Unit 5 Business contract and negligence Assignment
Diploma in Business
Unit Number and Title
Unit 5 Business contract and negligence Assignment
This Unit 5 Business contract and negligence Assignment aims to identify the aspects of contract laws and tort laws. Furthermore the report also checks the applications of these laws in various different business strategy. To avoid basic complexity the report is divided into four basic parts. The first part of the report or the task 1 tries to increase the basic knowledge about business contracts. Therefore the task 1 is further divided into three parts. The first section of the task 1 helps Peter Abraham, a self-employed building contractor understand the format and basic elements of business contract. In the second section task 1 defines the impact of various types of business contracts. Finally in the third section task1 analyzes different definition of terms for business contracts considering the remedies and damages. The first section of the second task or task 2 identifies application of contract elements in two given cases. In the second section of the task 2 the terms of contact laws are defined considering two cases. Finally the third section of task 2 evaluates the effect of contact terms. The first and second section of task 3 shows the differences/similarities of tort and contract liabilities as well as negligence of liability with example respectively. The third section explains vicarious liability with example. The two section of the task 4 applies the terms of tort and terms of vicarious liability in given cases respectively.
According to the question Peter Abraham who interested in setting up a building contract has no basic idea about basic business contract. Therefore he needs information about formation of business with positive and negative factors (Jenkins, 2014). The three sections of this task try to identify the basics of business contracts for Peter Abraham.
Business contract can be taken as an agreement between two or multiple persons but any agreement is not defined as contract. Business laws are important factors in any valid contract. Moreover any valid contract must have basic contract elements present in the same considering the legal factors. According to business laws any business contract has the following elements:
- Contract offer and acceptance: Basically a contract is the interface between two parties and one of the party offers something whereas the other party accepts the same and then the contract is formed. But there are some essential things which must be fulfilled for this contract element so that the business contract is taken as legal. First of all contract checks the mirror image rule of business contract (Koo, 2013). In this case the offered elements should remain same until the acceptance and they can be only changed via unequivocal assessments from both sides or via counter-offer and proper ways of negotiations. Moreover if the counter-offer comes with completely different terms the contract may auto-rejected. Another thing about this offer and acceptance element is the same must follow all the business law formalities to complete a valid business contract.
- Legal intention to initiate business relationship: The second element of a business contract identifies if the offered invitation is treatable or not. That means if the offer has a social and domestic nature then the offer is not taken as treatable invitation. Moreover if the offer comes as an advertisement then it must open a path of negotiation via which the acceptance party initiate the business relationship (Buchanan, 2014).
- Consideration based on business law: The third element or the consideration comes when there is a chance of negotiation from the acceptance party’s side. Moreover there are various ways of business considerations. But the principle thing about the third element of business contract is promise of something in return from the offering party. In a business contract consideration is one of fundamental right, interest, benefit and contract determinant(Jenkins, 2014).
- Abilities of offering and accepting parties: This element of business contract checks the capacity of both parties in a business contract. If any of the party is not valid according to contract capacity law then the contract becomes invalid also. The incompetent capacity of any party includes factors like age (minor or old person with partial disability in mind), social disqualification (criminals, unsocial behavior) etc.
- Free approval from both sides of parties: This element of business contract is also famous as free consent from both sides of contracts. The free consent from both parties will be taken as valid if and only if the contract maintains agreement of same things on the same sense from both sides (Aubert and Rivard, 2016). Moreover flaws, misrepresentation of offering and negotiating terms, influence, forcing and demanding can invalid the business contract considering both parties.
- Objects of contract:The offered object must be valid according to the business law.The object of contract is different from the contract element consideration. As an example if the offered object is a deserted house at low price that means it should not have any legal obligations to disturb the contract(Koo, 2013). Therefore invalid object of contract must have following factors: unlawful, forbidden, can cause suffering or damage, involves fraudulent activities etc.
- Clear meaning: According to this element of business contract the meaning of offer, consideration, negotiation must be clear and precise for both parties. Improper representation, incompleteness, uncertainty may make the contract invalid.
1.2Discussion on the impact of contract formation:
According to the business laws contracts are formed considering the formation, consideration, execution and type of validity. But the basic types of contracts reflect all the four factors of the business law. They are given as follows:
Face to Face: Tis type of contract is also known as verbal contract. Therefore the use of telephone, voicemail etc are entertained in this case. The major negative factor of this type of business contract is lack of documentation. Moreover this type of contract has no evidence to show in case of negotiation or counter-offer issues(Buchanan, 2014). The basic thing about this contract is it is based on oral conversations and therefore can increase complexity and difficulty during any fraudulent activities or breaches.
