresources.co.uk, 2016). Similar is the condition for case 7 wherein it was not possible for the attending doctor to foresee that the concerned patient may become infected due to the intoxication caused by the mould specimen present in the subject’s house. Therefore Goodmayes hospital cannot be held responsible if it is established that the damage caused was remote and the hospital authority were not devoid of the particular skill required to treat Mr. Brown.

Case 8

Case 8 have clearly indicated that the claimant suffered a severe injury caused as a result of negligent driving of the chauffeur company driver. In this case although breach in duty of care existed but prior holding the chauffeur company responsible it has to be investigated that whether the actions committed by the driver was a part of his employment. As evident the driver consumed   alcohol before driving and consumption of alcohol is not a part of his duty (Samaha, 2002). Hence the claimant cannot vicariously hold the chauffeur company responsible. In this context the case of Dee versus Marriott can be cited. Also the case of Beard versus London General Omnibus Company can be reviewed wherein the bus company and the tort committed were completely outside the accused duty (swarb.co.uk, 2016). However the concerned chauffeur company is legally entitled to sue the driver in accordance to the legal implications of employer indemnity.

Case – 9

In majority of cases with respect to liability of corporations in tort the employer is held vicariously responsible for the negligent action or tort committed by its employee. However prior imposing the legal implications of vicarious responsibility it is important to investigate the circumstances during which the tort was evident. The case of Meridian Global Funds Management Asia Limited versus Securities Commission (1995) can be   taken as an example wherein the primary question was to find out whether the company was informed regarding the fraudulent activity of its employees (Uniset.ca, 2016). Another case of Armagas limited versus Mundogas S.A (1985) exemplified that the company was held vicariously liable on the ground that the directors have assumed responsibility on their behalf and not on just behalf of the concerned company (swarb.co.uk, 2016). Referring to case 9 where a serious injury was caused to one of its employee during his employment period by another employee it is important to investigate that to what extent the supermarket owner has monitored its delegated workplace safety responsibility to a third party. If negligence proved in this respect the supermarket owner can be held vicariously responsible and is legally imposed to compensate the damages suffered (Samaha, 2002).


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