- Impact: In case of Peter Abraham face to face contract can increase difficulties as he is novice in the business and needs time to adapt. Therefore he can face breaching, fraud activities in case of face to face contract.
Written: Written contract has full documental nature where all the terms and conditions are given and documented in a clear and precise way. Moreover both the offering and accepting parties have copies of same signed contract as proof. A written contract is valid for individuals, organization behaviour or business parties(Aubert and Rivard, 2016). The power factor of this type of contract is both parties have written agreement copies for further movement. The sign of both parties is crucial in this case. Therefore the parties should sign the agreement copies after total understanding of rules and regulations.
- Impact: In case of Peter Abraham written contract is the best way of application. It can help him with clear and precise proof of business agreement in case of breaching.
Distance selling: This type of contract is the result of modern technology usage. Therefore this type of contracts are entertained via phone, email, audio or video recording. So the contract can be verbal or written. In case of verbal distance selling contract the agreement is made via phone or chat box without any evidence or recording evidence from phone and snapshots of chats(Jenkins, 2014). In case of written distance selling contract the agreement is signed via digital signature and both parties keep one copy of signed agreement as proof of valid contract. Moreover in this case the offering party sends rules and regulation of service or goods with all details like cancellation, refund and exchange etc. The accepting party can accept after consideration with digitally signed copy in case of written contract.
- Impact: As a self-employed building contractor Peter Abraham may have to use the Distance selling contract procedure. In this case as a novice he should use the written format of distance selling contract.
1.3Analysis of contract terms:
According to the business law any basic business contract may have the following terms of definition.
- Condition: This is one of the fundamental terms of business contract. According to business law the conditions are given with the offer in the contract. Moreover if one of the conditions is broken from any side then the contract is taken as breached. If the other party shows proof then the contract can be taken as invalid(Koo, 2013). As an example in case of Peter Abraham one of the conditions can be quality assurance of building goods and failing to maintain the same the acceptance party can claim Peter as fraud and the contract breached.
- Warranty: Another important term of contract. This term is in low level than the conditions of contract. This is also known as the promises made in business contract. Therefore failed promise can make the offering party to pay compensation for the damage but due to its low level structure the contract is not taken as breached. The damage payment can be in financial and non-financial terms according to the valid business laws. In case of Peter Abraham warranty can be of different types and amount of building materials and failed promises in the same can make Peter pay in financial and other terms of business laws(Buchanan, 2014).
- Innominate terms: This term identifies the possibility of breaches in a business contract and checks the position of the innocent party and their level of deprivation. In case the suffered party proves them fully innocent the contract provides them total benefit according to the business law. Moreover the innocent party can prove the contract as invalid. In case of Peter Abraham if he use distance selling written contract for some building materials as an offering party considering time and time delay of reaching the same to the accepting party may give the accepting party full financial advantage and claim of contract breaching(Jenkins, 2014).
- Exemption clauses (including legality): Another critical term according to the business law in a contract. The term checks the level of legal ability and its limitation in the contract for both parties. Basic business law divides the clauses in two types. The first one identifies the limitation in contract while the second one identifies the exclusion criteria for both parties in the contract(Aubert and Rivard, 2016). In peter Abraham’s case both the parties should consider the construction and fair level of knowledge of terms and conditions (contract).
2.1 Application of the contract elements:
Case Study (1): Carol tries to furnish her student apartment and replies via email to an advertisement of leather couch. The advertisement was with photo and specific information like color and price of the leather couch.
- Issue: The question in this case is if Carol is under contract after the email she sent to the advertiser.
- Solution: According to the elements of business contract in this case basic three elements should be considered. The elements are offer, acceptance and consideration. In this case the offer is the advertisement by any commercial body or individual. Considerations include the color, texture and price of the couch which is given in the offer or advertisement. Now to transform the advertisement into a contract in business offer, carol’s mail must reflect and identify with contract acceptance criteria. In the mail Carol has shown interest in buying the couch. To complete the contract she must receive a return mail from advertiser which includes other details like transaction method, date, time of sending the service to Carol. According to uniform commercial code Carol is not under contract until she gets return mail from the advertiser. Moreover the conditions also depend on the sentences used in the Carol’s mail (Fried, 2015). Again according to the Partridge Verses Crittenden 1968 case and the famous case of Pharmaceutical society Verses Boots advertisement does not mean offer. Therefore if there is no offer there is no question of acceptance. So Carol is not under any business contract.
Case Study (2): Devi is an independent person and had interviewed with a well-known IT firm called George, Smith & Fogarty, Inc. The firm sent Devi offer letter on 12th April, 2015 and Devi accepted it. Devi’s father Preston sent a letter to the firm offering a donation (£150,000) on 13th April if they hire his son. After receipt of the same George tries to enforce the letter against Preston.
- Issue: The question in this case can George enforces the proposal against Preston and question should be answered with valid reasons.
- Solution: In this case after several weeks of consideration George Inc. sent the offer letter to Devi on 12th April and he accepted the same. The letter of donation from Preston had reached George after the job contract between George and Devi is complete. Therefore the donation letter is unenforceable against Preston. As an example the Re McArdle case 1951 the payment promise is taken invalid as the promise is made after the job completion (McKendrick, 2014). The example of Collins Verses God fray 1831 also proves the additional considerations invalid after the contract is made. Moreover Preston’s offer is not accepted by Gorge therefore Preston’s treatment is not enforceable in this case.
2.2 Application of the contract laws:
Case Study (3): A popular London restaurant table booking for a couple is gone wrong when the male (couple) find that money is removed from his wallet while he is trying to pay. He has handed over his coat (wallet was inside coat pocket) at the entrance man of the same restaurant. According to the porter the back of the receipt has exclusion clause which indicates that valuables must be removed from the pocket. Therefore according to restaurant the man (couple) cannot demand his stolen money.
- Issue: The question is that according to the exclusion clause of business contract is the restaurant bound to pay back the money or not.
- Solution: In any business contract the rule of mutual consent and agreement say that both parties must be equally aware of all the rules and regulation of the contract. In this case the clause was on the back of receipt and the man in the couple has missed the same. Therefore it was the restaurant’s responsibility to show the man the clause in the back of the receipt. According to the Chappleton v Barry UDC 1940 case the plaintiffs have not seen the conditions in the back of receipt. Therefore their damages are the responsibility of the Deck chair owners as they have not pointed out the conditions in the back of the ticket (Ayresand Schwartz, 2014). According to the general rule of contract and another example of Olley v Marlborough Court 1949 case the rules are not brought into the attention and they are not in the contract. Therefore according to the exclusion clause’s rule the restaurant should pay the man.
Case Study (4):Zehphra has given his warehouse in rent to Aaron and Aaron made some improvement of the warehouse. Due to this improvement Zehphra promised Aaron a fixed rent of 5 years. But after one year Zehphra died and Yeti inherited the same property and now the rented property of Aaron shows an increase in value due to Aaron’s past improvements on the property. Therefore Yeti increased the rent and Aaron refused. Finally Yeti terminated the tenancy while Aaron sent a bill claiming his past expenses and Yeti refused.
- Issue: The question raised in this case is if Aaron is eligible to get compensation according to the contract and business rules.
- Solution: According to the Hutton Verses Warren 1836 case the justice is on the farmer’s side and considering the business rules of contract it summarize as that extrinsic evidences must be taken into consideration in case of accidents/mishaps during the period of contract. In Aaron’s case Aaron has evidence that according to deceased Zehphra the rent will not increase in 5 years period. Moreover the death of Zehphra in one year is an accident and according to the implied term rules the previous contract cannot be modified. The1836 case also tells that evidences cannot be modified even if they are silent. Another suitable example is the Moorcock ship case 1889. In this case the plaintiff get justice as providing knowledge about the dock was the responsibility of the defender (Manesh, 2013). Following the examples Aaron must get compensation for his previous improvement in the rented warehouse as deceased Zehphra has not given any other condition for the 5 year’s ‘not increasing’ rent contract.
2.3 Evaluation of effective terms of contract:
Case Study (5):In the form of motor insurance policy, a policyholder answers the question of previous theft claims or involvement in any motor accidents as negative (in a five years period). But the insurer observed that the policyholder has made previous theft claim in 5 year period. Therefore insurer made the policy void and all the policyholder’s claim void for stolen motor car.
- Issue:The question is if the insurer has done the right thing while terminating and claiming the policy void.
- Solution: First of all in the motor insurance form the policyholder has given wrong answer. Moreover the wrong answer means suppressing facts and the insurance policy of the motor insurance is based on the form’s facts. Therefore the wrong answer makes the claim of motor insurance for the stolen car wrong for five years duration. However the question is not extended with outcomes and disadvantages of proper answer (Tutt, 2013). But the previous claim of the policyholder is not concluded and according to insurance formalities all previous claims must come into a conclusion before any recent claims. Therefore insurer has done right thing while terminating the policy.
Case Study (6): A motor insurance policyholder answers two questions of car or parts modification and involvement in accidents in previous five years as negative. But according to insurer’s observation (on a new claim) the car is fitted with oversized equipment and the policyholder’s husband had two previous claims in past five years. According to the insurer the husband’s name is in the insurance form as a driver. Therefore the insurance policy is terminated while the claim is taken as void. According to policyholder she was not aware of car modification during buying and her husband’s previous claims.
- Issue: The question in this case is if the insurer has done justice while terminating the policy and claiming the insurance claim void.
- Solution: According to the rules of insurance policy all questions in the form should be answered clearly and unambiguously. The first condition probably is true that the policyholder is not aware of the modifications done on the car and this part is accepted in case of insurance. But for the previous claims by the policyholder’s husband they should be concluded before this new claim according to the insurance policy (Radu, 2013). Therefore the second condition has made the policyholder’s position misleading and risky for the insurer. So the insurer has every right to cancel the claim or terminate the policy.
3.1 Tort liability and contract liability:
- The basics of Tort include interruption of one party on another such that victim party shows damage, suffering etc. Moreover the interrupting party’s measure is unsafe on the health, property and other valuables of the victim party (Arlen, 2016). As an example, if a rock band in an event uses sound higher than normal sound level of music instrument which can cause temporary or permanent suffering /damages of the audience members then the case is under Tort.
- The next thing is how Tort law provides help to the damage parties. In this case Tort brings justice with only compensation. There is no question of restoring order considering mutual agreement. As an example if the rock band causes hearing damage for some audience members then the band have to pay for this. There is no question of negotiation here.
- Therefore Tort is based on wrong actions in civil services.
- The fundamentals of contract are based on the mutual agreement of offering and accepting parties where both parties know all the rules and regulations of the contract at the same level. Moreover the contract completes when both parties give their mutual consent. As an example if a service provider forces an old lady into signing a copy of upcoming service then the signed copy is not a valid contract. The basic business law says that contract is based on mutual agreement. Therefore agreement between plum farmer and juice event provider is an contract
- Another major factor about contract is in case of breaching, or modification of rules and regulation the compensation can come in form of reconsideration, negotiation, counter offer and finally breach/agreement violation penalties. As an example the old lady can claim penalty from the service provider as service provider’s act was forceful.
- Therefore contract is based on mutual communication and consent of same level with full knowledge of terms and conditions(Hersch and Viscusi, 2014).
Similarities: However both the laws have some similarities. They are as follows:
- Tort and contract at the fundamental level deals with rule and regulations’ violation or breach
- Contract violation means duty beaching according to the copies of contract whereas Tort violation means duty breaching according to the level of negligence and limited knowledge (Arlen, 2016)
- Both Tort and Contract breaching can claim damage repairing compensation and with valid proof can acquire the same. The penalties can be financial or non-financial according to the terms of business laws (Herschand Viscusi, 2014).
- Both the liabilities come from the same civil law structure and responsibility. As an example both liabilities can take help of civil law acts and insurance policies according to the business law
3.2 Explanation for liability of negligence:
The word negligence comes with the most fundamental meaning as careless attitude. In business terms or business law terms the same means failure to maintain certain standard in case of duty or exercise considering the ambience and environment. The liability of negligence is based on some factors. According to legal business terms they are:
- Duty conditions: Includes the relationship level between both parties and points to consider on the relationship.
- Duty breaching conditions: Includes the points which does not meet the reasonable care conditions according to the business relationship of both parties
- Exact causes with circumstances: Considers the exact actions of the accused party which fails to meet the liability standard.
- Immediate causes: Identifies the foreseeable acts of the accused in the liability level and the scopes for the same.
- Level of damages: This level must be valid according to the business law to provide compensation to the suffered person in the business relationship.
Moreover this factors or conditions if come out valid according to the business law then together they work as proof against the defender (Pourand Sharafatpeima, 2016). As an example if a customer gets infection from new underwear due to the high amount of sulfur in the same and as a suffered preson can prove that this is a ‘liability negligence’ from company’s side then the company has to give compensation. In this case duty was to wash the sulfur before packaging but breach of duty defines that company has not done so. Therefore the exact and immediate causes include forgetting attitude and high demand of the product. Finally level of damage or the infection is valid damage level and the customer can seek penalty according to business law.
3.3 Explanation of Vicarious liability:
According to the terms of business law vicarious liability is a type of secondary responsibility where someone else is taken responsible for some other person service’s action. Most of the organizations and primary business culture face this issue in the internal and external level of communication. As an example if two companies have a contract of product supply considering a date and the supplier company reach to the product company’s outlet with a delay(supplier’s personal delay) then the supplier company’s representative is not the trouble maker according to business law (Arlenand Carney, 2012). As a representative and employee of the company the supplier’s delay affect the supply company in vicarious liability case and the product company may take action against the supply company for delay. According to the case study of Lange verses Nabisco 1969 vicarious liability comes with the same result. Therefore the conditions for which any person or organization have part in vicarious liability issue are as follows:
- Scopes of employers agreement
- Independent and self-employers are responsible for their own damages
- Illegal acts of employee is not employers responsibility
- Principle and parental liabilities are under vicarious liability
More specifically in an organization the vicarious liability conditions are:
- Actions of employees during working hours and job schedule
- Valid proof of employment during damage
- Proof of action capacity of the employee
As an example if the RND department of a product company’s lab(external/lab used by other firms) is damaged due to working negligence of the current employees in the lab then according to the working hour, presence and action capacity proof the responsibility of the damage goes on the product company.
4.1 Application of negligence Tort elements:
Case Study (7):Mr. .Brown had gone to Goodmayes hospital with chest pain and breathing problem. On his complain the nurse called the doctor on duty and doctor prescribed some painkiller over the counter. Mr. Brown died from Pneumonia caused from toxic mould the very next day in his house.
- Issue: The question is hospital’s responsibility in this death according to negligence tort.
- Solution: Considering the example of Barnett Verses Chelsea and Kensington 1968 case one of the three people died due to Arsenic poisoning but according to the ‘but for’ test of tor the might have the antidote delayed in the hospital. Therefore the hospital was negligent from the point of emergency admission but not the point of victim’s death. In the present case Mr. Brown is not neglected as he received prescribed painkiller in time (Martin, 2016). His death on the very next day in this case is a coincidence. The case may go under negligence tort if Mr. Brown did not receive prescription or medicine at time. But still hospital in any way is not responsible for his death.
4.2 Application of Vicarious liability elements:
Case Study (8):An executive chauffeur company’s driver picked up a client from airport. The driver was drunk while picking up the client and consequently crashed the car in a lamppost causing serious injury to the client. According to investigation the driver was over the ‘drink driving’ limit.
- Issue: The question is if the executive chauffeur company is responsible for the damage of the client according to vicarious liability conditions.
- Solution: In this case examples can be taken from two famous cases of vicarious liability. In the first case or the case of Conway Verses George Wimpey and Co Ltd 1951 the company driver injured employee of a different company while giving the person lift and facing accident. According to the court this additional feature is not under the terms and conditions of employer’s company (Morgan, 2015). Therefore the accident is totally driver and the other company employee’s responsibility. But in the executive case the driver is collecting company’s client therefore driver’s action is the company responsibility. Again from the example of Beard verses London Omnibus company 1900 case the conductor’s individual responsibility failed the plaintiff in court as there is no proof of employee authorization of the conductor in the bus company. Therefore in present case the executive company has to pay according to the vicarious liability.
Case Study (9):Mr. Jones a delivery driver of an Essex supermarket slipped on the tail gate of the truck and drops the pallet on a colleague. The colleague was highly injured and after months of suffering he sues the supermarket for damage. According to the defender (Supermarket) the health and safety responsibility was in the hand of a third party during the accident.
- Issue: The question is if the supermarket is responsible for the damage.
- Solution: According to the case example of Wilson and Clyde coal verses English 1938 the company as a defendant argued that the suffered employee is responsible for his death due to negligence but according to the court level of work safety is totally dependent on the employer. In this Essex supermarket case the supermarket cannot avoid their responsibility for the damage of the employee as according to Vicarious liability rules the employee has the employment proof and the employee was under the employer’s capacity and scope. Therefore Essex supermarket has to pay the injured employee for workplace negligence (Scott, 2013).
The report is divided into four principal parts to define contract fundamentals according to business law. In the first task Peter Abraham identifies the basic terms, conditions of a contract via business law. Furthermore in the second task the report identifies the elements of contracts and type of breaching using some suitable case examples. Third task identifies the similarity and differences of contract and tort and further discusses negligence and vicarious liability with examples and conditions. Finally in the fourth part or task the report analyze application of tort and vicarious liability using suitable examples. From the report and examples the conditions, terms and elements of contract, tort and liabilities come clear.
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Scott, J., 2013. Vicarious Liability for Intentional Delicts-The Constitutional Factor Clinches Liability. JS Afr. L., p.348.
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